We're going to discuss, first and foremost, the rate cut. What does it mean for these names that we've been so used to leading the market higher? Caroline. Thanks for having me. You know, it's been quite the 24 hours. You know, after that super-sized rate cut, which most people in the market, us included, expected to be 50 basis points, although economists were skewed more towards the 25. Can't. You know, we saw some mixed price action, and overnight it looked like we were going to get a viable dip in coming in this morning. Things look quite a bit different. And so we do think that overall the trend is higher. Kind of look through some of this short-term noise. And as it relates to the top of the market, we do believe now for the first time in about 18 months that the market could really broaden out in a meaningful way.

And so they're not giving up on the I theme in the mega caps in general. They're outstanding companies. But I do think we have a little bit of a window for the rest of the market to catch up here. Okay. When you say broaden out, you mean small caps more broadly, or is there a way to broaden out the technology investment theme? Yeah, we like doing it across both vectors, actually, you know, in terms of the expression of the eye trade of moving away from the semiconductors, because if you just look at the kind of the chart patterns there and just the overall narrative, it seems a little bit exhausted relative to some other players in the growth space. Also, I do think, as you mentioned, small caps, you know, they have a window here where they can work. Regional banks is another part of the market that we like. That's probably going to be more of a

trade for us. But we do think, you know, the fact that rates are coming down, growth is still strong, and the next move by the Fed is going to be a cut. We can quibble about that's 25 or 50 when that occurs. At the end of the day, we don't really think that matters as much for the broader picture. So those are two different areas we're playing that broaden out theme within US equity exposure. So Zachary, with that in mind, why is it the semiconductor names and mega caps that are rallying hard this morning? Yeah, that's a great question. You know, I don't have a really spot-on answer for you now. I mean, I would just say, broadly speaking, over the last three weeks, we've seen a lot of volatility in these names. You know, speaking for the kind of the most popular stock in the world, NVIDIA, you know, we saw earnings.

They were really good, but not as good as people have come to expect. We got kind of a delayed reaction on that stock the following week and then reverse the following week. So there's just been a lot of back and forth, broadly speaking. And that's another reason that we think broadening out makes sense. Just because the volatility of this trade has gotten higher, it's gotten more difficult to hold. And so from a risk-adjusted perspective, you know, we think it makes sense to look outside of just the tip of the spear that's really been driving us for the last 18 months. Your second point earlier was that rates are going to come down, and we can debate the increments going forward and look at the dots through the end of next year. But quite reasonable question for many technology investors is what had actually changed between July and yesterday. Right. A 50 basis point cut yesterday and nothing through the summer.

And that for you guys in the markets must be difficult to calculate. Yeah, it is difficult, and you have to play a little bit of Kremlinology with what's going on, you know, within the FOMC. I mean, you know, our read of it is, I think Chair Powell, who's more dovish than the committee more broadly, he wanted to cut rates in July but couldn't get anyone there. And so, you know, the actions that we saw in the blackout period to kind of move the market towards a 50 basis point cut, that was indicative of Chair Powell kind of trying to make up for, you know, what didn't happen in July. You know, I think one of the reasons that stocks in rally initially yesterday after everything was released in the afternoon is that it's pretty clear the committee is more split than we thought. And so, you know, almost half the committee wrote down only one further

cut, you know, this year, which is quite a bit different than where the market is priced. And so, you know, I do think there'll be some back and forth on that. But broadly speaking, you know, the message is if the labor market continues to slow down into an area where we start to get concerned, the Fed will be more aggressive. And the fact that we have that Fed put back in in scope something we haven't had for about two and a half, three years, I think that's really important thing that you can lose sight of if you're, you know, just in the day to day trying to explain hour by hour moves. Zachary, This isn't just the central bank to the US, is the central bank to the world, and we're seeing risk assets rally across the world. What about European tech ASML, the best performer from a points perspective in Europe today?

What about Japanese tech? Yeah. I mean, we do continue to think the story is better in the U.S. than abroad. You know, a lot of that just has to do with the innate innovation and the structure of our capital markets versus the rest of the world. But we do think there's some opportunity in Japan. You know, that's more of a medium-term story in terms of structural reforms in a really, really cheap currency that can be a tailwind to U.S. investors. We're starting to see the yen correct, you know, quite a bit over the last few months. And we think that is a favorable trend that will continue there. But broadly speaking, we do like to express this theme more within the U.S., you know, talking about the European angle more broadly. I do think it's a little bit wild that there's only about a 25% chance that the ECB cuts rates in October.

You know, if you look at the growth trajectory, you look at the inflation dynamics, I really think they've been just waiting for some air cover from the Fed. And so I think that's something the market may start to think about over the next few weeks. And, you know, from a currency perspective, certainly that wouldn't be, you know, beneficial for European equities. ZAKARIA Let's conclude our conversation with an important question for technology investors and the technology industry around the world. Recession or no recession? Yeah. This. This one's pretty clear. No recession. You know, our framework has long been do not bet against the U.S. consumer that is employed. So we've been focused, laser focused on the labor market. And our read there is we're just coming back to normal from a period of extreme strength. Certainly, we're paying attention to the data flow as they come in and and marking that to market, you know, every

day. But, you know, broadly speaking, that has been our view and continues to be our view. And we think that, plus the fact that the next move from the Fed and other global central banks are going to be cuts, is going to bias equities higher into the end of the year.

Tech Outperforms After Jumbo Fed Rate Cut

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