1 00:00:03,333 --> 00:00:09,400 much larger S&P 500 to record highs this week.# There are several reasons fo 2 00:00:09,400 --> 00:00:14,600 investors' assessments of the economy right# now and where it will be in the months ahead. 3 00:00:14,600 --> 00:00:16,866 We're going to break this# all down now with David Gura,## 4 00:00:16,866 --> 00:00:19,800 business correspondent for NPR, who's# been 5 00:00:19,800 --> 00:00:21,766 David, it's great to have you here. 6 00:00:21,766 --> 00:00:26,066 So how much is the market rally connec 7 00:00:26,066 --> 00:00:29,866 investors' expectations that the Fed# is going to cut rates pretty soon? 8 00:00:29,866 --> 00:00:32,466 DAVID GURA, NPR Business Correspondent:# Yes, it's hugely tied to that, Geoff. 9 00:00:32,466 --> 00:00:35,766 And we got this indication last year# from the Feder 10 00:00:35,766 --> 00:00:41,300 looking to make cuts in 2023. There's been some# recalibration IN recent da 11 00:00:41,300 --> 00:00:45,333 how soon markets think the Fed is going# to actually do that, lower those rates. 12 00:00:45,333 --> 00:00:49,533 But they're looking around, investors are# looking around and seeing a bevy of economic## 13 00:00:49,533 --> 00:00:53,566 indicators that are looking pretty strong. And# they have this belief that the Federal Reserve,## 14 00:00:53,566 --> 00:00:57,666 despite what seemed like small odds at the# beginning of last year, the year before,## 15 00:00:57,666 --> 00:01:00,200 are going to be able to engineer# this so-called soft landing,## 16 00:01:00,200 --> 00:01:03,800 that they're going to get high inflation# under contro 17 00:01:03,800 --> 00:01:06,000 And that's certainly buoying# the stock market. Now,## 18 00:01:06,000 --> 00:01:09,566 I should say the gains haven't been widely# 19 00:01:09,566 --> 00:01:14,300 wh ich ended up being a much stronger year for# stocks than I think a lot of peop 20 00:01:14,300 --> 00:01:17,866 in light of what I was just talking about, that# being this fear that we could hit a recession. 21 00:01:17,866 --> 00:01:21,066 So we haven't had broad-based gains,# but stocks have performed much better,## 22 00:01:21,066 --> 00:01:23,433 I think, than Wall Street expected# at the beginning of last year. 23 00:01:23,433 --> 00:01:27,800 GEOFF BENNETT: And there's also a lot of investor# 24 00:01:27,800 --> 00:01:31,966 How has the promise of A.I. reordered the markets## 25 00:01:31,966 --> 00:01:35,400 and really fueled the returns of the# so-called Magnificent Seven? These## 26 00:01:35,400 --> 00:01:39,266 are the high-performing tech companies# whose stocks typically do really wel 27 00:01:39,266 --> 00:01:41,600 DAVID GURA: Yes, Geoff, this was# a huge turning point last year. 28 00:01:41,600 --> 00:01:45,133 So you mentioned the Magnificent Seven. This# 29 00:01:45,133 --> 00:01:49,266 wh o's an investment strategist at Bank of# America. He allowed that he's a fa 30 00:01:49,266 --> 00:01:54,733 Western movie from 1960 starring Yul Brynner# and Eli Wallach, which is why he named them. 31 00:01:54,733 --> 00:01:59,000 But the seven stocks are Alphabet,# Amazon, Apple, Meta, Microsoft, Nvidia,## 32 00:01:59,000 --> 00:02:04,133 and Tesla. And as you say, these are tech# companies, most of which are tied to A.I. or## 33 00:02:04,133 --> 00:02:08,600 interested in A.I. or doing work on A.I. I guess# Tesla is kind of the exception to that. Nvidia,## 34 00:02:08,600 --> 00:02:13,133 at the other extreme, this is a company that is# designing most of the microchips that are used## 35 00:02:13,133 --> 00:02:17,566 in the supercomputers that are powering the# technology that allows companies to use A.I. 36 00:02:17,566 --> 00:02:24,133 So they have really outperformed the market. Last# year, the S&P 500 was up 24 percent. Those seven## 37 00:02:24,133 --> 00:02:27,566 stocks, they rose by more than 100 percent# last year. So they have been carrying a lot## 38 00:02:27,566 --> 00:02:31,133 of the weight here. And there are a number# of reasons for that. A.I. is pa 39 00:02:31,133 --> 00:02:35,266 Another just has to do with the fact that these# are companies that are ingraine 40 00:02:35,266 --> 00:02:38,700 that we use every day, that they would have# staying power if there were going to be some## 41 00:02:38,700 --> 00:02:42,800 sort of economic downturn. And, finally,# they have a lot of cash on hand. 42 00:02:42,800 --> 00:02:46,800 a point where interest rates are higher# than they were for a really long time. 43 00:02:46,800 --> 00:02:49,666 A lot of companies, if they want# to expand, have to borrow money.## 44 00:02:49,666 --> 00:02:52,700 They'd have to borrow money at a higher# interest rate. These 45 00:02:52,700 --> 00:02:56,466 that wouldn't have to do that because# they have so much money on 46 00:02:56,466 --> 00:03:00,333 GE OFF BENNETT: And yet there are these# influential voices injecting notes of caution,# 47 00:03:00,333 --> 00:03:04,333 namely J.P. Morgan CEO Jamie Dimon,# who says, look, there are all sorts## 48 00:03:04,333 --> 00:03:09,833 of financial and geopolitical risks on the# horizon. Here's what he said to CNBC earlier. 49 00:03:09,833 --> 00:03:10,700 JAMIE DIMON, Chairman, J.P. Morgan Chase: I think## 50 00:03:10,700 --> 00:03:15,666 it's a m 51 00:03:15,666 --> 00:03:18,933 it's kind of like this little drug# we all feel. Like, it's just great. 52 00:03:18,933 --> 00:03:23,066 But, remember, we have had so much fiscal# monetary stimulation. So I'm a 53 00:03:23,066 --> 00:03:30,000 on the question side, that we are facing a lot of# things in '24 or '25. And we mentioned Ukrain 54 00:03:30,000 --> 00:03:34,200 the terrorist activity in Israel,# the Red Sea, quantitative tightening,## 55 00:03:34,200 --> 00:03:38,633 which I still question if we understand# exactly how that works. I don't think we do. 56 00:03:38,633 --> 00:03:41,766 GEOFF BENNETT: I mean, he's got a point.# Why isn't the market apparently taking## 57 00:03:41,766 --> 00:03:47,100 into account a host of geopolitical crises# and the shipping challenge 58 00:03:47,100 --> 00:03:52,266 it and all of the knock-on effects to the# stock market and the economy, potentially? 59 00:03:52,266 --> 00:03:54,966 DAVID GURA: It's a really good question,# Geoff. And I think that these are all## 60 00:03:54,966 --> 00:03:57,933 things that are worrying to some investors. I# think they 61 00:03:57,933 --> 00:04:02,066 we have been able to get through a lot# of tumult and crises in re 62 00:04:02,066 --> 00:04:05,900 But Jamie Dimon stands out as the head# of the largest bank in this country and## 63 00:04:05,900 --> 00:04:10,133 somebody who is more frank and forthright# about the prospect of these risks than I## 64 00:04:10,133 --> 00:04:13,800 think a lot of executives are. You heard# him there mentioning Ukraine, the war in## 65 00:04:13,800 --> 00:04:17,733 Israel. These are topics that he returns to# time and time again, because he is sor 66 00:04:17,733 --> 00:04:22,766 looking at history with a really broad breath# and fearing that this could have a big eff 67 00:04:22,766 --> 00:04:27,466 not just on the economy, but on sort of the# geopolitical system in the world as well. 68 00:04:27,466 --> 00:04:31,133 So he's raising alarm about this. I think a lot# of people listen to Jamie Dimon, again, because## 69 00:04:31,133 --> 00:04:36,200 he's running such a large institution. But so far,# we have seen markets kind of sh 70 00:04:36,200 --> 00:04:41,666 look at what's happening in the Red Sea. We have# seen shipping companies pull their ships out of## 71 00:04:41,666 --> 00:04:46,900 that waterway, send them on a 10-day journey# around Africa to avoid that conflict there. 72 00:04:46,900 --> 00:04:50,133 We're beginning to see effects of this# tumult. And I think it's something that,## 73 00:04:50,133 --> 00:04:53,633 of course, Wall Street is going to continue# to watch here in the days an 74 00:04:53,633 --> 00:04:56,200 GEOFF BENNETT: And we should be clear.# The stock market is not the economy. 75 00:04:56,200 --> 00:05:01,100 But you could argue that, because of# a number of fa 76 00:05:01,100 --> 00:05:04,200 Wall Street is really intertwined# with what happens on Main Street. 77 00:05:04,200 --> 00:05:05,866 Do you see it that way? 78 00:05:05,866 --> 00:05:09,966 DAVID GURA: Yes, it's important 79 00:05:09,966 --> 00:05:13,466 What we're seeing right now in the# stock market is confirmation of the## 80 00:05:13,466 --> 00:05:17,000 fact that the economy is doing pretty well,# again, better than I think a lot 81 00:05:17,000 --> 00:05:20,266 expected it would be. So you look at the# data points that we have gotten recent 82 00:05:20,266 --> 00:05:23,266 look at retail sales. Those came in# stronger than expected. We're go 83 00:05:23,266 --> 00:05:27,400 get some figures on GDP, on growth later# this week, another ind 84 00:05:27,400 --> 00:05:31,333 We have seen the labor market remain really# strong and resolute. What we're seeing is## 85 00:05:31,333 --> 00:05:35,133 the market really embrace each of those# economic data points, Geoff. It's kind## 86 00:05:35,133 --> 00:05:40,133 of confirming this sentiment, this sense that# the economy is doing well. And as we sa 87 00:05:40,133 --> 00:05:45,500 big survey of consumer sentiment last week, a# lot of people, yes, investors, but consumers,## 88 00:05:45,500 --> 00:05:49,166 the rest of us as well, are feeling more# confident in the direction of the U.S. economy. 89 00:05:49,166 --> 00:05:50,400 GEOFF BENNETT: David Gura of NPR. 90 00:05:50,400 --> 00:05:52,466 David, always great 91 00:05:52,466 --> 00:05:59,333 DAVID GURA: Geoff, thanks.