Michael Cembalest on Why AI Is the Stock Market Bet of the Century

Joe Weisenthal (0:00)

Hello, Odd Lots listeners, I'm Joe Weisenthal.

Tracy Alloway (0:02)

And I'm Tracy Alloway.

Joe Weisenthal (0:03)

Tracy, we're doing another live show, and it's right here in New York City.

Tracy Alloway (0:07)

Yeah, this one should be our biggest yet. And we're gonna have a bunch of Odd Lots favorites and do something maybe a little different to some of our previous live podcast recordings.

Joe Weisenthal (0:18)

When the guests are revealed, the show is gonna sell out right away. So you should really just go get your ticket right now. It's June 26th, it's at Racket NYC, and you can find a ticket link at bloomberg.com/oddlots or bloombergevents.com/oddlotslivenyc.

Tracy Alloway (0:34)

We hope to see you there.

Michael Cembalest (0:38)

Bloomberg Audio Studios, podcasts, radio, news.

Tracy Alloway (0:54)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:58)

And I'm Joe Weisenthal.

Tracy Alloway (0:59)

Joe, does it feel to you, like every day when you wake up in markets, there is a new sort of dominant narrative, and often it is the exact opposite of the narrative that was dominant a day or two ago?

Joe Weisenthal (1:15)

Go on, say more what you mean. Where are you going with this? I mean, I agree in some sense, but I think you have something specific in mind.

Tracy Alloway (1:21)

Well, no, I actually have a bunch of things in mind. So, for instance, recently, there was a lot of talk about the bond vigilantes back and people worried about the fiscal deficit. And then this week, that seems to have suddenly gone away, or at least it's not the only thing people are talking about. Tariffs, obviously we had the big market freakout in April and then we had subsequent delays and extensions of the deadlines. I don't hear people talking about tariffs as much as they were in April.

Joe Weisenthal (1:51)

And then through it all is, on days when we don't have to talk about tariffs or bond vigilantes, then we immediately turn to AI. Well, this is what I was going to say. So this is the thing, there's like this default thing that's in the background, which is AI and then that of course leads to things like power and electricity and so forth. So yes, I now see what you're saying, which is that on any given day, it's like you spin the roulette wheel or the Wheel of Fortune and then it's like, okay, it's an AI day. Actually, we're recording this May 28th, by the time people are listening to this and video earnings are going to be out.

Tracy Alloway (2:26)

Oh yeah.

Joe Weisenthal (2:26)

And so today is an AI day, or tomorrow might be an AI day.

Tracy Alloway (2:29)

What I was going to say is one of our previous guests, Victor Schvets over at Macquarie, he framed it really well, where he was basically saying if you can't gauge what the dominant narrative is going to be every day, or if everything that's happening is so volatile and so dramatic and we're talking about really big changes, then you have to go back to doing the normal thing. The normal thing before all of this started in the new year, was worrying about AI and thinking about AI and whether or not all of that AI spending is going to be backed by revenue. On that note, that's what we're going to do today. We're going to go back to normality, although we are going to talk about some of the current stuff as well. I am very pleased to say we have someone who I have wanted to get on the podcast for a really long time.

Joe Weisenthal (3:17)

Me too.

Tracy Alloway (3:18)

He's finally sort of been let out into the wild, so we are very excited. We're going to be speaking with Michael Cembalest. He is, of course, the chairman of Market and Investment Strategy for JPMorgan Asset Management. He writes a great, great piece called I On The Market, which he's been doing for-

Joe Weisenthal (3:34)

Which has a cult following on Wall Street. Every time a new Cembalest piece comes out, everyone talks about it and reads it.

Tracy Alloway (3:40)

Yeah, and I think it's been going on for something like 20 years now. And he himself has been at JPMorgan since 1987 So a real witness to financial market history. So I'm very excited. Michael, thank you so much for finally coming on the show.

Michael Cembalest (3:54)

Thank you very much. Good to be here.

Tracy Alloway (3:57)

I guess my first question is, can you explain what you do over at JPMorgan Asset Management? I On The Market is a phenomenal publication. I've been a fan for a long time, but I always wonder, is there a difference between writing investment outlooks for asset management clients versus writing them if you're on the sell side?