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Is “Follow the Money” the right path? · UBS Trending

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  We know you're anxious,
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  there's lots of uncertainty and it's easy to invest on sentiment.
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  But fundamentals are strong
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  and we're going to talk about that in a whole lot more right now.
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  On UBS trending.
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  Hey everyone and welcome to UBS trending I'm Anthony Dory.
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  Thanks for joining us today in the studio with me.
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  My guest is Brian Mulberry,
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  portfolio manager from Zacks Investment Management.
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  Brian, nice to have you join me. Good to see you.
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  Good to see you.
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  Thank you so much. Of course.
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  You know,
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  I feel like this is one of those conversations
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  where we could go in a million directions,
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  but I wanted to kind of start with you
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  because let's kind of get down to brass tacks.
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  I think what we're seeing right now,
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  and we're all sitting in this time
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  where this Iran conflict is happening.
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  We're no strangers to geopolitical conflict.
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  Russia, Ukraine has been going on for a while.
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  We had Covid in 2020.
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  We had, Liberation Day in April of 2025.
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  What are the fund like?
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  Let's take that out.
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  There's but there's strong fundamentals there.
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  Talk about what the fundamentals are telling us,
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  where we can kind of maybe push aside the reactionary headlines
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  that are literally happening on our TVs and phones
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  multiple times throughout the day.
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  Absolutely.
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  You know, the
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  the world seemed to change on February 28th,
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  which is when the Iran conflict started.
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  And that's where we saw
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  more of an emotional reaction,
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  this sentiment change in the market.
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  But we do have evidence of the economy up to that point.
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  And that's why the market was still climbing,
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  still going higher after three years in a row of strong returns.
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  And that's
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  because the fundamental nature of the economy is still strong.
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  The labor market is resilient.
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  Unemployment is low.
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  Wages are still growing. Prices are stable.
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  Not as low as somebody like the fed would want them to be.
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  But they're not terrible.
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  And we are seeing other things like,
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  retail sales that came out yesterday still going higher.
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  So the resiliency of spending and the consumer is strong.
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  And that does drive positive growth in things like GDP over time.
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  So all of that as a backdrop
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  leading up to what happened at the end of February
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  was why the market was still going higher.
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  Now, one of the reasons the market is still technically strong
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  and come back to where it was after the sentimental lows for
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  the conflict in Iran, is
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  all of those facts are still true, right?
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  And we can still prove them at this point. Yeah.
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  And looking at so our chief investment office here
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  looking at the equity markets does have an attractive rating.
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  Obviously they say be diversified.
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  But they're looking at health care tech AI
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  energy even financials as
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  you know, places to put money to work
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  because the fundamentals are so strong.
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  So when you take the sort of sentimentality
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  out of that trade, Brian.
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  And again,
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  I want to dip back into I read one of your recent, white papers
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  talking about, how Liberation Day from April 2020, April 2025.
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  Initially, the reaction was very negative
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  on the equity side of the markets,
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  but then quickly turned around and I said even 2020,
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  in March of 2020, when Covid first became the headline,
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  the markets initially sold off.
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  But anybody looks at that chart for the S&P from April on,
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  there was strong growth there.
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  So just kind of give us a sense of
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  when the fundamentals are really in focus.
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  Where do you want to be positioned?
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  Absolutely. You really just want to follow the money.
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  I mean, in at this point, the strong growth in GDP is durable
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  because it's backed by business investment,
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  not government spending.
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  That's not always been true.
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  In the last five years, we've seen a lot of government
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  spending create a lot of jobs,
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  but that becomes very uneven and it's not as productive capital.
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  So the fact that now it's the business investment
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  that's driving GDP.
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  Just think of the hyperscalers
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  spending $650 billion this year alone.
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  That's real money.
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  That's showing up on the balance sheets
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  of a lot of different companies.
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  So that's real productive capital causing the growth
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  that's causing the growth in the job market.
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  It's also causing growth, in other things like productive
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  technology, AI, adding to productivity and things of that nature.
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  So the real spending, the real investment is what adds
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  to the durability of that fundamental picture right now.
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  It makes it incredibly strong in this moment.
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  What do you say to viewers, investors
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  who are out there saying, fine, Brian,
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  that sounds great,
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  but I'm still really nervous
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  and I'm anxious about what could potentially happen
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  with the Iran conflict.
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  There's talk
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  that if they don't open the strait anytime soon in Europe,
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  airlines may have to, you know, shutter many, many flights.
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  They only have six weeks worth of jet fuel.
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  That's could be an economic, you know,
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  an impact in a negative way.
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  What do you say to those people who say,
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  I'm too anxious to even think about investing right now?
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  Well, and believe me, what you've described in terms
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  of the sentiment in the market,
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  it has gone to extremes immediately.
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  And I think Covid did reshape people's minds
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  and that the worst case scenario
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  I don't think anybody ever thought
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  that you could close down the global economy for a period of time
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  and have everything come to a grinding halt.
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  So now everything feels like Covid again.
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  When one of these events happens. Right.
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  You talked about Liberation Day, the market and the sentiment
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  went and priced
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  in maximum tariffs for the maximum period of time.
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  The rest of us understood that this was just a bargaining chip
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  and that there would be a normalization
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  once real trade agreements came into place.
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  And so that normalized over time,
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  and that allowed the market
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  to come off of those worst case scenario lows in sentiment.
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  Same thing is happening right now.
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  The worst case scenario is that oil is going to be $200
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  a barrel forever.
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  And that's going to have a material impact on the global economy.
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  The reality is, in the immediate term, yes, the one month forward
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  contracts are volatile
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  because we have this this,
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  you know, conflict that's still ongoing.
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  But if I look for nine months, it's back down below $80 a barrel.
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  Right.
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  So the market and the fundamentals,
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  the market are telling you
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  that access to these products will open
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  and it will open sooner than later.
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  So yes, there's short term pain.
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  There's a lot of uncertainty.
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  And again,
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  because of how
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  we got rewired during Covid,
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  I think everybody goes to that maximum level
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  of negative sentiment and that and that causes this pullback.
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  But now when that worst case scenario does not materialize,
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  it allows the market to return to fundamentals.
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  And that's why the markets are back up to where they are.
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  Right.
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  And one of the probably the biggest disclaimer
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  is that every single financial services
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  firm in the world has is past
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  performance is not an indicator of future results.
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  But if you do look at the history since 20, really 2020,
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  I think that was such a boon.
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  It was such a,
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  a watershed moment where markets did react negatively, but then
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  and then fundamentals took over where we all thought,
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  I think in March or February 2020.
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  Oh my gosh, look out below.
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  Yeah, but it didn't go that way.
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  And then again with Liberation Day and what we're seeing now.
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  So I think, you know,
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  you do have to kind of look at history
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  to understand
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  that there are potential positive paths down the road.
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  So you're talking about following the money, Brian.
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  Yeah. Where how where are you following the money right now?
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  Because if you look at value stocks
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  versus growth stocks, we have a neutral view on both.
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  But value has outperformed growth by 8 to 10% or so.
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  Where do you see some opportunities here.
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  Well again
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  that transfer of capital coming
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  as an investment from large cap tech, which is in the growth side
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  over to things like industrials, durables manufacturers,
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  just look at,
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  you know,
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  anything that's in the construction
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  mining materials type of space.
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  We need those materials and the expertise to
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  to build data centers. Right.
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  If Microsoft needs 100 data centers they're very large spaces.
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  You're going to need to move a lot of dirt.
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  So even things going down to like John Deere, caterpillar,
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  those types of names that just move dirt,
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  they're benefiting from that investment.
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  You just look at their backlog of orders.
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  And that's where the revenue is going from one side,
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  which is growth
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  that has driven the market for the last three years
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  to a point
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  where they have this revenue
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  that they can invest into future growth.
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  And it's showing up in these other balance sheets.
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  So even just the mining companies that are out there,
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  not just looking for gold,
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  but also other metals,
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  you know, iron ore is up because we're going to need steel.
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  Copper is up through the roof.
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  Even silver becomes an industrial metal at some point in time.
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  So you're able to kind of follow that revenue invested
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  into the growth of revenue and earnings, you know,
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  and all of these other sectors. Right?
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  I always remember this story
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  that somebody told me
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  is that when you go back to the gold rush
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  in the United States, back, you know, hundreds of years ago,
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  it was the people who were actually selling
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  the picks in the shovels
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  who were making out really well
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  because you were guaranteed to sell it
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  when you went out with a little pan
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  and you weren't guaranteed to get some gold.
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  So infrastructure has always been a huge part of success
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  and then driving business growth.
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  So thanks for sharing that
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  with us, Brian,
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  on the risk side though, because obviously there's always a risk,
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  you know, what do you see right now
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  as places
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  that maybe you're avoiding
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  or keeping a close eye on is a better way to put it?
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  Well, sentiment works both ways, right?
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  And so
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  this market
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  also has a tendency to price in the best outcome possible.
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  And so that could drive a lot of positive momentum
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  in a short period of time.
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  The risk would be at some point Microsoft says,
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  you know, we have a new wave of technology
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  that is incredibly efficient.
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  We don't need 100 data centers, we only need 50.
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  And so that means that their actual investment
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  becomes half of what they've committed in this period of time.
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  Now, is that likely?
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  No, because
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  the one limiting factor to AI and the growth of AI is compute.
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  We don't have enough compute.
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  We need the data centers.
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  So at the moment we can fundamentally back up the story
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  and say they have to build these things, but we don't know what.
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  We don't know
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  if there's a wave of innovation
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  that comes along, quantum computing,
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  something like that, that says, hey,
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  we can do so much more with way less, you know, data is needed,
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  then that would be disruptive
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  to the value sectors that we just talked about,
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  because the capital committed
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  would be less than than
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  what actually lands on their balance sheet.
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  So we're aware of that.
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  But you just look for different ways
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  to verify that demand for computing power is out there.
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  And anybody in Silicon Valley right now
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  is just complaining about the cost of tokens.
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  Right. And tokens is just another way to say compute.
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  If tokens are expensive, that means demand is high.
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  The rest of this should still follow the path that we're on.
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  Yeah, I love the kind of, open ended ness.
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  Obviously technology has always been that way,
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  and it's it's hard to see exactly where it's going.
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  But as you just
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  described with quantum computing, I mean, that's a
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  that's literally a game changer in the tech industry
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  and obviously
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  all of the other components of where tech leads,
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  which is everywhere.
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  I mean, everything is some adjacent to technology.
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  And I it's fascinating to see where it's going.
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  Absolutely. Yeah.
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  And it's a cold fusion kind of a moment
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  right where you're trying to provide endless power
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  on a nuclear level without the boom.
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  Right. And this is exactly where quantum computing is.
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  They've been able to do this,
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  I think mechanically a couple of different ways,
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  a couple of different times.
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  But they cannot sustain it in a way
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  that's commercially acceptable.
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  So you never know when that moment
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  is actually going to become viable,
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  which would then lead to the disruption and everything.
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  But again,
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  you have the sentiment, best case, worst case that keeps tugging.
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  You know, the market back and forth.
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  We want to go back through and just follow the real earnings
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  and the real profitability.
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  And that will tell us that, you know, the scale has arrived,
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  that this is going to be a real moment
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  that transforms the economy.
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  Excellent, Brian, thanks very much.
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  Good to have you come through. Love to have you back again.
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  Obviously there's a lot going on
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  and we could probably talk more about this for hours.
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  Absolutely. Good to see you. Brian Mulberry from Zach.
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  Thank you very much.
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  And thank you all for joining us.
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  There's a lot more information
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  coming out of UBS
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  and our great partners like Zach's at ubs.com/views.
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• 11:16
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  Trending. So give us a follow when you have a chance.
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  And as always,
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  if you have any questions
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  about what Brian and I spoke about today,
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  please make sure to continue this conversation
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  with your financial advisor.
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  Until next time, I'm Anthony Pat story.
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  Have a great rest of your day everyone, and remember
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  to keep your eyes on what's trending. We'll see you soon.