Brian Griggs, Head of Portfolio Strategy at Nuveen, breaks down whether the shutdown ending is actually a bullish catalyst for the market.
Transcript:
Caroline Woods: Joining me now is Brian Griggs, Head of Portfolio Strategy Group at Nuveen Brian, great to have you here at the desk.
Brian Griggs: Thank you. It’s great to be here.
Caroline Woods: So it looks like this record breaking government shutdown may finally be nearing an end. Market is certainly celebrating that this morning. I’m curious about how bullish of a catalyst it will actually be, though for stocks, given the fact that it wasn’t all that much of a drag to begin with?
Brian Griggs: I would agree, I think it helps more than it hurts the direction of stock prices, but honestly, I think the stock market has been focused more on three things. One, very strong Q3 earnings where we’ve seen on aggregate companies beating to the upside, two, anticipation of Federal Reserve Federal Reserve rate cuts and three likely the continued investment by the I complex in terms of CapEx and investment fueling those AI gains. So that’s what’s working for this market
Caroline Woods: Yeah that’s right. What’s the biggest risk for this market now that the government shutdown might be off the table?
Brian Griggs: Well, I think we are starting to see pretty dire consumer sentiment readings, particularly drawn down by the lower end of the consumer household segment. And I think that there is a risk that some of that negative household sentiment could spill over into the actual hard data. We aren’t seeing signs of that yet. Other than that, I think more and more investors are talking about the increased concentration of some of the mega-cap tech stock names. So that’s a dynamic we’re to continue to monitor as we go forward into 2026.
Caroline Woods: Do you think that the catalyst, the positive catalyst though outweigh those potential risks. I guess the bigger question is, where do stocks go from here. Can they go back to rally mode or is it continued choppiness ahead?
Brian Griggs: Well, I think we’re going into a seasonally strong part of the year. And on top of that, we’re having strong fundamental readings, strong earnings announcements on top of anticipated rate cuts. I think all of those catalysts are near-term bullish for the equity market. But longer term, from a portfolio construction standpoint, it’s hard to argue that starting value valuations today aren’t elevated, and that’s going to draw down long term expected returns for equity market investors.
Caroline Woods: Do you expect AI and big tech to continue to power this market higher?
Brian Griggs: I think that we will see in the years ahead a broadening out of how AI is implemented across corporate America, and that should help with profit margins, certainly, but it’s a little bit of a paradox, because if we do see that could argue that could only increase the importance of these mag seven names and their weight in the index. So I think the story here is really to maintain that exposure, particularly to those select AI companies. But make sure you’re diversified across your equity portfolio, lean into higher quality names, dividend growth companies listed infrastructure names with more defensive characteristics to make sure that you don’t get whipsawed by being overly concentrated in just a handful of stocks.
Caroline Woods: I saw in your notes that you really called the durability of AI spending a key focus. What are you watching for. To see if this CapEx cycle really has staying power?
Brian Griggs: Well, ultimately, all of these CapEx investments, they need to show revenue generation at some point in the future. I don’t think we’re there yet. I think the projected demand for AI services is enough to warrant the increased spending in the AI space, but it’s certainly something that we’re monitoring. We’re trying to understand the fundamentals of all these individual companies and their different relationships in the AI ecosystem, and that’s really the key going forward to identify those winners and losers in the AI space.
Caroline Woods: You talk about more rate cuts as a potential catalyst. Seems like it’s pretty split in terms of if we’ll see another cut come December. I think you called it a coin toss. What could tip the balance either way.
Brian Griggs: Well, the market’s I think leaning a little bit more towards a rate cut now than a pure coin toss in December. But generally speaking, we’re calling for three rate cuts at some point over the next 12 months. We’ve been in a little bit of a blind spot for economic data with this shutdown. Now that shutdown could be nearing an end, we should see a little bit more visibility into the strength of labor markets.
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