Animal Spirits Podcast: Talk Your Book – What's Working in the Stock Market?
Date: March 9, 2026
Hosts: Michael Batnick & Ben Carlson
Guest: Chris Galopo (Franklin Templeton)
Episode Overview
This episode dives into the dramatic shifts currently playing out in global stock markets, with a particular focus on the ripple effects of AI, sector rotations, and surprising performance from forgotten corners of the market. Michael Batnick and Ben Carlson are joined by Chris Galopo of Franklin Templeton to parse through the “black cloud” of AI anxieties, the real (and perceived) pain in tech, and the opportunities and dangers lurking in both U.S. and international equities. The conversation provides a frank, sometimes sobering, and ultimately nuanced look at what's really working in the stock market right now.
Key Discussion Points & Insights
1. The AI Overhang: Societal and Market Ramifications
- Opening Sentiment: Both hosts and guest reflect on the pervasive, gloomy mood stemming from AI’s societal implications, referencing recent articles that heightened concerns about the human impact (00:42–01:30).
- Michael: “Right. The stock market could be just fine and millions of people are out of jobs. That’s the… human toll that is giving you the black cloud.” (01:30)
- AI’s Macro & Market Impact: While AI is expected to drive profitability and margins and theoretically keep the market afloat, uncertainty about its full impact (especially the risk of widespread job loss) hangs over investor sentiment (01:30–02:12).
2. Current State of the Market: “Bear Market Feel” Despite All-Time Highs
- Market Dislocation: Despite the S&P being near its all-time high, certain sectors—particularly tech/software—are seeing steep selloffs, leaving investors with a bear market “feel” (02:12–03:56).
- Notable Stat: “If you heard our conversation and… took out the stock market is 2%, near an all-time high, you would assume that we’re in a deep bear market.” – Chris Galopo (02:12)
3. Broadening Market Participation & Surprising Winners
- Rotation from Tech to “Left for Dead” Sectors: Dividend aristocrats, industrials, energy, and staples—overlooked for years—have turned into surprising out-performers while tech stumbles (02:25–03:12, 05:41–06:24).
- “2/3 of all stocks are outperforming the S&P this year, which is like the highest number in 50 years…” – Michael Batnick (05:41)
- Equal Weight Index Outperformance: 68% of S&P stocks are up YTD. 41% are up more than 10%. The equal weight S&P (a proxy for the “average stock”) is outpacing the headline index (06:25).
- “It’s just not the names that everybody knows.” – Chris Galopo (06:25)
4. Tech and AI: A Re-Evaluation and Rapid Shakeout
- The Bubble Conversation: The current downturn in mega-cap tech is compared to past bubbles:
- Microsoft, for example, is in a 27% drawdown, and “the market is saying, we want nothing to do with this.” (07:11)
- On the sell-off: “Stocks take the staircase up and the elevator down, right?” (09:37)
- Not a Classic Bubble: Chris contrasts the fundamentals-driven rise of the “MAG7” with past bubbles; most price increases were justified by explosive earnings growth: “MAG7 EPS up 750%… S&P earnings growth outside of those names was just 32%” (11:07).
- Rapid Re-pricing: The market’s speed has increased—downturns that once took years now play out in weeks. Tech's fall has led to panic, but other sectors are catching a bid (13:08–14:27).
- “What can happen in two or three weeks used to take a year…” – Ben Carlson (13:08)
5. Investor Psychology & Sentiment
- Fear is Spreading: Even with the S&P near highs, there's a “virus of fear” spreading, with investors contemplating worst-case scenarios—job loss, recession, and capital preservation (psychological, not fundamental) (17:43–18:09, 24:25).
- “It’s hard to reintroduce risk appetite when that black cloud is hanging over every investor.” – Chris Galopo (24:25)
- Shoot First, Ask Questions Later: Investors are selling indiscriminately in certain sectors, and “overreaction makes sense” given the magnitude of uncertainty (16:01–16:31).
6. International Equities: A Long-Awaited Turn
- Bullish on Non-U.S. Markets: Franklin Templeton has been bullish on international (ROW) equities for the first time in 15 years, pointing to earnings power and new catalysts for rerating (18:48–20:54).
- “Foundational piece that is earnings power forward… is present in EM, in India, in Japan…” – Ben Carlson (19:29)
- Investor Skepticism: Investors have been reluctant to re-enter these markets, even in the face of strong data and currency tailwinds (19:19–20:54).
7. Handicapping AI Risks: The Walmart Example
- Ambiguity in Forecasting: The hosts discuss the challenge of projecting AI’s long-term impacts and how impossible it is to confidently handicap multiple plausible macro futures (26:35–27:09).
- Walmart Case Study: Walmart projects 5 years of revenue growth with no increase in headcount, highlighting AI’s potential to boost productivity (27:13).
- “Walmart… expects to grow revenues for the next five years at the same rate… with zero headcount.” – Ben Carlson (27:13)
- Shoppers using AI tools in-store spent 35% more than those who didn’t (27:26–28:36).
Notable Quotes & Memorable Moments
-
On Market Reality vs. Perception:
“If you heard our conversation…you would assume that we’re in a deep bear market.”
— Chris Galopo (02:12) -
On Sector Rotation:
“2/3 of all stocks are outperforming the S&P this year, which is like the highest number in 50 years…”
— Michael Batnick (05:41) -
On Tech’s Peak:
“Stocks take the staircase up and the elevator down, right?”
— Ben Carlson (09:37) -
On AI Anxiety:
“The stock market could see plenty of profit increases… and millions of people are out of jobs. That’s the… human toll that is giving you the black cloud.”
— Michael Batnick (01:30) -
On Market Speed:
“What can happen in two or three weeks used to take a year and now it’s like boom, boom, boom.”
— Ben Carlson (13:08) -
On AI’s Market Impact:
“Walmart reports good earnings. They expect to grow revenues…with zero headcount…Shoppers using their AI tool…spent 35% more.”
— Ben Carlson (27:13, 27:26) -
On Investor Psychology:
“It’s hard to reintroduce risk appetite when that black cloud is hanging over every investor.”
— Chris Galopo (24:25) -
On Market Bottoms:
“Markets bottom on bad news. Guys, got to remember that.”
— Ben Carlson (30:38)
Key Timestamps
- 01:30 — The human toll of AI vs. stock market outcomes
- 02:25 — Forgotten sectors begin to outperform
- 05:41 — Historic breadth: 2/3 of stocks outperforming S&P
- 07:11 — Tech drawdown: Microsoft as AI proxy, bubble debate
- 09:37 — Parabolic tech run: “Stocks take the staircase up…”
- 11:07 — Five-year breakdown: MAG7 vs. S&P earnings
- 13:08 — Rapid market repricing, speed of information
- 17:43 — Spread of fear beyond fundamentals
- 18:48 — International equities’ surprising run
- 27:13 — Walmart’s AI-driven growth, productivity and margins
- 30:22 — Falling prices reduce risk; market pricing in bad news
- 32:31 — Eye of the storm: Political, human, and market risks
Conclusion & Takeaways
- Breadth Has Returned: The era of ultra-concentration in megacap tech may be ending; equal-weight and forgotten sectors are outperforming, even as headline indices conceal pain below the surface.
- AI Anxiety Looms: The rapid adoption of AI creates both optimism for profits and deep concern for jobs, feeding an unusual cocktail of fear even as top-line results remain strong.
- Rapid Cycles: Sell-offs and recoveries happen faster in today's market, compounding investor anxiety.
- International’s Moment: For the first time in years, international equities (especially EM, India, Japan) are matching or beating the U.S. in terms of earnings power.
- Investing Admonitions: The market is pricing in a lot of fear—possibly too much—and “markets bottom on bad news.”
- Endnote: Despite prevailing angst, the macro picture is “pretty okay”; unless labor markets dramatically deteriorate, the risk of systemic collapse remains low.
For more from Chris Galopo, subscribe to his weekend newsletter (LinkedIn: Chris Galopo).
Tone: Frank, candid, sometimes anxious but data-driven and balanced.
Utility: Listeners gain actionable context about current sector rotations, cultural anxieties around AI, and how behavioral heuristics can override fundamentals—even as the tape shifts beneath our feet.