Podcast Summary: The Compound and Friends – February 18, 2025

Episode Title: Global Stocks Lead, US Lags, How DOGE Layoffs Might Affect the Economy, Josh’s Breakout in Progress

Hosts: Downtown Josh Brown and Michael Batnick, accompanied by guest Duncan and others.

1. Introduction

In this special Floridian edition of The Compound and Friends, hosts Downtown Josh Brown and Michael Batnick, along with guest Duncan, delve into the current dynamics of global and US stock markets. Filmed from Boca Raton and Naples, Florida, the episode explores why global equities, particularly in Europe and China, are outperforming US markets this year. Additionally, the hosts discuss significant federal layoffs orchestrated by the Department of Government Efficiency (DOGE) and the potential economic repercussions. Josh also shares insights into his personal investment breakout.

2. Global Stocks Outperforming US

Key Discussion Points:

• All Country World Index (ACWI) vs. US Stocks: The hosts examine the ACWI, highlighting how global breadth is improving on a country-by-country basis despite US lagging.
• Technical Analysis: Willie Delic's analysis points out that ACWI excluding the US is in its longest sustained uptrend since pre-2008 financial crisis, although it faces resistance at its pre-crisis peak.

Notable Quote:

• Josh Brown [04:34]: "Global breadth is improving on a country level basis. The new high list has expanded sharply and an increasing percentage of markets are above their 50 day averages and 200 day averages."

Insights:

• The improvement in global markets signals renewed investor interest outside the US.
• Despite being under-owned, international equities are gaining momentum, challenging the traditional dominance of US markets.

3. China's Market Rally

Key Discussion Points:

• Fiscal and Monetary Policies: China's aggressive fiscal and monetary measures have bolstered its stock market, particularly internet stocks.
• Economic Initiatives: President Xi's high-level symposium with business leaders has fostered confidence in the private sector, leading to significant corporate announcements, such as Alibaba’s new large language model (LLM).

Notable Quote:

• Josh Brown [10:31]: "Chinese Internet stocks have been doing very well. And quite frankly, the Europe-China trading partners paradigm is way more important than any other in the world."

Insights:

• China's strategic economic policies are driving its market performance, making it a pivotal player in global equities.
• The sustainability of this rally remains a topic of discussion, with questions about long-term growth and valuation multiples.

4. European Market Performance

Key Discussion Points:

• Investment in AI: Europe is ramping up investments in artificial intelligence, signaling a shift from a regulatory role to a competitive stance in the AI landscape.
• Economic Indicators: The MSCI European Monetary Union index has reached new highs, supported by optimistic trade relations and strategic investments.

Notable Quote:

• Josh Brown [12:05]: "Europe is being led by what's happening in China."

Insights:

• Europe’s proactive investment in AI aims to position itself as a key player rather than just a regulator, potentially enhancing its market performance.
• Improved trade relations, especially with China, are contributing to the robust performance of European equities.

5. US vs. Global Investment Performance

Key Discussion Points:

• Ed Yardeni’s Analysis: US stocks have not been exceptional since Trump's election, with major international indices like Germany’s DAX, France’s CAC, and China’s markets outperforming.
• Forward Earnings: The MSCI forward earnings per share metrics indicate that global markets are more attractive compared to the US, influencing investor allocations.

Notable Quote:

• Ed Yardeni [14:04]: "US Stocks haven't been exceptional since Donald Trump won the presidential election on November 5th."

Insights:

• The divergence in performance between US and global markets suggests a potential shift in investment focus.
• Valuation multiples and earnings prospects are making international equities more appealing relative to the US market.

6. Federal Layoffs by DOGE and Economic Implications

Key Discussion Points:

• Significant Layoffs: Approximately 275,000 federal workers have been laid off, including 75,000 accepting buyouts and 200,000 probationary workers being let go.
• Economic Impact: The sudden reduction in federal workforce could have broader economic implications, particularly in regions heavily reliant on government employment.

Notable Quote:

• Heather Long [22:32]: "Roughly 275,000 federal workers lost their job this week. That's over 10% of the federal workforce."

Insights:

• The scale and speed of these layoffs are unprecedented, leading to concerns about potential disruptions in government services.
• While the immediate economic impact may be muted due to the current payment of laid-off workers until September, long-term effects on spending and regional economies remain uncertain.

7. Jamie Dimon’s Rant: Return to Office

Key Discussion Points:

• In-Person Productivity: Jamie Dimon, CEO of JPMorgan Chase, emphasizes the importance of returning to the office to enhance efficiency and creativity, criticizing remote work practices.
• Generational Impact: Dimon highlights concerns about younger generations missing out on social and professional development due to prolonged remote work.

Notable Quote:

• Jamie Dimon [32:23]: "The young generation is being damaged by this. They are being left behind socially, ideas, meeting people."

Insights:

• The push for a return to in-person work underscores a broader debate about the future of work and its impact on productivity and innovation.
• Balancing remote and in-office work remains a critical challenge for large corporations aiming to foster collaborative and creative environments.

8. Company Highlights: DoorDash and Instacart

Key Discussion Points:

• DoorDash Success: Despite skepticism, DoorDash has thrived by scaling its three-sided network involving drivers, supermarkets, and consumers. Market consolidation has reduced competition, solidifying its position.
• Instacart’s IPO Performance: Instacart has shown significant growth since its IPO in September 2023, appreciating 65% since inception despite initial scrutiny.

Notable Quote:

• Bucha Capital [39:08]: "DoorDash built, coordinated and effectively scaled a three-sided network using zero-era funding that is no longer available to their competitors. So spreadsheets are actually irrelevantly. You just buy the stock."

Insights:

• The success of gig economy platforms like DoorDash and Instacart highlights the importance of network effects and market consolidation in achieving sustainable growth.
• Investors are increasingly recognizing the value in companies that effectively manage and scale multi-sided platforms, leading to significant stock performance improvements.

9. Schwab’s 24/5 Trading Expansion

Key Discussion Points:

• Extended Trading Hours: Charles Schwab has announced that clients can now trade a wider range of securities 24 hours a day, five days a week, reflecting evolving market demands and technology advancements.
• Market Implications: This move could increase market liquidity and accessibility, particularly appealing to younger investors and those in different time zones.

Insights:

• Extended trading hours signify a shift toward more flexible and accessible investment platforms, catering to a broader, global investor base.
• While the immediate volume and liquidity may remain modest, the long-term adoption could reshape trading practices and investor behavior.

10. Conclusion and Upcoming Events

The hosts wrap up the episode by highlighting upcoming shows and events, including a live session with Brian Belsky in Naples, Florida. They encourage listeners to engage with their content on YouTube and other platforms, emphasizing their commitment to providing valuable insights for both novice and seasoned investors.

Final Note: The episode emphasizes the growing significance of global markets, strategic investment in technology sectors, and the evolving landscape of work dynamics. The discussions provide listeners with a comprehensive understanding of current economic trends and investment opportunities, framed by expert analysis and real-time market observations.

Notable Quotes Recap:

• Josh Brown [04:34]: "Global breadth is improving on a country level basis."
• Ed Yardeni [14:04]: "US Stocks haven't been exceptional since Donald Trump won the presidential election on November 5th."
• Jamie Dimon [32:23]: "The young generation is being damaged by this. They are being left behind socially, ideas, meeting people."
• Bucha Capital [39:08]: "DoorDash built, coordinated and effectively scaled a three-sided network using zero-era funding that is no longer available to their competitors."

Timestamp Highlights:

• 00:00-03:48 – Introduction and overview of global vs. US stock performance.
• 04:34-08:22 – Detailed analysis of ACWI and global breadth.
• 10:31-14:04 – China’s market rally and Ed Yardeni’s insights.
• 22:32-30:58 – Federal layoffs by DOGE and economic impact.
• 32:23-37:23 – Jamie Dimon’s commentary on returning to the office.
• 39:08-43:31 – Success stories of DoorDash and Instacart.
• 44:43-51:46 – Schwab’s 24/5 trading and final discussions.

Conclusion: This episode of The Compound and Friends offers a deep dive into the shifting tides of global and US markets, the ramifications of substantial federal layoffs, and strategic moves by major corporations. With expert commentary and real-time analysis, listeners gain a nuanced perspective on navigating the complex landscape of business and investing in 2025.