Podcast Summary: The Compound and Friends
Episode: "What Did the Fed Actually Say?"
Date: October 31, 2025
Main Hosts: Josh Brown, Michael Batnick
Special Guest: Stephanie Roth (Chief Economist at Wolfe Research)
Overview
This episode goes deep on recent macroeconomic developments, tech sector trends, and—most prominently—a close read on the latest Federal Reserve policy commentary. The discussion blends reactions to tech earnings, the impact and future of AI on the economy and labor market, and the implications of Fed Chair Jerome Powell’s latest messaging for investors and consumers. With Stephanie Roth offering a wonky, data-driven perspective, the energy is lively, often irreverent, but grounded in timely market and policy analysis.
Key Discussion Points and Insights
1. Tech Earnings, Capex, and the AI Build-Out
(07:52–23:30)
- Tech Spending Strength
- Tech companies (Meta, Microsoft, Google) are sustaining strong revenue growth—Meta up 26% YoY, Microsoft 18%, Google 16%.
- “The spending is strong. It's gonna continue to be strong. We get a lot of questions, is this a bubble? ... Our sense is absolutely no.”
— Stephanie Roth (08:19)
- Capex and Economic Ripple Effects
- Companies are ramping up capital expenditures (capex) for AI infrastructure. Meta, for example, is guiding much higher capex in 2025 and 2026.
- Josh quotes Meta: “We are still working through our capacity plans but we expect to invest aggressively ... We anticipate this will provide further upward pressure on our capex.” (13:01)
- Stephanie estimates about a quarter of US GDP growth is currently tied to the AI-driven capex boom.
- “It’s roughly about a quarter of the GDP growth ... driven by all this capex spend so far.” (14:03)
- AI Productivity Gains
- Early evidence: Productivity uptick visible in tech and professional services.
- Roth: “...we’re seeing it so far. Productivity within the tech space has picked up a little bit... but outside of that there’s no clear correlation yet ... My expectation is over the next couple of years this is what we’re going to be watching...” (09:51)
- Is it a Bubble?
- Historical perspective: The AI boom so far is nowhere near the unsustainable levels of past bubbles (dot-com, China supercycle, railroad).
- “The only thing we could find is the China supercycle ... $14 trillion. In today’s dollars, the dot com was about a trillion. So nothing else compares outside of the China story.”
— Stephanie Roth (16:58) - “For the next at least 12 months, this is not a bubble and it's not an issue. It could become a bubble ... but I think we're a long way away from that.”
— Stephanie Roth (54:59)
- Labor Market Disruption
- Recent college grads aiming for tech face high unemployment as AI shifts skills demand.
- “...right now is within young workers ... specifically looking for jobs in the tech sector. It’s the youth unemployment specifically for white collar workers. Those people are having some trouble finding jobs.”
— Stephanie Roth (14:59)
2. Fed Policy and the Rate Cut Debate
(23:52–33:15)
- Powell’s Messaging
- “A December rate cut is far from a foregone conclusion”—the main line that shifted market expectations.
- “The market was pricing a nearly 100% chance of a December cut. Powell completely poured cold water on that.”
— Stephanie Roth (24:32)
- Why the Market Reacted
- Immediate repricing: housing and mortgage-related stocks swooned as the cut became doubtful.
- Cut vs. No Cut?
- “The labor market appears to be largely fine. The economy is pretty steady. There's not a great reason to be cutting at this point, just given where they are today and where the economy is.”
— Stephanie Roth (24:44)
- “The labor market appears to be largely fine. The economy is pretty steady. There's not a great reason to be cutting at this point, just given where they are today and where the economy is.”
- Dissent in the Fed
- Notable rarity: two dissents in opposite directions for the rate decision—showing debate inside the Fed, but only one (Meyer) wanted a 50bps cut for political reasons (26:24).
- Consumer Health and Debt
- “We're looking at a chart of household debt relative to disposable income. ... the consumer is healthier today than ... a year ago and two years before.”
— Stephanie Roth (28:53) - Stress is most acute in the lowest-income consumers, but for the broad economy, “it doesn’t appear to be getting that much worse.” (29:12)
- “We're looking at a chart of household debt relative to disposable income. ... the consumer is healthier today than ... a year ago and two years before.”
3. Wealth Effect and Consumer Spending
(34:07–38:58)
- Stock Market’s Influence
- Michael Batnick stakes out a strong view: The wealth effect from equities is the biggest driver of consumer behavior, more than wage growth or housing.
- “People are not doing that because of the value of their house ... they're doing that because they feel rich.”
— Michael Batnick (36:42)
- Stephanie Roth’s View
- Initially skeptical, Roth acknowledges that, with $6 trillion in equity net worth gains this year and broader stock market participation (especially among Millennials and Gen Z), the effect is likely bigger than historical data suggests.
- Millennials' exposure to stocks is far above what Boomers had at the same age—a shift in economic dynamics.
- “Millennials ... own about 23% of their net worth in equities. Boomers ... had only 6% ... at the same age.” (38:27)
4. AI, Labor Market Dynamics, and Future Disruption
(39:32–42:22)
- Adaptation and Economic Dynamism
- “About 60% of people who are working today are employed in jobs that didn't exist in 1940 ... Even though a lot of jobs will get displaced as a result of AI... eventually the economy will be in a better place.”
— Stephanie Roth (39:46)
- “About 60% of people who are working today are employed in jobs that didn't exist in 1940 ... Even though a lot of jobs will get displaced as a result of AI... eventually the economy will be in a better place.”
- Low-Hire, Low-Fire Labor Market
- Companies are neither firing nor hiring at historic rates—creating labor “stasis.”
- What to Watch Next
- Monitoring a range of labor indicators (claims, WARN data, etc.) is necessary—no single signal gives a reliable heads-up under current conditions.
5. Inflation, Housing, and Tariffs
(44:59–51:28)
- Shelter Inflation (Owner’s Equivalent Rent)
- Despite common criticisms, Stephanie clarifies the methodology and says recent drops in this data are broadly valid.
- Tariffs: Effects and Surprises
- Tariffs caused goods inflation to run higher than usual, but the magnitude is less than expected.
- Companies spread out price increases (the “sneakflation” effect).
- Only about 50% of tariff pass-through has likely occurred so far—more could come but slowly.
- Portfolio managers and investors are now more focused on AI than tariffs.
- Tariffs caused goods inflation to run higher than usual, but the magnitude is less than expected.
6. Credit Spreads, Investment Cycles, and Bubble Anxiety
(51:41–55:24)
- Credit Spreads Tight, but Not Worrisome
- “I don’t know if I would emphasize that too much. I think it's telling you that the economy's fairly healthy and there's ... little signs of stress.”
— Stephanie Roth (52:32)
- “I don’t know if I would emphasize that too much. I think it's telling you that the economy's fairly healthy and there's ... little signs of stress.”
- Investment Boom Context
- AI-related investment is substantial but, as a share of GDP, still below levels historically associated with bubbles.
- “When you get calls, is it a bubble? Your answer is no, maybe someday.”
— Michael Batnick (55:20, paraphrasing)
- Investor FOMO and Bubble Talk
- Many asking about bubbles are likely frustrated by missing out or anxious about valuations.
7. China, Trade, and S&P Market Risk
(57:37–60:14)
- US–China Interdependence
- Despite headlines, US/China trade exposure is fairly balanced. Key tech names (Tesla, Apple, Nvidia) have double-digit revenue exposure to China.
- “China was the only country that showed equal, roughly equal leverage to the US. Everybody else showed the US had a ton versus [them].”
— Stephanie Roth (58:05)
- Trade “Truce” and Market Rally
- The recent Biden–Xi summit “paves the way for the rally” into year-end—more about easing tension than a substantive trade deal.
Notable Quotes & Memorable Moments
| Timestamp | Quote | Speaker | |---|---|---| | 08:19 | “The spending is strong. It's gonna continue to be strong ... Is this a bubble? ... Our sense is absolutely no.” | Stephanie Roth | | 09:51 | “Productivity ... within the tech space has picked up a little bit ... My expectation is over the next couple of years this is what we’re going to be watching.” | Stephanie Roth | | 14:03 | “It’s roughly about a quarter of the GDP growth ... driven by all this capex spend so far.” | Stephanie Roth | | 16:58 | “The only thing we could find is the China supercycle ... $14 trillion. In today’s dollars, dot com was about a trillion. So nothing else compares outside of the China story.” | Stephanie Roth | | 24:08 | “A December rate cut is far from a foregone conclusion. That was by far the important thing ...” | Stephanie Roth | | 28:53 | “We're looking at a chart of household debt relative to disposable income ... the consumer is healthier today ...” | Stephanie Roth | | 36:42 | “People are not doing that because of the value of their house ... they're doing that because they feel rich.” | Michael Batnick | | 38:27 | “Millennials ... own about 23% of their net worth in equities. Boomers ... had only 6% ... at the same age.” | Stephanie Roth | | 39:46 | “About 60% of people working today are in jobs that didn't exist in 1940 ... Even though a lot of jobs will get displaced as a result of AI... eventually the economy will be in a better place.” | Stephanie Roth | | 52:32 | “I don't know if I would emphasize [tight credit spreads] too much ... the economy's fairly healthy and there's ... little signs of stress.” | Stephanie Roth | | 54:59 | “For the next at least 12 months, this is not a bubble and it's not an issue. It could become a bubble ... but I think we're a long way away from that.” | Stephanie Roth |
Segment Timestamps (for Key Topics)
- Tech Earnings & Capex: 07:52–23:30
- Fed Policy Commentary: 23:52–33:15
- Wealth Effect & Consumer Spending: 34:07–38:58
- AI & Labor Market: 39:32–42:22
- Inflation, Housing, & Tariffs: 44:59–51:28
- Credit Spreads & Bubbles: 51:41–55:24
- China Trade Exposure: 57:37–60:14
Original Tone and Style
The tone remains conversational, banter-heavy, and often playfully self-deprecating. The hosts weave in cultural references, inside jokes, and a bit of Halloween-flavored energy. Stephanie’s expertise as an economist shines, and her explanations are detailed but approachable. There’s a shared skepticism about both doomsday and euphoria narratives—favoring data, context, and humility about what the future holds.
Final Thoughts
Stephanie Roth’s presence catalyzes a thoughtful, multidimensional conversation that demystifies Fed policy, contextualizes the AI investment surge, and spotlights how much the current economic expansion relies on tech-driven capital allocation and society-wide equity market participation. The episode is especially valuable for listeners wanting both macro and micro investment insights, with practical guidance for understanding where the US economy, markets, and policy may head next.