This $1.5 Trillion Manager Expects More Fed Hikes. So Why Is He Still Bullish?

Mike Hunstad, president of Northern Trust Asset Management, estimates that AI accounts for more than half the risk in the S&P 500. For an investor who sees real promise in AI, that poses a practical question. How much of the portfolio should depend on being right about it?

Hunstad joins Jack Forehand and Justin Carbonneau to explain where he expects the payoff from AI to show up first. A company that uses AI to do the same work at a lower cost could see its margins rise well before the gains show up in GDP. He also explains how the stock market can move the economy in the other direction. If wealthy households have been spending some of their stock gains, a 20% equity decline could change what they buy.

The conversation turns to what investors actually own. Hunstad uses the changing makeup of the Russell 1000 Value Index to show how a value fund can carry more technology exposure than its name suggests. He also shares the question he would ask an active manager after hearing their best stock picks. Which stocks did you underweight to pay for those bets, and do you have just as much conviction in those decisions?

Topics covered:

- What Treasury yields tell Mike Hunstad about inflation and the Fed’s choices

- Why profit margins are his first test of whether AI spending is paying off

- How the spending habits of wealthy households can turn a stock market decline into an economic slowdown

- Where quality, value and low-volatility stocks fit in a portfolio with a large AI exposure

- How much stock actually becomes available to investors when a large private company goes public

- Why price-to-book can miss value in businesses built on intangible assets

- How tracking a company’s suppliers, customers and peers changes the way investors measure momentum

- When a factor looks cheap and why timing a shift into it is difficult

- How the stocks a manager leaves out can overwhelm the gains from the ones they pick

Chapters:

00:00 What stock prices and economic headlines are saying

06:45 The Fed, interest rates and the 10-year Treasury yield

11:11 AI productivity and the case for a positive supply shock

18:31 How a stock market decline could reach consumer spending

22:51 AI capital spending and the lessons of the dot-com era

28:54 Who captures the gains from AI, and how to measure them

34:18 Mega-IPOs and how much stock comes to market

38:36 What private markets add to a public equity portfolio

44:11 Measuring value and momentum through investor behavior

49:10 Can investors time their factor exposures?

57:16 The portfolio risk in stocks you leave out

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No information discussed in this podcast should be construed as investment advice. Securities discussed may be held by the hosts and guests, their firms or their clients.