CapEx boom, margins and valuation questions

Ed Yardeni returns to Excess Returns to break down the evolving market landscape, why he moved the Magnificent 7 to underweight, and how AI, productivity, interest rates, global markets, and sector leadership will shape the next stage of the Roaring 2020s. Ed explains why the economy has remained so resilient, what could finally trigger a true market broadening, and how investors should think about everything from tech competition to inflation, private credit risks, and Fed policy heading into 2026.

Main topics covered
• Why Ed reduced the Magnificent 7 and tech from overweight to market weight
• How extreme sector concentration affects portfolio construction
• The escalating competition inside AI and large-cap tech
• The AI CapEx boom and how it changes earnings, margins, and valuation
• Valuation considerations for tech leaders at this stage of the cycle
• Whether the Mag 7 should be compared to past tech bubbles
• How AI adoption may spread to the broader economy and boost productivity
• Economic impact of AI on jobs, wages, and long-term inflation
• Why the US economy avoided recession despite persistent warnings
• Rolling recessions vs traditional recessions and how they shape markets
• Private credit risks and whether they pose a systemic threat
• Prospects for small caps, mid caps, financials, industrials, and healthcare
• Why 2026 may finally bring true market broadening
• The outlook for international investing and emerging markets
• Ed’s S&P 500 roadmap to 7,700 next year and 10,000 by 2029
• Fed policy, rate cuts, inflation, bond vigilantes, and political pressure
• Key risks investors should monitor heading into 2026

Timestamps
00:00 Mag 7 concentration and the case for rebalancing
03:00 How Ed builds probability-based market scenarios
04:30 Why the Roaring 2020s thesis still holds
06:00 The no-show recession and economic resilience
07:00 Why he moved the Mag 7 and tech to market weight
09:30 How every company is becoming a technology company
12:20 Knowing when a successful thesis has run its course
13:30 The dominance of the US market and global diversification
15:00 Why market weight, not overweight, for tech and the Mag 7
16:00 Tech competition, AI leapfrogging, and margin pressure
18:30 The CapEx boom and valuation questions
21:00 Comparing today’s tech leaders to the 2000 era
23:00 How AI could lift productivity across the entire economy
25:00 Putting AI in historical context
27:00 How new technologies solve constraints like energy and compute
29:00 AI’s long-term impact on productivity and growth
30:00 Labor market disruption and job transition dynamics
31:20 Will AI be deflationary over time?
32:30 Technology, China, automation, and global deflation forces
33:00 Ed’s forecast for the S&P 500 through 2029
35:00 Why recession indicators failed this cycle
37:00 How liquidity facilities prevent credit crunches
39:00 Private credit risks and transparency challenges
40:45 The potential for market broadening in 2026
42:20 Takeaways from the latest Fed meeting
44:00 Should the Fed be cutting rates?
45:00 Fed independence under political pressure
47:00 Why bond vigilantes may return in 2026
48:00 International investing opportunities and ETFs
49:30 Closing thoughts and key risks ahead