Can't connect productivity improvements to AI yet, says Charles Schwab's Liz Ann Sonders

let's bring in lazan Saunders Charles Schwab Chief investment strategist lazan I know you've been listening to this conversation a lot has been written about the line from Nvidia to say manufacturing construction to productivity and what that does to real rates over time are you a Believer longterm I I agree with what David said I think this is a very positive long-term productivity story I'm just not sure you can yet connect the dots to what we've seen in productivity improving as being either

broadly about or very specific to uh AI I think that's coming but um also to your point you've got Nvidia and it's you know 40% of its customer base is represented by the small handful of companies that are also within the Magnificent 7 and I think that's been the market story but but under the surface there's obviously a lot more churn in averages particularly like the NASDAQ where the average NASDAQ member has had more than 20% draw down from a year to date High you don't see that when you jus

t look at the averages because of the dominance of names like that right what do you make of I was talking to Jim earlier this morning about how we were sort of supposed to be mired in this seasonally weak period uh the number of rate Cuts has been coming off and yet here we are at record closes what does it count for then well this is going to be the interesting thing to see how much of the Market's overall gain is a function of Fed rate Cuts now even before the the hotter CP report and the bet

ter than expected jobs report we as you know Carl we were not in the camp that felt that March was the start point I think that that market had gotten a bit over at skis not just with an early start point but six or seven rate cuts and the market obviously has come back to where the FED uh sits right now but I'm not sure that that just translates immediately into okay they'll they'll cut in May and it'll only be three times a data dependent fed means we're at the mercy of the data and I think re

ally key in the pce report you know Sarah talked about the 3-month change the six-month change which historically has been what the FED has focused on not just the most recent Point number but less so at the most recent press conference but specifically at the 60 Minutes interview that uh Jay Powell did he talked about a 12-month change I think that was just another way to talk about they want to see an extended period of time where that disinflationary trend is in attacked and so that that make

s those 12month numbers I think a little bit more of a tell with each uh inflation report that we get pce or otherwise are you Fielding questions lazan from clients about about do com bubble I mean I I can't tell you how many charts are being passed around now that are comparing Nvidia to Cisco back then or comparing the market cap growth of Nvidia to other you know big big tech companies during the internet bubble what do you say to that tons of tons of questions and and you can certainly point

to valuation problem but the underlying strength of these companies in terms of cash flows and profitability is starkly uh different from what was going on not across the board in the late 1990s you had strong tech companies that still exist today that are large and meaningful but you also had so much silliness at the time and you know valuations on things like eyeballs and really no prospects certainly with the benefit of hindsight of profitability in a lot of these companies that's not the ca

se that that doesn't mean you don't end up in a valuation bubble of sorts but I think that the denominator of this equation in this environment is I think the most Stark difference relative to the denominator in the equation back in the late 1990s