In This Article:
The "magnificent seven" powered the major indexes higher in the first half of the year, mainly thanks to investor excitement surrounding AI. Citigroup U.S. Equity Strategist Scott Chronert Tells Yahoo Finance Live that the AI boom was a "shock effect" to the market. Chronert says AI will be "an important part of the narrative going forward, but expectations, I think, we just have to give them room to adjust."
Video Transcript
JULIE HYMAN: Markets have remained under pressure in recent weeks and attempts of a rally this month have been ultimately short-lived. Even today, that's the case. Cautious investors wary of weaknesses in the market are looking for any chance of softening in equities and bond yields. As more strategists see growing signs, a correction could be coming.
Let's bring in Scott Chronert, Citigroup Equity Strategist, to weigh in. Scott, it's great to see you. Even--
SCOTT CHRONERT: Likewise.
JULIE HYMAN: I mentioned, even today, this is happening, right? We had this huge NVIDIA-spurred rally in the shares of NVIDIA and in the NASDAQ and now it seems to have faded. Are we seeing diminishing returns from this sort of AI enthusiasm?
SCOTT CHRONERT: So I think that's a fair question. The way I would characterize it is that we talk about shock effects to the market both to the positive and to the negative. And I think the last quarter result and the influence that had on the broader semi and big seven was pretty impressive. And that was the more positive shock, if you will.
Investors have had now time to process this. And so going forward, it becomes more company-specific and becomes a little bit more incremental. And so I just think we just have to have that perspective. I don't think the AI trend and the influence it can have on S&P 500 earnings longer term is at risk here. I think it's still an important part of the narrative going forward.
But expectations, I think, we just have to give them room to adjust as previous events have unfolded. And now, we're looking at new incremental information.
BRAD SMITH: Amid the AI hype phase right now, and as we've kind of transitioned to the show me part of that phase too, what are the defining characteristics of a growth name in that environment?
SCOTT CHRONERT: So it's a good question. So, typically, you go back over the years and looking at growth stocks. And you do need to see an ongoing positive trajectory and revision bias to the numbers, OK? That usually is how you define growth. And that's how you define growth relative to economic sensitives or cyclicals.