The Bubble Question

In this episode of The Markets, Chris Hussey interviews Mike Washington on the Goldman Sachs trading floor about the third quarter earnings season, the trade war, and potential market bubbles. Mike notes the resilience of U.S. bank earnings and consumer spending, even at the lower end. He observes that while the market is fragile to external shocks like tariff announcements, retail investors quickly buy the dips. Mike also addresses concerns about a market bubble, arguing that current valuations, flow of funds, and consumer strength do not indicate an imminent collapse, though a 5-8% pullback would make sense. Mike suggests focusing on retail, which has underperformed recently despite strong consumer data, and recommends buying downside protection given the uncertainty due to a government shutdown and missing economic data. He also emphasizes the importance of the upcoming earnings reports from the top 10 U.S. stocks, which make up a significant portion of the global stock market.