Welcome back to Squawk Box. Join us right now for a wide-ranging market discussion. Greg Fleming is here. He's the president and CEO of Rockefeller Capital Management. He's also former president of Morgan Stanley Wealth Management. We are always trying to figure out where we are in the sort of cycle of things. We've been watching a lot of earnings come out. You had Google come out spending a lot of money. There was a period of time where people loved when companies spent money. Now they don't like them spending money. Where are we really?
You know, I would say, first of all, we're always in that time and it is, you know, we want to live in interesting times. They certainly are with the technological change here. I think we're in a... there's plenty of reason to be optimistic, including the fact that the economy and the... the positive is broadening out beyond technology. You see small caps and you see, you know, I think the economy doing better on a broader basis. You've got extensive deregulation, which is a positive. You've got tax cuts coming, which is a positive. So, I think there's plenty of reasons that you got low energy prices. So, we can tick through a whole set of things that to be positive about. Some of the concerns that I still look at are ones we talk about every time here. The fiscal situation, the federal debt. Spending continues to be at, you know, 25% of GDP, which is way above trend line over since World War II or the last 50 years.
And that's an issue. And you know, you look at a place like Japan that recently had the spike in yields, you know, tied to the level of debt there. So, that's still a concern. There's clearly a shift going on in the technological world and in AI as everybody's trying to figure out where the different providers are. You know, when I look at AI and there's the universe of people that are bringing the agents and that are investing in all of that including the data centers. And then there are all the companies that are trying to use it to become more productive. And I think there needs to be more focus on the latter because the success of this technological revolution will come down to the thousands of private and public companies that are trying to use the tools to increase productivity and create an overall higher level of growth in the American economy.
That makes a lot of sense, but the gains that we've seen in the markets based the valuations on some of these things, the capex that we're seeing on that, is it justified by what you're talking about, the real good that's there, or do you anticipate that we will see some market swoons as the result of the market kind of getting out over its skis?
It's a great question. First of all, after the last 3 years, 54% increase over 3 years, when we've seen that in the past, the fourth year is always more volatile. So, later in the cycle, you have repositioning from, you know, one sector to another, which we're having now. So, we expect more volatility this year and we're seeing it. The other thing I'd say, Becky, on that is that there will be winners and losers in all that capex. And there will be, you know, and you see this, the market's pretty harsh if anybody misses, you know, even a Microsoft misses and it's off double-digit percentage-wise. So, there will be winners and losers in that and obviously all of the capex going into the creation of the tools isn't going to get the return that everybody's looking for. But if there's enough of a productivity surge on the other side, it can justify the overall level or come closer to justify the overall level of investment, you know, half a trillion dollars last year, more going forward. It is a technological revolution. If the product of all of those investments does change the way every company, public and private, in every industry functions and makes them more productive, then, you know, the revolution occurs and there can be some correlation between the amount that went in and the other side, but it has to be a broad-based impact.
But do you think on the other end people who have jobs and are making more money to pay for it? So, for example, I imagine your financial advisors who work with you are already using AI a little bit, maybe.
Yes. And my company is my company like every company's trying to figure out how to take the tools and make everything more efficient.
I imagine it's trying to make some of those people more productive and maybe it is. The question is whether the MD that used to have a couple of analysts that worked with them is going to need all of those analysts in the future. And what that ultimately looks like. When you think even about hiring, for example, over the next 12 months, has it changed?
Well, I'd say two things on this. One, you know, if we have a team of private advisors and they have say 20 clients and they're managing a hundred million dollars for each client. So, it's a two billion dollar book of client assets. And there's five people on that team. It could be they'll have 40 clients at a hundred million dollars each and have six people on the team in three years. And that's kind of the goal of the productivity increase. So, you know, everybody's reaching for that, Andrew. The other thing I'd say is and we've talked about this. After the internet really took off, you had something called a search optimization engineer, which none of us could have conceived of, you know, in 1995. And you had a whole bunch of them. Now, I've heard phrases like a machine behavior auditor. Will there be a job for somebody to watch the agents and make sure they're doing what they're supposed to? Or another job I heard about was a forensic trust specialist, somebody who goes in and makes sure that it really is Becky on the video and, you know, so maybe PR firms are going to need somebody like that cuz the client says, 'Hey, there's so much out there that's not us.' So, you know, technological revolutions create new jobs. And so far in history and ultimately I think this will probably be true here, but it could be there could be some painful transition moments. Every major technological breakthrough has created more jobs than it's cost in human history.
