Welcome to Market Catalyst. I'm Julie Hyman. We are 30 minutes into the US trading day. So, let's get to the three market catalysts we're watching this hour. First up, we dig into the latest economic data and what it means for the Federal Reserve. Plus, Tesla rallies on progress in its Robo Taxi division. We'll dig into the outlook with Dan Ives of Wedbush. And we'll get a read on the state of consumer spending with the chief economist at the National Retail Federation. Let's get a check on the major averages here. We had of course the delayed jobs report today and it was a mixed bag. You know, we had downward revisions. We had a lot of job losses related to not the government shutdown but DOGE and the delayed effect of those cuts. But we had a more positive number for November than had been expected. So, put all of that together, you get a mixed picture for stocks right now. The S&P 500 barely higher, the NASDAQ up about a quarter of 1%, the Dow a little bit lower. We've been watching bond yields as well of course and we've been seeing some fluctuations and some volatility there as well. Well, as we mentioned, the November jobs report showing payrolls rising by 64,000, higher than the estimate of 50,000. Still, the unemployment rate ticking up for a fourth straight month to 4.6%. Joining me now, Mohamed El-Erian, Allianz's chief economic advisor. And Mohamed, I'm having a little bit of trouble with this jobs report, I don't know about you, just in terms of getting that clear picture of what is really going on.
So we should really look through this report. There are so many distortions and I think Jerome Powell was absolutely right when he said we shouldn't take anything out of it. But if you put a gun to my head and say ignore all the distortions you have to come up with a conclusion, and I say do I really have to and you say yes, I would tell you it just points to a weakening labor market.
And the weakening not just in... I mean we talked to an economist earlier who said most of it has to do with the government stuff, if you take that out it looks okay. I mean is that how valid do you think that assessment is?
So it is valid that a lot of it has to do with the government. We lost over 100,000 jobs there. However, if you look at the private sector you see it's all about health and education. The other sectors are struggling. And if you extrapolate what's happening to the unemployment rate you would worry. But I want to stress again, these data could be really distorted and we have to be careful how we interpret them.
Okay, so let's leave the jobs report aside for a moment then. You know, we get other jobs data to some extent, right? We get various private surveys, we get the weekly jobless claims. So if we pretend this didn't happen this morning and I said to you what's the character of the job market right now, what would you say?
I would say weak and most importantly, Julie, decoupling from GDP growth. So, we are likely to see continued solid GDP growth and a weakening labor market. That is a relatively new phenomenon and it's one that puts the Fed in a difficult position, especially given that the inflation rate is stuck around 3%. So, we will look good in terms of GDP growth, we will look weaker in terms of the labor market, and we've got to keep an eye on whether inflation expectations remain anchored which I think they will but that is key.
Why is that happening? The weakening labor market paired with expanding GDP.
Part of it has to do with the role of AI. AI related spending has become a major driver. It doesn't have the same multiplier effect through the economy as other spending does. Part of it has to do with the lower end of the household sector. The low-income consumers are having more difficulty. And I think looking forward, people are worried that as AI goes from being a demand issue to a supply issue, that that decoupling may increase. It doesn't need to. I want to stress it doesn't need to. If you talk to companies like Accenture, if you talk to a company like Walmart, they emphasize the labor enhancement side of AI. However, the tendency for a lot of companies will be the labor displacement side of AI.
Well, and how many companies? I mean, you know, whenever you see these kinds of technological advancements, you also see them being used as an excuse or reason to slim down even if it's not actually being replaced by that technology. How much of that is already happening and how much of that do you think we will see and how do you tell the difference, I guess?
It hasn't yet happened and it's a risk. You know, we've been in what people have called a low-hire, low-fire environment. If you're in a low-hire, low-fire environment, you think twice about getting rid of your labor force. If we suddenly see a spike in private layoffs, then other companies will use that as air cover. We haven't seen it yet. I want to stress we haven't seen it yet, but that is a risk going into next year.
There. I've heard some optimism around the sort of tax stimulus that's going to be coming into the economy both for consumers and for companies. How much do you think that will be a tailwind for 2026?
It certainly will be. I mean, we will have loose fiscal and monetary policy. We will have continued AI spending. We will have as a result solid growth above 2% which compared to Europe will look incredible. But that central scenario, as compelling as it is, I don't think commands more than a 50% probability. You have two tails that are equally fat. One is a boom, literally a non-inflationary boom as AI impacts the supply side and productivity goes up. And the other one is a stagflation. If the bond market decides to refuse to fund as easily as it's funded so far, all the demands from both the public and the private sector and if that's a policy mistake. So, it's going to be an interesting year because while there is a central scenario, it doesn't command an overwhelming probability.
Okay, I want to take each of those things and dig into them a little bit. Okay, so let's take the AI fueled productivity first. It doesn't feel like we're there yet. And so I wonder, you know, do you think that does start to really take hold in 2026? Is it the later part of 2026? And sort of what does that look like? How do we see that unfolding?
I do see it taking hold. So right now we're obsessed with those working on AI. You know, Gemini 3, how wonderful it is. Oh, no wait, OpenAI is going to come up with something. It's all about those working on AI. We haven't focused enough on those working with AI, the adoption issue. We don't have an adoption policy. It's not hard actually to put in place an adoption policy. If you freeze those working on AI where they are and you simply implement throughout the economy what they have achieved, you have a major productivity growth that is only in AI. What about robotics? That is coming down the pike in an important way. So I certainly think that we will see it play out over a number of years. There is a possibility, not a probability, a possibility that it could be accelerated, but that requires corporate America to really increase the adoption rate.
Are you using it? And which model are you using? Do you have a favorite one?
So, I use it all the time. I use Gemini. I think it's incredible what it does.
Like, what do you use it for? I'm just curious. I mean, I use it when I'm doing research for interviews, for example. I've been using Gemini also. So what do you, how do you use it?
So I use it for that. I use it for checking what I write. I use it for looking at slides I use when I teach and ask a simple question: How do I make this more engaging? I use it for a whole range of things and it has really increased my productivity. It also actually increases the time I spend on it because I get very intrigued by certain things. But it's incredibly powerful. I generate images and you'll see if you look at my weekly, you'll see the image generated and underneath I put generated by AI. And I simply say when I read a long report, just to make sure I don't miss anything, I say summarize the main points. So I use it all the time and I find Gemini 3.0 incredibly powerful.
Yeah, I like, I say I've been using that one too. So okay, so that's the one side of it. Let's talk a little bit more about Treasury supply, the bond market, because we've already seen little glimmers of that, right? At a time when the Fed is cutting, very unusually, 10-year and 30-year yields are going up. So, is that a sign of things to come next year that we could see more of that phenomenon in the bond market, especially with more Treasury supply coming to market?
So, there's tremendous supply from the public sector and from the private sector. Data centers now alone are going at a rate of 150 to 175 billion a year in terms of debt issuance. That is big. Then you have a 6% of GDP deficit. That's big for this part of the cycle. What I worry about is at some stage the bond market's going to say, you know what, we're not pricing in risk the way we should be pricing in risk. That is part of the downside scenario we talked about, is that the bond market's appetite, which has been incredibly strong, somehow becomes less so.
And how probable, where do you put that probability?
So I have, and that's not going to satisfy you, I have a 50% probability for the central scenario and about 25% for each side. And the big message of this, whether you're a policy maker, whether you are a market participant, whether you are a CEO, don't fall in love with your central scenario. Just recognize that it's a multimodal distribution and you've got to pay attention to the tails and you've got to ask yourself which tail can I navigate better.
Yeah, I mean that's a good lesson over the past few years. Don't get too wedded to that central scenario. Speaking of central scenarios and how things shift over time, we've got new betting odds on who's going to be the next Fed chair, right? Kevin Warsh has really gained in the odds market here. You and I have talked before about who the next leader could be. Is Kevin Warsh a good choice? Better than Kevin Hassett? What do you think?
So Kevin has gone from below 10% to today, I looked on Polymarket just before I came in, he was at 47.
Sorry, yes. And Kevin Hassett is down to 41. So that's a complete transformation. Now there's some circularity in this because it moved on President Trump's statements and of course it then attracted people to bet. Look, I have a better view of what Kevin Warsh would do as Fed chair than I do of Kevin Hassett. Why? Because Kevin Warsh has gone beyond the interest rate issue. He has written about balance sheets. He has written about reforms to the Fed. He understands that a Fed that has got its analysis wrong, its predictions wrong, a Fed that has governance issues, needs reform. So I am comfortable with what he favors in terms of Fed reforms. And we know much more actually about what he would look like as a chair than we know what Kevin Hassett is going to look like as a chair.
As an aside, how nuts is it that we're talking about the betting markets and who they think the next Fed chair is going to be? I mean, do you think that that whole phenomenon is useful for markets? Is it useful for society?
It's not useful for this. I mean, it's totally nuts for this because it's the decision of a single person. It is very different from when you're trying to predict millions of people voting. That's very, very different. But having said that, it's the delta that's interesting because the delta has moved on comments from President Trump.
Yeah, the one person who's making that decision.
Mohamed, thanks so much for coming in. It's good to see you.
Appreciate it. Coming up, we'll speak to tech analyst Dan Ives, who's got some big expectations, surprise, surprise, for Tesla next year. What he sees ahead for that company and the rest of the sector.
Tesla shares are near a record as the company confirms robo taxi tests without a driver are underway in Austin. Tech analyst Dan Ives saying Tesla's ambitions in the autonomous business could drive it to a $3 trillion valuation by the end of 2026. But we talked to Garrett Nelson, CFRA research analyst. He's not quite as confident. Looking at consensus numbers for 26 and 27, we think they're too high still and we haven't seen the worst of the drop off in their EV sales. In a couple weeks when they report fourth quarter sales, we will see that fourth quarter being the first full quarter in which the US market was not subsidized in terms of any sort of EV tax credit. Dan Ives, Wedbush managing director and global head of technology research, is joining me now in the studio. Dan, I know what you're going to say. He's too focused on the spreadsheets. He's too focused on the car business. I know what you're going to say by now. But this is how the company makes most of its money right now. So, yes, I understand the AI future, but what about the car present for Tesla?
I mean, look, if you're owning it for numbers and for the car business, I think that's the wrong reason.
But it has to fund the other stuff, right? And it's funding it in part through selling cars.
So it has to sell enough cars in order to not just make a profit but also to fund some of these ambitions. Right? I look at almost like a bracket, like in other words like a worst case, base case, best case. As long as it's sort of above a worst case, and I think now it is in terms of deliveries, then the business model continues to play out and that ultimately does fund what I really view as the key piece, which is the autonomous and robotics future. Look, in terms of if you started this year and I told you where numbers was going to be at the end of the year, you're like where's the stock going to be based on those numbers? You'd be like, ah, it's 200, 250.
But it speaks to my view, and you have talked about a lot, is when you look at physical AI, there's Nvidia and Tesla. I think the two best out there. And now it's about proving it out. But as an investor right now, if you're bullish on Tesla, you're not focused on consensus 26. But to your point, I do think deliveries has stabilized. I think China's actually shown growth. And you look at the last few quarters, it's actually better than expected.
I'm curious because you said you have worst case, base case, best case. What's your worst case scenario for Tesla?
Well, I think worst case, if you go back like 6 months ago, I mean, we felt like worst case.
Yeah, it felt like worst case because also given deliveries, given a lot of the brand issues, given what you saw in Europe and obviously, you know, tax credits coming off in terms of the US.
So we were trending toward a worst case. And look, it spoke to my view where Musk needs to be a wartime CEO focused on this core Tesla chapter, which I view is probably the most important chapter ever for Tesla and for Musk. So I think you now are seeing a different Elon. You're seeing a different company. And look, Julie, I think we sit here a year from now the stock's at 650, 700, or it's lower than here. In other words, this is a make or break year.
I'd call it a make or break year.
And I think it's going to be make relative to autonomous, 30 cities showing the volume production, not just delaying it. I think that's why it's such an important year.
Okay. So you mentioned a couple of the goals there. Give me the top three things that it needs to do this year to push it higher rather than going lower.
Well, one, I mean you need to be in 30 cities. When you look at Austin and now what we're seeing in California and some other cities, you need to be in 30 cities with the robo taxi. So that's one. Two, no safety driver. Now you're starting to see that now in Austin. We saw it firsthand. You need to see the geofence area expand to a point where I believe it gets significantly more than where Waymo is, right? You know, relative to even having a huge head start. And I think the third is volume production. In other words, you actually need to show volume production of Cybercabs coming out of Gigafactory in Austin. Look, I think those are the three that are extremely important to show. Okay, is the whole story going to take hold this year? No. But it shows that those are huge building blocks to what I view as kind of the future of Tesla.
And it's interesting that you say that because Musk has always been good at vision and big pronouncements, but what you're talking about is execution and there his record has been less even or at least less consistent on time, right? He's had a lot of delays in the past. So you're confident though that you think he can hit those goals?
Look, it's just like SpaceX. I mean, you're trying to solve the most complex AI, I'd say like some of the biggest problems out there. When you do get to full autonomous, you're dealing with lives. You can't just be 99%. I mean, so you're talking about the margin of error. You can't even look at it in a spreadsheet. So, this is something where it's so important that they do this from a safety perspective and continue to stretch it out step by step. But look, I mean, I think autonomous alone is worth a trillion. And I think when you look at robotics, you look at Optimus, you look at this all playing out, that's how I get to in a bull case, a $3 trillion valuation at the end of 26.
Okay. I'm curious about something. I know that they've put Grok in some of the Teslas, right, which is the xAI LLM. Have you been in one of them that has Grok? Like how do you even, do you talk to it while you're driving? What do you do with it?
Yeah, it's interacting with it. And I think that's something you just like need somebody to chat with. You chat with your Grok in the car. What do you do with it? But to some extent it speaks to that's going to expand because the whole view is that this is all part of the Musk ecosystem. I mean, Tesla is going to own, I think, a decent-sized piece of xAI. You look at SpaceX that's going to go public next year. And I think it's possible Tesla will also have ownership, at least a piece of SpaceX. And then you look at Grok and you look at everything that's happened here. I mean I think eventually what this is all going to, there's going to be some holding structure that you probably as a public entity in terms of Tesla, xAI, whatever they own a SpaceX and some other things. But look, I think this is sort of the vision for Elon. He recognizes in this arms race with Altman, with Jensen, with Nadella, with what we see from Palantir and everything else, this is the time. This is not a time to watch from the sideline.
Yeah. Okay. I was just talking to Mohamed about how he uses... Thank you. How he uses these large language models. Which one is he? I'm curious, like are you a ChatGPT guy? Are you a Grok guy? And how are you using it?
ChatGPT, also Gemini, use a little Grok and Perplexity. So I use it for different things. I think you know each has its strength. Look, I use it every day in terms of like organization, content. You know, it's one where like solving different problems, like my travel. I mean, so depending on different ways, I use them. But it's something where this is just the beginning because you think about like autonomous, like most consumers, the models are just the beginning. It's going to be like robotics. It's going to be, you know, when you look at autonomous, it's going to be what ultimately will be like Apple having a true AI store in terms of apps. And I think that's where everything's heading. This is just year three of an 8 to 10 year buildout.
I know that Brian Sozzi, I don't know if you know, OpenAI is Yahoo Finance Company of the Year. And he was zeroing in on the idea that OpenAI might come out with a phone at some point. Do you think that's a competitor for the iPhone or do you think no?
I wouldn't say necessarily a competitor to the iPhone just like when we've seen other companies try to go after that. But it does speak to what Sozzi is talking about. OpenAI, like they're planting flags everywhere because what they're essentially doing is like look, they're building the stack. I mean you could say it's a combo Amazon, Apple, Google all combined in terms of what they're doing. Look, some have criticized that and I think you've seen names like Oracle, obviously that's been an overhang on it. But I just continue to view like you're building out a new economy. You're talking about trillions being spent. For the first time in 30 years, the US is ahead of China when it comes to tech. And that's very important relative to where OpenAI stands and relative to the US ecosystem in terms of big tech.
There's another stock I want to ask you about and that is CoreWeave, which as you know has sold off pretty sharply. Maybe the company didn't sort of message very well about some delays at one of its data centers in terms of construction or one of the data centers it's leasing, not that it owns. Are you worried about that name in terms of execution risk, in terms of debt, in terms of the business model?
Yeah, I'm not. I mean, because I look at CoreWeave, Nebius is another one in terms of some of the Neoclouds. Look, I just my view is like you're going to see things quarter to quarter move out. You're going to see some blemishes in this really fourth industrial revolution. But I don't view it as sort of these panic moments, everyone heads for the elevator, yelling fire in a crowded theater. I mean, I do think this is one where it's going to be hyperfocused, but the onus is on them to execute, communicate it. Because right now, like look, investors are so sensitive naturally, right? In terms like is this a bubble? Again, like I've told you, I think it's 10:30 p.m. in that AI party that goes to 4 a.m. But these are that the responsibility is on the companies to communicate.
Okay. So, let me ask you this then. I understand the thesis on the whole AI space, but if there are ones that are maybe a little bit higher risk in terms of messaging and execution, why not avoid that one? Why not just buy the other ones that don't necessarily have that risk?
No. And like in our ETF, we have the 30 AI names. I mean CoreWeave is one of them. But the point is you can't just bet on one company. I think you do have to, whether it's the Godfather of AI Jensen Nvidia, whether it's AMD, whether it's Micron, on the software and the hyperscaler side, bet on your Palantirs, the MongoDBs, the energy companies, the GE Vernovas and others. So I do think to that point, you have to think about a barbell approach. If you just bet on one, there's risk, right? In terms of what could happen with that company. I mean, Oracle would be a perfect example. I think when it comes to the best way to play AI revolution, you have to own some chip names, software.
But I guess I'm asking why not avoid say a CoreWeave and an Oracle? Why not just leave them out?
