Stocks Get AI Boost as Bonds Rise After Jobs Data

Core Insights - There is a prevailing sense of fear among clients despite a strong air story and enthusiasm for alternatives like gold and crypto [1][2] - The AI narrative remains robust, indicating a significant focus on technology's impact on the economy [2][6] - Fixed income has shown strong returns in 2023, leading to discussions about its role as a hedge and the viability of traditional investment strategies like the 60/40 portfolio [4][5] Investment Strategies - There is ongoing hesitation regarding fixed income as a hedge, particularly after the events of 2022 [3] - Rebalancing discussions are crucial in the current innovation cycle, where volatility may arise from overenthusiasm in AI-driven markets [6][7] - Monthly rebalancing schemes can lead to significant turnover, indicating a trend among retail investors to actively manage their portfolios [9] Market Valuation - The U.S. market is perceived as expensive relative to other markets, with high valuations across various sectors [11] - Research indicates that modestly high valuations are not predictive of returns, emphasizing the need to focus on extreme valuation moments [11][12] - Most sectors are currently viewed as having extreme valuations, warranting caution in investment decisions [12]