CREDIT FIRM. VICTOR, WHAT YEAR IT HAS BEEN FOR CREDIT. THIS IS AN INDUSTRY THAT HAS BEEN IN FEARS DEFENSE OF ITSELF, BLUE OWL VOCALLY SAYING YOU ARE WRONG, JAMIE DIMON.THINGS ARE NOT WRONG. YOU MAY BE SIDE A LITTLE MORE WITH JAMIE DIMON IN THIS ARGUMENT. VICTOR: WE ARE LIVING IN A WORLD WHERE IT IS TRULY A K-SHAPED WORLD.TECH, DATA CENTERS, FINANCING THEM, BUILDING THEM, GOING OUT WITH THESE VALUATIONS, THAT IS A VERY HOT MARKET. THERE IS A WHOLE OTHER PIECE OF THE INDUSTRY, THE BOTTOM PART OF THE K. WHEN W ...

CREDIT FIRM. VICTOR, WHAT YEAR IT HAS BEEN FOR CREDIT. THIS IS AN INDUSTRY THAT HAS BEEN IN FEARS DEFENSE OF ITSELF, BLUE OWL VOCALLY SAYING YOU ARE WRONG, JAMIE DIMON.THINGS ARE NOT WRONG. YOU MAY BE SIDE A LITTLE MORE WITH JAMIE DIMON IN THIS ARGUMENT. VICTOR: WE ARE LIVING IN A WORLD WHERE IT IS TRULY A K-SHAPED WORLD.TECH, DATA CENTERS, FINANCING THEM, BUILDING THEM, GOING OUT WITH THESE VALUATIONS, THAT IS A VERY HOT MARKET. THERE IS A WHOLE OTHER PIECE OF THE INDUSTRY, THE BOTTOM PART OF THE K. WHEN W ...

Group 1 - The market is currently focused on competition, particularly from models in Europe and Asia, with China launching several initiatives [1] - There is a prevailing sentiment that the overall market capitalization and valuation are improving, with clients maintaining their positions in AI and semiconductor sectors [2] - Exposure to US consumer-related stocks, especially in distressed discretionary staples like food production, is decreasing, indicating a K-shaped economic recovery [3][4] Group 2 - The K-shaped economic trend suggests that while some sectors may experience earnings growth, inflation is eroding real earnings, impacting corporate investment and equity performance [5] - Concerns about US consumer spending are leading companies to focus on higher-end consumers, particularly in the food production sector, which may face margin stress [5][6] - Clients are reallocating resources towards capital expenditures (CapEx) rather than consumer-related investments, reflecting a cautious approach in the current economic climate [6]

Market Competition & Global Landscape - The market anticipates increased competition, not only within the US but also from models in Europe and Asia, including China's emerging presence [1] - Cost-effectiveness is a key consideration, particularly in making Asia training more competitive [1] Investment Strategy & Market Resilience - The market views the overall situation as a rising tide that lifts all boats, emphasizing the importance of total market capitalization and valuation [2] - Clients are maintaining their positions in AI and semiconductor sectors, demonstrating resilience in recent weeks [2] Consumer Behavior & Economic Trends - Clients are reducing exposure to US consumer-related stocks, including discretionary staples like food production, indicating a K-shaped economy [3][4] - Earnings growth in real terms is being eroded by inflation, impacting corporate investment and equity performance, especially for companies concerned about US consumer spending [5] Margin Pressure & Resource Allocation - Potential margin stress in consumer staples may not align with current macro data [5][6] - Clients are shifting resource allocation towards investment and CapEx, away from the consumer side [6]

Group 1: Company Performance - Mastercard reported a top- and bottom-line beat for Q3 2025, with revenue growth of 15% year-over-year (YOY) [1] - Visa achieved a small EPS beat and a significant revenue beat, with net revenue up 11% YOY and EPS up 14% YOY [2] - American Express missed revenue expectations but had a strong EPS beat, raising full-year sales guidance to reflect 9-10% growth [3] Group 2: Economic Context - The Federal Reserve reported that net credit card charge-off rates at commercial banks have decreased to 4.17%, nearly 50 basis points lower than the previous year [4] - Despite weak consumer sentiment indicated by the University of Michigan survey, consumer spending remains resilient enough to support the economy [5] - Consumer delinquency rates are rising, and market volatility reflects investor concerns about economic conditions [6] Group 3: Market Dynamics - American Express is positioned to benefit in a K-shaped economy, with affluent customers continuing to spend while lower-income consumers become more frugal [7][9] - Visa and Mastercard are more vulnerable to economic downturns affecting lower-income consumers, as they primarily earn revenue through transaction fees [11] - American Express has a more attractive valuation compared to Visa and Mastercard, trading at 23 times forward earnings and 3.5 times sales, while Visa and Mastercard trade at higher multiples [12][13] Group 4: Stock Performance - American Express shares have increased nearly 40% since April, outperforming Visa and Mastercard [13] - For Visa or Mastercard to catch up to American Express, economic distress would need to impact higher-income earners, which is not currently anticipated [15]

Group 1 - China's debt level has surpassed that of the US, leading to concerns about the rapid accumulation of debt and the People's Bank of China (PBoC) cutting interest rates to manage it [1][5] - The US middle class is shrinking, not due to an expanding lower class, but because more individuals are becoming wealthier and joining the upper class [2][5] - The average age of first-time homebuyers in the US has increased from 33 years before COVID to 40 years in 2025, indicating a growing affordability crisis in the housing market [2][5] Group 2 - Despite bearish sentiment among retail investors, the S&P 500 has experienced a significant rally, raising questions about whether this is the "most hated rally ever" [3][5] - Gold prices have rebounded and are trading significantly above US$4,000 per ounce, reflecting a positive trend in the precious metals market [4][5]

Economic Outlook - Wall Street warns of a "K-shaped" economic recovery [1] Potential Risks - The "K-shaped" recovery implies a widening gap between different segments of the economy [1]

Core Insights - Global equity markets experienced a rally in Q3 2025, driven by enthusiasm for generative AI and strong capital flows into semiconductors, with the MSCI All Country World Index reaching record highs and returning 7.7% [7][8] - The U.S. equities outperformed due to robust economic growth and earnings, while emerging markets, particularly China, saw significant gains fueled by AI optimism and supportive government policies [8][9] - The investment strategy focused on quality growth faced challenges as the market favored high-beta growth stocks, leading to underperformance relative to broader indexes [8][16] Market Performance - The Polen Global Growth Composite Portfolio returned 3.0% gross of fees and 2.7% net of fees in Q3 2025, underperforming the MSCI All Country World Index [17] - Top contributors to the portfolio's performance included Oracle, Shopify, and Alphabet, while the largest detractors were Paycom, SAP, and Adyen [17][18] Investment Activity - New positions were established in NVIDIA, Broadcom, TSMC, Boston Scientific, and Uber, while positions in ADP, Airbnb, Accenture, and Thermo Fisher Scientific were eliminated to optimize portfolio positioning [22][23] - The decision to invest in semiconductor companies was influenced by the increasing demand for AI-related hardware, with NVIDIA expected to generate earnings growth of approximately 20% per year [25][26] Economic Context - The U.S. economy grew at a revised annual rate of 3.8% in Q2 2025, driven by technology capital expenditures and AI-related spending, despite concerns over a softening labor market [10][13] - The Federal Reserve lowered interest rates by 25 basis points for the first time in 2025, indicating a shift in focus towards employment [13] Sector Analysis - Defensive sectors like healthcare and consumer staples lagged as the market bifurcated into 'AI winners or losers,' with high-beta growth companies dominating returns [15][16] - The hyperscaler management teams indicated significant increases in future capital expenditures, particularly for AI-related projects, reflecting strong demand in the sector [14] Company-Specific Highlights - Oracle reported a 359% increase in remaining performance obligations, highlighting the demand for cloud computing and AI infrastructure [11][12] - Boston Scientific is expected to grow earnings in the mid-teens over the next 3-5 years, driven by its innovative medical products [29] - Uber anticipates nearly $200 billion in booking transactions for 2025, with a projected earnings growth of around 20% per annum over the next five years [30]