“Small caps have been overlooked for a number of years now, and you’re going to begin to see a trickle down.” – 04:00
Kristof Gleich, President and CIO of Harbor Capital, joins Remy Blaire to discuss the current financial landscape, particularly in light of ongoing trade tensions between the U.S. and China, and the implications for investors navigating these complexities.
As the earnings season kicks off, Remy and Kristof explore the performance of America’s largest banks, which have reported robust earnings driven by a strong deal-making environment and fixed income trading. Kristof highlights the bifurcation in the market, distinguishing between AI-driven technology sectors and more traditional industries. He expresses optimism about the economy’s resilience, suggesting that growth could accelerate into 2026, while also emphasizing the importance of monitoring top-line growth in AI companies as earnings reports unfold.
The discussion shifts to the various factors influencing U.S. equities, with Kristof noting the volatility experienced earlier in the year due to tariffs and trade policies. He believes that these concerns have largely settled into the background, paving the way for more positive economic policies, such as the One Big Beautiful Bill Act. This transition, he argues, is likely to foster a reacceleration of growth, creating a somewhat paradoxical market environment where strong fundamentals coexist with ongoing trade issues.
A significant portion of the episode is dedicated to small-cap stocks. Kristof reveals that while 50% of expected earnings growth this season is concentrated in just six major tech companies, he anticipates a catch-up trade for small caps, which have been overlooked for years. He discusses the burgeoning demand for data centers and the subsequent need for industrial equipment, suggesting that specialized small-cap companies could benefit from this CapEx boom. Kristof stresses the importance of a selective, active investment approach in this space, as many small caps remain unprofitable.