Brian Wesbury explains why cutting government spending could be painful in the near-term but boost longer-term economic growth, similarities and difference between Trump and Reagan, and how he thinks about investing in an overvalued market.

• Net inflows for US-listed ETFs totaled $103.5 billion in January, bringing total ETF assets under management to $10.61 trillion. 
  
  
• Equity ETFs had net inflows totaling $59.3 billion in January, bringing trailing 12-months (TTM) net inflows to $793.7 billion. Active equity ETFs accounted for $20.3 billion in net inflows in January, compared to $39.0 billion in net inflows for passive equity ETFs. Total AUM in actively managed equity ETFs was $566.1 billion, accounting for 6.7% of all equity ETF assets ($8.46 trillion), as of 1/31/25. 
  
  
• Fixed income ETFs had net inflows totaling $38.3 billion in January, bringing TTM net inflows to $312.8 billion. Active fixed income ETFs accounted for $16.9 billion in net inflows in January, compared to $21.4 billion in net inflows for passive fixed income ETFs. Total AUM in actively managed fixed income ETFs were $304.1 billion, accounting for 16.7% of all fixed income ETF assets ($1.83 trillion), as of 1/31/25. 
  
  
• Commodities ETFs had net outflows totaling $0.7 billion in January, bringing TTM net inflows to $3.6 billion. Precious metals ETFs (-$1.1 billion) had the largest net outflows for the month, while broad commodities ETFs (+$0.6 billion) had the largest net inflows. 

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Interest rates and earnings...keep your eye on the ball. 

On February 11, 1990, Mike Tyson, then the most dominant boxer in the world, was knocked out in a fight in Japan by an unknown named Buster Douglas and the United States woke up in shock. On January 27th, 2025, NVIDIA, currently the most dominant company in the world, was “knocked out” by an unknown AI company from China named DeepSeek and the United States woke up in shock.

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Mandeep Singh, Global Head of Technology Research at Bloomberg Intelligence, joins the podcast to explore how massive investments in artificial intelligence made over the past few years could drive future innovations and profits. From humanoid robots to self-driving vehicles, Mandeep shares his expert analysis on the potential impact of these technologies in the years to come.

In the fourth quarter of 2024, alternative investments (“alternatives”), on average, had slightly negative returns with Real Estate being a large negative outlier as interest rates moved significantly higher. The Federal Reserve (the “Fed”) continued the path of lowering the Federal Funds Rate, choosing to cut 25 basis points at each of its meetings in the quarter. The U.S. Treasury curve steepened significantly as short maturities followed the decline in Fed Funds Rate, while yields 5 years and longer rose precipitously to completely unwind the rally in rates of the third quarter. Intermediate and long rates are now at levels above where they began 2024. Higher rates are likely the result of significant revision in expected Fed action and bond market participants way of co-opting the Fed's “higher for longer” mantra.  The economic picture domestically remains positive if not spectacular, in our view. Recent inflation data has trended upward, and money supply growth (“M2”) has been positive but concerns over faltering growth in China may be keeping longer-term inflation expectations in check.

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Companies are investing billions to build out artificial intelligence capabilities.  Ryan shares First Trust’s perspective on various investment themes that may benefit—either directly or indirectly—in the years ahead.

Artificial intelligence (“AI”) is widely expected to be the next great disruptive technology, but for AI to reach its potential, a significant increase in electrical power generation and transmission will be required. While most new power capacity has come from renewable energy in recent years, we believe natural gas will play a critical role in satisfying AI’s voracious appetite for electricity over the next several years. Below, we discuss some of the reasons that natural gas may be well-suited to meet our growing energy needs. We then highlight how the First Trust North American Energy Infrastructure Fund (EMLP) may benefit from growing electricity demand from AI and other sources.

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• Net inflows for US-listed ETFs totaled $146.1 billion in December, bringing total ETF assets under management to $10.19 trillion.
  
  
• Equity ETFs had net inflows totaling $121.1 billion in December, bringing trailing 12-months (TTM) net inflows to $753.3 billion. Active equity ETFs accounted for $18.1 billion in net inflows in December, compared to $102.9 billion in net inflows for passive equity ETFs. Total AUM in actively managed equity ETFs was $527.8 billion, accounting for 6.5% of all equity ETF assets ($8.12 trillion), as of 12/31/24.
  
  
• Fixed income ETFs had net inflows totaling $15.8 billion in December, bringing TTM net inflows to $295.7 billion. Active fixed income ETFs accounted for $8.2 billion in net inflows in December, compared to $7.6 billion in net inflows for passive fixed income ETFs. Total AUM in actively managed fixed income ETFs were $285.9 billion, accounting for 16.1% of all fixed income ETF assets ($1.78 trillion), as of 12/31/24.
  
  
• Commodities ETFs had net outflows totaling $1.5 billion in December, bringing TTM net inflows to $1.1 billion. Energy commodity ETFs (-$0.6 billion) and precious metals ETFs (-$0.7 billion) had the largest net outflows for the month.

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Last year was a spectacular year for the U.S. equity markets. Almost a repeat of 2023 in many ways. Stocks, as measured by the S&P 500 Index (“Index”), returned 25% in 2024, following a 26.3% return in 2023, resulting in a total return of 57.9% over the two-year period. In fact, the Index has delivered annual returns exceeding 25% in four of the past six calendar years.

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Paul Black and Mike Trigg are portfolio managers and co-CEOs at WCM Investment Management. They join the podcast to discuss WCM’s unique path to becoming a leading global equity manager, highlighting WCM’s unconventional approach for identifying investment opportunities, including why a company’s culture matters and the important of economic moat trajectory.