Charles Schwab CEO Rick Wurster Talks Future of AI

Rick Wurster · The Charles Schwab Corporation

Not clearly a bubble: many stocks look fairly or undervalued, though some are richly priced.

Rick says the market feels like a boom after several years of strong returns, but he is not convinced it is a bubble. His reason is that a tremendous number of stocks look fairly valued or undervalued. Some highly valued companies have incredible fundamentals and are creating new markets, so high multiples are not surprising. He still finds many companies that look cheap.

“one thing that gives me some confidence that maybe we're not in a bubble is there is a tremendous number of stocks that I think are either fairly valued or undervalued.”at 4:48

Rick Wurster · The Charles Schwab Corporation

US economy and markets are strong, driven by productivity gains and a historic AI investment boom.

Rick says the economy is strong and that is why markets have kept rising despite uncertainty. He points to incredible productivity growth and an AI-driven wave of investment at a level he has never seen in his career. He sees fundamentally a lot of great things happening.

“You're seeing incredible productivity growth. This birth of AI that's driving a lot of incredible level investment, certainly level of investment I've never seen in my career.”at 12:55

Rick Wurster · The Charles Schwab Corporation

Midterm uncertainty is a short-lived market headwind; markets have risen after every midterm he cites.

Rick says the market does not like uncertainty and the midterms create some. He expects the market to get past it soon. He cites past midterms, where the market went up after the election cycle got through, in what he says is 19 of 19 cases. He argues the economy's strength is what has kept markets rising.

“The market doesn't love uncertainty, and and the midterms create uncertainty. But we'll get past that soon. And if you look at the past midterms, 19 of the last 19 midterms after we've got through them, the market's gone up.”at 12:55

Rick Wurster · The Charles Schwab Corporation

Inflation is the biggest risk to stocks, mainly by pushing bond yields up and lifting discount rates.

Rick names inflation as the biggest risk to the market. The mechanism is that if bond yields keep rising, the large amount of debt in the world becomes more expensive. The discount rate applied to equities then rises. Carol notes inflation seems persistent, and Rick agrees it is something to watch.

“I think to me, the the biggest risk is inflation because the way inflation could hurt the market is if bond yields continue to go up, there's a lot of debt in the world.”at 13:42