Speaker 1:

From the New York Stock Exchange at the corner of Wall and Broad Streets in New York City, welcome Inside the ICE House. Our podcast from Intercontinental Exchange is your go-to for the latest on markets, leadership, vision, and business. For over 230 years the NYSE has been the beating heart of global growth. Each week we bring you inspiring stories of innovators, job creators, and the movers and shakers of capitalism here at the NYSE and ISIS exchanges around the world. Now, let's go Inside the ICE House. Here's your host Lance Glinn.

Lance Glinn:

Back in August, Opening Bell Daily's Phil Rosen joined me here at the New York Stock Exchange as we kicked off the first conversation of what will be and what has been a monthly recurring series focused on markets and the headlines that are moving them. Over the course of our first two conversations we have focused on the Fed, AI spending, the job market inflation among other topics. Now we may hit on some of those in our third conversation today. But the markets change, new headlines drive what's happening, and Phil is back once again to break it all down. Phil, thanks so much for joining me as always.

Phil Rosen:

Thank you, Lance, for having me.

Lance Glinn:

Let's begin with the government shutdown. As we record today on Thursday, October 9th, the government is still shut down. When this releases on Tuesday of next week that may still be the case, may not be, but no matter, the shutdown doesn't really seem to be impacting markets all that much. You put out a newsletter earlier this month titled, Wall Street is buying the dip on the government shutdown. In it you highlight the resilience of the market and how this current closure hasn't derailed new highs. So first, what do you think is just driving this resilience and has kept the markets largely in the green as the shutdown has gone on?

Phil Rosen:

Every investor I talk to, they say, "What government shutdown?" They're not even paying attention to the turmoil and the uncertainty in Washington right now, and you can see this in the VIX index, right? Since the government has shut down it has remained below its long-term average. And I think this morning it was at like 16 point something, and that's below 19, which is what it's usually at. So investors, traders don't even notice what's happening right now with the White House with lawmakers, and that has opened the doors to stocks going higher. We had a ton of bullish momentum going before the government shutdown, but since the government shutdown started it's almost as if we've taken away any potential bearish headwinds.

So, if you take out economic data that people were expecting to be lower or negative, the jobs report was supposed to be bad. You take that out of the equation, suddenly investors have more reasons to be bullish, because they don't have those negative indicators coming into the lane. So, all that has pushed stocks higher. Pretty much everything is going up. This is very much everything rally, right? You're seeing it with asset prices, you're seeing with hard assets like gold and Bitcoin. This is a very bullish time, and the fourth quarter is also the best quarter of the year for stocks. So, things probably are going up from here.

Lance Glinn:

And we're going to talk about Bitcoin a little bit later in our conversation, but you mentioned it, right? With no economic data coming out because everything's on pause, there are no bearish, as you said, headwinds to sort of pull anything back, right? We don't see the jobs report, we don't see anything like that, that puts pause on investors or those on Wall Street and says, "Hey, maybe we should slow down." So, it really is or has been helpful in a certain extent to the markets that the shutdown is happening. Do you think though that this resilience will hold if the shutdown stretches on? As we record, like I said, on Thursday, the government's been shut down for over a week now. What's the tipping point, if there is there, where markets might start to care a little bit more? Has history shown us anything where that may be the case?

Phil Rosen:

Yeah, I mean, the longer the government shutdown goes on, historically, then you could start to get a little bit more volatility, a little bit more negative returns. But generally, markets are flat to up on every government shutdown since decades past. And a lot of people were saying, when the government first shut down a week ago, they were saying, "Oh, now investors will be flying blind without economic data, so we don't know how to invest." That is a bunch of baloney. I think investors just took it as, "Okay, we're going to push asset prices higher." The bullish tailwinds are still in place. You have AI momentum. All that spending is going to, people still expect it to deliver ROI in the near term at least. And you have earnings expectations have been rising. And that typically does not happen this time of year, but analysts have been raising their expectations for the fourth quarter. And then you have recession fears getting lower. So, all the odds on prediction markets for recession have been going down for months.

So, you have those three things on top of the absence of potentially negative government data. There's no flying blind here. This is just confidence, optimism, a bit of frothiness, but I don't see asset prices pulling back because of the government shutdown.

Lance Glinn:

And I do want to stay on the topic of a strong and resilient market. Now, historically, September has been the weakest month for stocks, September of 2025 did not follow that historic trend. Why do you think we saw such strength this time around? Was it earnings, Fed expectations, AI hype, a mix of all three? What do you credit for? What really was a strong September?

Phil Rosen:

Yeah, I think it was all those things. The first Fed rate cut was huge. I think people were bullish on that cut, but also on expectations for further cuts into the year, and into next year. So that, plus AI plus earnings have been stronger than expected and continue to get revised. So all of that, it didn't really give people a reason to acknowledge the seasonality of September. So September, historically the worst month of the year for stocks that did not happen this year. And something you can look to as well. If everyone expects stocks to be negative, that might be reason to take the other side of that bet, right? And I think a lot of investors took that approach in September, and I don't see how this momentum could slow down, unless there was a real Black swan event right now.

And I think in a few months we might start to see some of the AI spending materialize, either good or bad. And that could be something that derails some of this momentum for big tech. But at this point that has not. There's been no indication of that. So, you see a lot of people point to the meteoric rise in tech stocks, like NVIDIA and others, but pretty much their earnings have justified those share prices. So, that's a pretty unusual thing actually. Because you have a lot of fears of a bubble. Everyone's afraid of a bubble, but earnings are justifying the share prices. So that kind of deflates the bubble fears in my view. Because we've never seen businesses this big make this much money this consistently. And I don't know if that trend is going to slow down anytime soon.

Lance Glinn:

And now we're heading into what's historically the strongest quarter of the year, since 1950 the S&P has averaged a 4.2% gain from October to December. Do you think, and it seems like I know the answer to this before I even ask, do you think we're set up for another strong finish to the year?

Phil Rosen:

All indicators would suggest that. And past performance not indicative of huge results, of course, but everything looks fairly bullish right now. And again, that could be, you only know it's a bubble in hindsight, typically, right? And right now there's a lot of speculation. You have a lot of capital and leverage going into the market, and you have a lot of credit in the market. And you also have maybe the best marketing campaign ever for the stock market in AI. So, you have all these ingredients to bubbles of history, but right now the enthusiasm is sort of washing over all of that. So, you have some pundits here and there saying, "Oh, it's a bubble." But I don't know if we'll see this. I don't expect anything to pop, let's say, by Christmas, if that's what you're asking. But it is true that if you wanted to take the devil's advocate, you have all the ingredients for a bubble right now. But then the new variable we're looking at is the robustness of these businesses.

Lance Glinn:

Is there anything investors should really be keeping a close eye on as the end of the year moves forward? As we get closer to 2026, we know that those first few months of new year tend to be a little bit more volatile. Should investors or Wall Street or traders, whomever, retail or experience, should they be looking for anything over the next months? And we can sort of talk about this as we talk in November, December. But anything in your eye that they should be looking forward to in the next few months that might move markets?

Phil Rosen:

Yeah, the biggest catalyst, in my opinion, will probably be more rate cuts. So the Federal Reserve is expected to cut multiple times into next year, and historically, those are very bullish for stocks. And then the AI trend is going to continue. So earnings are probably going to be better than we expect, and we're already raising our expectations for those AI companies. Those are a couple of things that I'll be watching. But the big topic that seems to be getting everyone's attention right now is the debasement trade. JP Morgan had a note a week ago, and they essentially declared the arrival of the debasement trade, which is actually not so accurate. Because of the debasement trade for gold bugs and Bitcoin investors, that's been happening for years. The debasement of the dollar and the loss of purchasing power, that is not a new phenomenon, but because JP Morgan has suddenly given a name to it, the financial press-

Lance Glinn:

Now it is.

Phil Rosen:

... can talk about it. You and I can talk about it, but this has been a ongoing trade, let's say. Not even a trade. It's more of an investment. The Bitcoin investors I speak with, they're very, very long-term oriented. So, they're not buying Bitcoin to make 5%, 20%, something like that. They're buying it because they do not want their U.S. dollars to be worth less in five years from now, 10 years. So, they're going to use Bitcoin as a savings account, instead of let's say, holding cash. And if you look at since the pandemic we've lost 25% of our purchasing power in U.S. dollars. So, Bitcoin or gold, I think makes sense as hard assets to not lose your purchasing power. And that's really been the big thing right now.

Lance Glinn:

And I had Bitcoin scheduled for later in our conversation. I want to move it up a little bit since we're touching on it. It does tend to perform well in October. It has performed well in October, closing higher in nine of the last 10 Octobers. What is behind this seasonal strength right now as we sit in 2025? Is it this historical momentum? Is it JP Morgan putting a name to this debasement trade? Are there underlying dynamics that really have driven this sort of pattern for Bitcoin and has propelled it over the course of the year, and especially now to really strong highs?

Phil Rosen:

So, Bitcoin investors know October is called Uptober, and the fourth quarter is excellent for Bitcoin typically. Bitcoin averages a 60% return in the fourth quarter dating back for 10 years, so that is very bullish for Bitcoin. But also right now you have the institutional backing and infrastructure of Wall Street going into Bitcoin. So you have these ETF products that are giving a lot of people exposure to Bitcoin that would never go out and get Coinbase and buy Bitcoin. So, this is giving a lot of, let's say, older investors or skeptical investors sort of a traditional asset to hold Bitcoin with.

Lance Glinn:

And it brings more to the party, essentially.

Phil Rosen:

Yes. Oh, huge capital going in. IBIT is the most profitable product for BlackRock, and that's their Bitcoin ETF. And it's only a year and a half old or something like that. So, suddenly you have this massive institutional vote of confidence driving Bitcoin's price higher, and you have all the money on the sidelines coming in that maybe a year or two ago would have no reason or no interest in Bitcoin. But because suddenly there's an ETF for it, that's pushing prices higher, for sure. And you have a lot of institutions buying into the Bitcoin treasury trend, let's say, right? So you have a lot of companies that are putting Bitcoin on their balance sheet to protect their purchasing power. Because they don't want to hold us dollars anymore. Because they know that a dollar is going to be worth maybe 20% less in five years. So, to them Bitcoin is a better bet, and I think in the last five years Bitcoin's up 1,000%, so it's paid off pretty well so far.

Lance Glinn:

We talked earlier about it in our conversation this AI spending, and obviously we've seen an influx of it as of late, largely driven of course by names like OpenAI, AMD, NVIDIA among others. How have markets reacted to these capital outlays and really the sheer size of these investments, because these are hundreds of billions of dollars worth of investments to AI and to all these different companies?

Phil Rosen:

And markets seem very optimistic right now. I will say the spending that these big tech companies are dedicating and committing to AI, and it's going out years and years in advance. So, some of these contracts, they're not going to be complete or paid off for 10 years. When you have that not worrying markets, so if you have a company committing hundreds of billions in capital over 10 years into a technology or an infrastructure that's not even fully developed yet, and the stock keeps going higher, markets are definitely optimistic about the tech, the business, the demand for these products. So, obviously markets are very bullish on this still. And this goes back to what we were saying about a bubble. It's you have the best marketing in the world right now on the future potential of AI. That makes everyone wants to get involved, get in the market. And these companies are capitalizing on that, because their share prices are exploding.

But I don't know, if you and I were to sit down in five years and say, "Oh, remember when we were having this conversation in 2025, wondering if it was a bubble?" We may not even know by then, because if all the spending just continues and then we still get the narrative of the ROI is coming years down the line, who knows? This thing could last a lot longer than anyone knows.

Lance Glinn:

This could be decades. This could be decades for us.

Phil Rosen:

Maybe, and we may not know the true value of all this spending for a long time. But right now, I think a lot of investors see it as an opportunity to make a quick buck. But also, some people really believe, "Okay, this is world-changing infrastructure, world-changing technology. You have to be very dumb to not participate in this."

Lance Glinn:

Well, Phil, I always look forward to our conversations. It was great having you at the NYC. As always, thanks so much for joining us Inside the ICE House.

Phil Rosen:

Thank you for having me.

Speaker 1:

That's our conversation for this week. Remember to rate, review, and subscribe wherever you listen, and follow us on X @ICEHousePodcast. From the New York Stock Exchange, we'll talk to you again next week Inside the ICE House. Information contained in this podcast was obtained in part from publicly available sources and not independently verified. Neither ICE nor its affiliates make any representations or warranties expressed or implied as to the accuracy or completeness of the information, and do not sponsor, approve or endorse any of the content herein, all of which is presented solely for informational and educational purposes. Nothing herein constitutes an offer to sell, a solicitation of an offer to buy any security, or a recommendation of any security or trading practice. Some portions of the preceding conversation may have been edited for the purpose of length or clarity.