Maybe people are asking the Wrong Question…

It seems like the people involved in the markets are bogged down in the question, “are AI stocks in a Bubble“. As I keep saying, in a Macro sense that may be true. However, in terms of reactionary trading parameters, we are not close to a bubble yet.

Maybe the big question at the moment is, what is the real state of the economy. What is the market starting to realize since the beginning of the year. Maybe the market is realizing a number of things:

  1. That cutting regulations may not be a big short-term positive economic factor.
  2. The continued Yin-Yang Trump activity may be wearing down the economic outlook.
  3. The number of workers employed is below needs, forget the unemployment rate, the fact is the number of potential workers is weak at best.
  4. That the main driver of GDP is the buildout of the AI infrastructure, a sector that is years from showing a payback of that investment.

What evidence is there that is showing the possibility of a different real economic situation from what the market is viewing? It is the 30-05 YR Yield Curve, supposedly Alan Greenspan’s number one thing to watch. In the short term sense it has fueled asset markets since July 2023. In the longer term sense there is a different predominate direction, a down direction since 2014. This chart is based on weekly data updated today at noon. With the daily chart the curve peaked on January 7th as Trump’s negative market actions started escalating again.

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