Tech: The AI bubble. Capital expenditure (capex) on data centres is propping up the economy. There is circular financing going on. Nvidia invested in Open AI which will use the money to buy Nvidia chips. Also involved in circularity are Oracle, Microsoft and Meta. Rick Perry (the old pol) brought an IPO that valued the company (Fermi: power for data centres) at $6 Billion, but they have no assets and no sales.
AI is very real and will blow your socks off, but not this year, not next year. There will be an AI winter, as has happened several times in the last 50 years, but this one is likely to be the briefest and shallowest of them all because of the advancement of the technology. The current issues are that centres are overly expensive and the current tech is hard to exploit despite the over-promising. It is only generative AI that mimics good looking answers regardless of the underpinnings. Rest assured that the next AI summer will deliver on this summer's promises and will make a new round of over-promises. Each forthcoming AI summer from here on will blow your socks off.
Rates: Interest rates are coming down. That stimulates the economy. Some is a good idea to combat rising unemployment, which is subdued by greatly reduced firing and reluctance of people with jobs to quit and look for better. Immigration has shut down.
Delayed effects: The deferred resignation agreements (layoffs) are only just kicking in, as are shutdown furloughs and "reductions in force". Tariff effects have been smeared out and not imposed uniformly or with a steady hand.
Stimulus: The Big Ugly Bill is stimulative to the economy because it has ballooned the deficit. The impact of the debt is increasing all the time and will catch up. Another delayed effect.
Irrational exuberance: The market is as highly priced as it has ever been. See the Schiller (Nobel economics) CAPE index: https://www.multpl.com/shiller-pe It's higher than 1929 and almost as high as the 2000 bubble. There are frothy over-valued IPOs. The retail investor is relentlessly buying the dips but that means they won't get out in time and will be jamming the exits when the crunch comes. The Exchange Traded Fund (ETF) that focused on meme stocks is back now, after having crashed and burned a couple of years ago.
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