The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Easing back in
Futures rallied small last night and stayed positive into the open. Overseas markets rallied over a percent, so the risk-on trade carried over the ocean to us. The S&P opened about 10 and rallied substantially just before 10 AM. This coincided with a sharp rally in Europe, just as that market was closing. We treaded water about the 6900 level for the bulk of the day, fading in the afternoon and finishing with a modest gain at the close. Treasury yields climbed a bit across the curve as strong US economy narratives spread across the Street.
News wasn’t very influential on stocks today. The absence of zinger headlines, specifically AI-scare themed, seems to soothe the nerves of the market. With each uptick and non-scary headline, investors are growing more courageous to buy the dips, especially in tech stocks. The price action of last week is looking more and more like a boy-who-cried-AI situation. As such, investors are returning to the stocks that have been so good to them for so long.
It’s not that markets are dismissing the AI-scare as bogus. It’s just that without concrete examples of existential threats, investors are viewing last week’s concerns as some combination of early, overdone, and misplaced.
Consensus is that the market imagined a crisis. It didn’t actually witness the start of one. That could be a mistake. The imagination of the market isn’t always wrong. There’s merit to it in many cases. Currently we have to evaluate whether the imagination of last week has some predictive element to it, or if it was fear of a fiction.
As things remain quiet and as we slowly advance, more and more investors come to believe that the AI-scare was/is a bogeyman. If the AI-scare turns out to be real, an evidential news item will break the tape. It will be fast. It will be bad. The longs will feel serious pain. Would it trigger a crash? I don’t think so but that’s a reasonable possibility.
My speculation is perhaps too dire. The market doesn’t believe that a real AI-scare event is coming. I hope it’s right. I can’t shake the doomsday scenario.
Maybe this is just a psychological rabbit hole. The market stopped going down it this week. Maybe we need new highs to pull the fearful (myself included) away from their paranoid delusions.
See you tomorrow.
-Mike
Visdom Market Commentary
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