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Liz’s view The bull market of the early 2010s was called the most hated rally in history. This one may be a close second. Back then, investors underestimated the power and determination of the Federal Reserve to prop up a flagging economy. Flatlining corporate earnings, European debt bombs, and runaway government spending disappeared into a sea of free money. Today’s problem is hyperscalers spending themselves into oblivion, spreading inflation well beyond Silicon Valley and obscuring problems nearly everywhere else. The S&P 500 hit another record yesterday, even as oil stays trapped in the Gulf and Europe tilts toward another debt crisis. The rally is driven by just a handful of AI companies. Some of them have the earnings to back it up — Goldman Sachs expects Nvidia and Micron alone to account for a third of the S&P 500’s earnings growth in the current quarter — but the return on their investments is far from certain, and far from now. Alan Greenspan’s declaration that the Fed can’t deflate a bubble without wrecking the economy is far from economic canon, but it’s holding up in the AI era. Mark Zuckerberg and Satya Nadella aren’t slaphappy consumers who can be sobered up by higher rates. They are self-styled great men of history in an existential race and won’t stop spending until their shareholders make them. Their shareholders are very happy. You see the problem. Notable - “Increasingly, the market is running on one engine,” The Wall Street Journal wrote of the AI boom, while “just about everything else is going down.”
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