In today’s briefing:
- Five Reasons to Be Bullish
- Beware of the AI Hangover
Five Reasons to Be Bullish
- A review of technical and sentiment conditions shows that stock prices are setting up for a sustained advance.
- The combination of strong momentum, good breadth and skeptical sentiment points to higher stock prices.
- Key risks are evidence of a disturbing relative strength by defensive sectors and an upcoming CPI report that could upend the bullish narrative.
Beware of the AI Hangover
- We believe AI is overhyped in the short run and underhyped in the long run.
- Recent instances of earnings report reactions of stocks in the AI ecosystem indicate excessive frothiness and even AI bellwethers like NVDIA have begun to consolidate sideways.
- A St. Louis Fed study of the pace of technology adoption suggests that AI adoption will undergo a long cycle like the PC, so investors need to be patient.
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