Dear Trader,
Ray Dalio’s worried about AI. So is a UK strategist who just cut his 2027 S&P 500 target to 5,000.
And yet the money keeps coming.
Bank of America’s retail clients just turned net buyers for the first time since late July, and Mike Novogratz is telling people to pile in.
Most of the Street still sees room left in this AI run, and the buyers keep backing that up.
Tim Colby’s hosting State of the Market today at 10 AM ET, and he’s bringing on Hans Albrecht to dig into it.
Hans has spent months writing about the AI build-out, so I want to hear where he thinks this run goes next and what could get in its way.
The bond market tops my list: the 10-year term premium just hit its highest level since 2014, and higher long-term rates hit the AI trade right where it borrows.
Tim and Hans will walk through all three stories below and talk about where Hans sees the overall market heading from here. Bring your questions.
This link adds State of the Market to your calendar.
The Daily News Breakdown
SIGN: Ray Dalio thinks the AI bubble is getting close to popping, and retail traders are buying anyway. Dalio even gave everyone a tell to watch: billionaires cashing out. Panmure Liberum strategist Joachim Klement went further, calling for the pop in 2027 or 2028 and chopping his year-end 2027 S&P 500 target from 8,300 to 5,000, with the index closing Thursday at 7,765.
Bank of America says its retail clients just turned net buyers for the first time since late July. Google searches for “stock market bubble” have dropped to 14 on Google Trends’ 100-point scale, down from a June peak of 100. Even Mike Novogratz agrees it’s a bubble, and he told investors to pile in anyway.
SIREN: The 10-year term premium just hit its highest level since 2014, and it drove the latest leg of the selloff that pushed Treasury yields to a 24-year high. That premium is the extra yield investors demand to lock money up for a decade instead of rolling short-term bills. The New York Fed’s model has it up about 0.4 percentage points since mid-September, to roughly 0.98%.
Inflation expectations barely budged, the Fed already hiked last month, and oil’s stuck in a range above $100. Strategists blame France’s debt mess, a $2 trillion U.S. deficit, and broken stock-bond correlations. Aegon’s Frank Rybinski says the move has staying power, which is lovely news if you’re waiting on a cheaper mortgage.
SNEAKER: Oil slid Friday after President Trump said the U.S. won’t attack Iran before the Nov. 3 midterms, a promise with its expiration date stamped right on it. Brent fell $1.37 to $102.91, and WTI dropped $1.09 to $90.40. Iran says it’s reviewing the U.S. response to its plan to reopen the Strait of Hormuz within seven days.
Meanwhile, Hurricane Isaias has shut in about 1.3 million barrels a day in the Gulf of Mexico, roughly 63% of the region’s output, and the restart depends on post-storm inspections. Brent’s still on track for a weekly gain. Washington also slapped sanctions on 17 vessels hauling Iranian crude the same day Trump talked up “productive” discussions.