The Crossroads of a Structural Bull Run: AI Capital Expenditure, Dollar Liquidity, and Market Rebalancing_

Author: arndxt

Compiled by: Tim, PANews

The prospects for a macroeconomic re-acceleration are relatively limited, and its sustainability relies on the support of affluent households and AI-driven capital expenditure. For investors, the key to this cycle is not broad-based Beta returns:

Focus on semiconductor and artificial intelligence infrastructure as a long-term growth driver.

Be cautious about broad-based indices; the concentration of the seven tech giants masks the market's fragility.

Pay attention to the movement of the US dollar: its direction may determine whether the current cycle continues or ends.

Similar to the 1998-2000 cycle, the fundamentals of the market may remain solid, but the volatility will be more intense, and asset selection will be the key factor distinguishing active winners from those who simply rise with the market.

1. Dual-track economy

The market is the economy. As long as the stock market is at or near historical highs, recession rhetoric is difficult to form.

We are undoubtedly in a dual-track economic model:

The top 10% of income earners contribute over 60% of consumer spending. They leverage their wealth accumulated through stocks and real estate, resulting in a sustained increase in consumption levels.

At the same time, inflation has particularly severely eroded the wealth of middle- and low-income households. This widening gap is precisely the reason for the coexistence of economic “re-acceleration” and a weak labor market, along with an affordability crisis.

2. Federal Reserve policy is viewed as a narrative risk

Policy fluctuations will become the norm, as the Federal Reserve is facing a dual challenge of inflationary pressures and political cycles. This creates a window for opportunistic positioning, but it may also trigger sharp downward shocks during expectation resets.

The Federal Reserve is in a dilemma:

Strong GDP data and resilient consumer spending demonstrate that slowing down the pace of interest rate cuts is reasonable.

The market is excessively expanding, and if interest rate cuts are delayed, it may trigger a “growth panic.”

Historically, lowering interest rates during strong profit periods (the last occurrence was in 1998) tends to extend bull market cycles. However, the current cycle has shown distortions: inflation remains stubborn, the “seven giants” of the U.S. stock market dominate profits, while the remaining 493 components of the S&P 500 are underperforming.

3. Asset selection in a nominal growth environment

Configure scarce physical assets (gold, key commodities, real estate in supply-constrained areas) with productivity platforms (AI infrastructure, semiconductors), while avoiding excessive concentration in the celebrity stock field driven by network popularity.

The future situation is more likely to approach a structural bull market rather than a widespread rise.

Semiconductors remain the foundation of artificial intelligence infrastructure, and capital expenditures continue to drive growth.

Gold and physical assets are steadily re-establishing their status as tools for hedging against currency depreciation.

Cryptocurrency is currently under the dual pressure of leveraged liquidations and treasury bond accumulation, but its structure remains closely linked to the liquidity cycle that drives up gold.

4. Real Estate Market and Consumer Dynamics

If both the housing market and the stock market are weak, the psychological “wealth effect” on consumption will collapse.

The real estate market experiences a short-term rebound (dead cat bounce) when interest rates are lowered, but structural difficulties still persist:

The supply-demand imbalance caused by population pressure.

The end of the student loan and Federal Housing Administration's repayment suspension policy has led to a surge in cases of loss of collateral redemption rights.

Regional economic differentiation (the coexistence of asset buffering for the baby boomer generation and pressure on young families).

5. US Dollar Liquidity

The US dollar is a hidden pivot; as the global economy weakens, a stronger dollar may first crush the more fragile markets rather than the United States.

An underestimated risk is the contraction of the dollar supply.

Tariffs will reduce the trade deficit, thereby limiting the global flow of dollars back to US assets.

The fiscal deficit remains high, but due to the decrease in external buyers of U.S. government bonds, liquidity mismatch issues have emerged.

The CFTC's positioning data shows that the short positions on the US dollar have reached historical levels, indicating a potential short squeeze on the dollar, which could impact risk assets.

6. Political Economy and Market Psychology

We are at the final stage of the financialization cycle:

Economic policies are designed to “maintain the status quo” before politically critical junctures (such as elections and mid-term elections).

Structural inequality (rent increases higher than wages, wealth concentrated among older demographics) has created populist pressures, prompting policy changes across various fields from education to housing.

The market itself has dual characteristics: the concentration of the seven major weighted stocks supports the valuation while also laying the groundwork for vulnerability.