by Dr. Chris Kacher
Earnings season
Bond yields have risen due to the expectation of stagflation, a situation of slow growth and rising inflation due in part to the tariffs. Yet major stock market averages are trading around new highs.
It could be that optimism on earnings season is here, so markets are expecting stocks to rise on an easy earnings beat, given that second-quarter year-over-year earnings growth was cut from 8.5% at the start of the year to 3.7% due to the tariffs issue.
AI supercharged
It could also be that a growing number of companies are taking advantage of AI-related technologies to improve their bottom lines. The speed at which AI is growing is beyond breakneck. Some aspects of AI are doubling in as little as 3 1/2 months, with the majority in agreement that many facets of AI are doubling every 6 months. AI is expected to add at least 0.5-1% per year, but this may be conservative unless adoption bottlenecks occur. Hopefully we learn from strangulation by regulation while nuclear power companies help with energy generation.
Strategists at Goldman Sachs and Bank of America have both recently raised the S&P 500 year-end price targets:
=Bank of America: 6,300, up from 5,600
=Goldman Sachs: 6,600, up from 6,100
Imagine a world where AI reliably boosts global productivity by a full percentage point every year starting in 2027, a scenario Goldman Sachs sees as plausible. Compound that growth, and by 2030, the global economy is roughly 6% larger. That translates to an extraordinary $6 trillion in additional wealth.
Yet, this prosperity comes with profound disruption. Entry-level white-collar jobs could shrink by as much as 30%. Many displaced workers may retire early, while others find new opportunities in emerging digital industries or shift into traditional service roles. In the U.S., unemployment among active job seekers could spike into the high single digits; in parts of continental Europe, it could reach the low teens. Wage inequality is likely to widen: top earners (90th percentile) may see their incomes rise by 15%, while median wages stagnate and the lowest quartile actually declines.
This transformation will redraw the global economic map. Winner will be countries rich in energy and semiconductors like the U.S., Taiwan, and the Gulf states will run surpluses as demand for their resources soars.
Inflation will split into two distinct stories. The cost of digital cognition plummets toward zero, making AI-powered services nearly free to scale. Meanwhile, the price of electricity, land near data centers, and rare metals for GPUs remains high. Cities, as hubs for talent and innovation, continue to attract people, keeping urban real estate at a premium.
The result? The Consumer Price Index may become a confusing mix of falling digital costs and stubbornly high physical expenses due to regulatory capture on things we need the most such as healthcare, housing, energy, food and education. Regulatory capture occurs when regulatory agencies act primarily in the interest of the industries they are meant to oversee, rather than the public. This dynamic can reduce competition, entrench incumbents, and lead to high or rising prices for consumers.
Left unchecked, these trends point to what can be called an "Oligarchic Boom": rapid economic gains, but with the lion’s share captured by a select few. The gap between winners and losers grows, setting the stage for political backlash and social unrest.
In short, AI-driven growth promises immense wealth, but without proactive policy and social adaptation, the benefits risk being concentrated at the top, leaving many behind and fueling tensions that could shape the next decade.
Compute power will be key. Big Tech is spending billions to stay in the lead. In turn, AI’s hunger for electricity is surging. Data center demand is set to double by 2030. Even with AGI, humans will be needed to set goals, provide real-world context, and steer models. As AI takes over cognitive tasks, new jobs emerge such as model curators, prompt engineers, and data verifiers. These roles may start small and specialized, like early IT departments, but can grow into major sectors if education and gig platforms scale up quickly. To deal with the spoils going to only a few, Sam Altman has been discussing universal basic income from the largesse of the AI companies’ outputs to speed re-skilling.Further, when a core input becomes cheap, new industries and roles always emerge. Electricity didn’t just replace candle makers. It unlocked aluminum, MRI scanners, and entire sectors we couldn’t imagine before. As AI slashes the cost of cognition, we’ll see a surge in new services: personalized tutors, automated drug discovery, hyper-local business intelligence, and whole industries built around evaluating and directing AI. These aren’t hypotheticals; venture capital is already backing them.
Yes, many traditional jobs will vanish. But valuable new roles are already taking shape. What they need isn’t science fiction, but investment, standards, and time to scale. Whether these new jobs arrive fast enough to offset mass unemployment is a question for leaders and policymakers, not technologists.
Even if only some predictions are right, we’re on the brink of a work revolution that would normally take decades, compressed into just a few years. Entirely new job categories must be created, or we risk widespread economic disruption.
In the end, much of our economy may soon be devoted to data centers and AI infrastructure. That investment will create room for new industries to grow, but whether that leads to more productive existing sectors or the birth of entirely new ones remains to be seen.
Every wave of automation has created more work than it destroyed, but only after a painful transition period. The more widely we spread the new tools, the greater the likelihood that the rising tidal wave lifts all boats.Bitcoin run
Global liquidity is expanding rapidly, driven by global central bank easing and favorable financial conditions. This environment is reminiscent of the 2017 crypto bull cycle but is now "on steroids" due to the scale and speed of institutional involvement and improved market infrastructure.
Unlike 2017, when retail investors drove the rally, the current phase is characterized by increased institutional participation, as shown by rising stablecoin reserves, declining retail inflows, and Binance’s growing spot market share.
Raoul Pal refers to the current and upcoming phase as the **"banana zone"**, the final stage of a macro-driven bull market where liquidity floods the system, volatility drops, and asset prices (especially high-beta assets like crypto) can surge far beyond intrinsic value. This is when exponential adoption meets exponential liquidity, driving nonlinear price appreciation.
Gold is one of the most sensitive real-time indicator of financial conditions, followed by global M2 (money supply), and then assets like Bitcoin and tech stocks. The ISM index is expected to rise toward the mid-50s by Q2 2026, which historically aligns with large moves in risk assets and the onset of "alt season".
The current market cycle may extend beyond the traditional four-year pattern due to post-pandemic dislocations and aggressive monetary interventions. Pal predicts that, as crypto becomes a global settlement and financial infrastructure layer, the asset class could reach a $100 trillion valuation within 6–8 years, driven by both traditional finance (TradFi) demand for stablecoins and the gradual onboarding of Web2 giants to decentralized platforms.
Meanwhile, Willy Woo, a leading Bitcoin analyst, recently stated that Bitcoin is in the late stage of its current bull market. He sees significant institutional buying and robust fundamentals but suggests the cycle is maturing. This late stage suggests we may be in the equivalent of 2017 or 2021 when Bitcoin had climax tops. Woo is not calling for an immediate top. He notes that on-chain data shows continued accumulation and that the market is not yet overheated. He has forecasted a swift move to $118,000 and even supports long-term targets much higher, with the potential for a $10–$50 trillion market cap in a decade. Woo highlights that institutional capital is still flowing in smoothly, and he does not see the kind of retail-driven mania that typically marks a final top. So odds favor a continuation of the uptrend.
Sentiment overly optimistic
That said, on July 2, both the NAAIM Exposure Index and AAII hit relative highs. Such peaks often come a few weeks before market mini-tops where the major averages may fall for a few days or more. Instead, markets didn't flinch as global M2 continues to march higher. One caveat is institutional cash is at one of its lowest points since 2010 at around 4%. This suggests less capital to keep pushing markets higher. We also have the Japanese bond issue as discussed in a prior report which could spill over into US treasuries. So keep stops tight and dont get greedy.
Further, on the recent actionable report we sent out yesterday, one of the stocks had a buyable gap up (not just a mini-gap) so use that as a rough guide as an exit point in that name as well as in the other two stocks should market conditions weaken. That said, the stock had a strong finish to yesterday's trade as did the others in the report. All are trading higher since yesterday's strong close in the premarket today.