by Dr. Chris Kacher
Wall of worry with numerous issues
The stock market continues to overall trend higher even as the headwinds remain intact. Traders are in full FOMO mode, treating every piece of chaos as a reason to buy because “the market climbs a wall of worry.” They’re penciling in ever-higher targets for the year, ignoring the AI capex overspend issue, its bottlenecks, slowing global liquidity, and a market priced for perfection given its high valuations. Further, Trump said he would end the war between Russia and Ukraine but that never happened. So when he says the Iran situation will end in a few weeks or less, it's hard to believe. The price of oil is heading higher, but earnings have been strong so far.
While the next Fed Chair Kevin Warsh said AI is going to make everything cost less, and that we could be at the front-end of a productivity boom, this will happen in time. Supply side deflation driven by AI and robotics will likely be a forcefully bullish event but is likely at least another year or two away. Full “supply-side deflation” requires widespread adoption + agentic AI + robotics scaling — not just hyperscaler spending.
The April 29 hyperscaler earnings (MSFT, GOOGL, AMZN, META) are the immediate test. Investors want proof that AI revenue is accelerating enough to justify the spend.
At the time of this writing, an hour after the April 29 close, Microsoft reported a solid beat with revenue at 82.9 billion dollars and EPS at 4.27 dollars. Azure growth reaccelerated to 40 percent constant currency and the AI business hit a 37 billion dollar annual run rate up 123 percent year over year. The numbers showed clear demand outpacing supply yet the stock gapped lower after hours as the market fixated on continued high capex and questions around free cash flow timing.
Alphabet posted the cleanest result in the group with Google Cloud growing well above 50 percent. Revenue and search held strong while capex guidance stayed in line. Shares spiked higher after hours on the evidence that AI monetization is accelerating faster than feared and the cloud story remains intact.
Amazon delivered AWS growth at its fastest pace in 15 quarters with the segment beating estimates and AI services showing further momentum. Retail margins also held up well. The reaction was mildly positive with the stock holding steady after hours as investors saw the numbers as validation that the massive capex plan is starting to pay off without major surprises.
Meta beat on revenue and EPS with ad business strength but raised full year capex guidance materially higher to between 125 billion and 145 billion dollars. The increased spend on AI infrastructure weighed on margins and free cash flow expectations. The stock sold off sharply after hours as the market punished the higher cost outlook despite the topline beat.
Overall the April 29 cluster confirmed ongoing AI demand across the hyperscalers but highlighted that capex pressure and monetization timing remain front and center.
Will the real inflation please stand up?
For now, the inflation pain is still alive and well. AI capex, oil, and commodities are inflationary in the short term. Sure, the official annual CPI has dropped from its 9% peak down to around 3%, but longer term tells the real story. Cumulative price increases since 2020 have been massive, and the cost of living has stepped up to a permanently higher plateau. Groceries, rent, insurance, education, healthcare, and energy are still hammering most American households. Each new wave of inflation is proving more painful than the last, regardless of what the annual number suggests. There has been no genuine respite. The official statistics are heavily massaged, but the daily reality for normal people is that inflation continues to grind higher.
Truflation (currently ~1.8%) is a newer, blockchain-based, real-time index that uses a different basket of goods and more frequent data. It often runs lower than official CPI (currently ~3.3%) and shadowstats (~10–12% using pre-1980 or pre-1990 CPI). It tends to react faster to actual price changes in the economy.
Neither Truflation nor ShadowStats is perfect, but if we’re being honest about what most Americans are actually experiencing, **ShadowStats** comes a lot closer to reality than the official numbers or even Truflation.
Right now the official CPI sits at around 3.3%. Truflation, which uses real-time data, is showing roughly 1.8%. ShadowStats, which calculates inflation using the older pre-1980 and pre-1990 methodology, puts the number much higher — typically in the 6–7% range, with some versions showing 9–10% or more.
Here’s the thing: ShadowStats better reflects the **actual pain** most people feel in their daily lives. The categories that really matter — healthcare, housing, education, food, and energy — have all risen faster and much harder than the official CPI suggests. When your rent, insurance, college tuition, grocery bill, and gas tank keep hammering your budget month after month, a 3.3% inflation number feels like a bad joke.
The BLS made major changes to the CPI methodology back in the 1980s and 1990s — switching to geometric weighting, heavy hedonic quality adjustments, and changing how housing is measured with Owners’ Equivalent Rent. Those tweaks were sold as making the index more “accurate,” but in practice they’ve systematically lowered the reported inflation rate. It could be argued that quality is generally on the rise so should not diminish inflation when the real culprit is money printing, yet it does the current way the CPI is calculated.
ShadowStats essentially throws most of those adjustments out and shows what inflation would look like under the old rules. That’s why it feels more honest to so many people.
Truflation is more modern and transparent than the official CPI, and it reacts faster to real price changes. But even it still underweights some of the biggest cost-of-living drivers that hit middle-class families hardest.
So if you want a number that tracks short-term momentum, Truflation is useful. But if you want a measure that better reflects the **real cumulative inflation pain** most Americans have been living with — especially on housing, healthcare, education, food, and energy — ShadowStats is much closer to the truth. The official story says inflation has come down nicely. The ShadowStats version, and your own wallet, tell a very different story.
Of course, markets tend to follow the official figures of the CPI and PCE since PCE is the Fed's preferred indicator.
Ultimately, this is a market driven by fewer and fewer companies which makes it all the more top-heavy.
If the reality check finally arrives — whether from disappointing earnings or GDP numbers, AI bottlenecks, AI Capex overspend, or higher-for-longer rates — it might not be so pretty.
That said, Raoul Pal's burst of global liquidity due to the massive $7–10 trillion debt rollover will boost markets but this won't likely hit until late this year though markets are forward looking. In the meantime, the pace of global liquidity continues to slow until at least late Q3 (September '26). But right now, the combination of geopolitical easing + strong earnings + AI growth narrative is overpowering the headwinds.