SignalPlus Macro Analysis: AI Continues to Surge, U.S. Economic Data Shows Strong Performance

As expected, the risk market surged significantly, with Nvidia's explosive earnings results driving the stock market to new highs. The AI giant saw its market value increase by $247 billion yesterday, setting a record for the largest single-day market cap increase, surpassing Meta's $197 billion achieved earlier this month. Additionally, mainstream analysts and media have begun to defend the stock's historic rally, claiming that the growth in EPS has led to a compression in the price-to-earnings ratio (the forward P/E ratio is "only" 35 times).

Moreover, a statistical study indicates that the current AI "bubble" is still in its early stages, with more room for growth. The study analyzed over 1,000 large-cap stocks that rose more than 35% within three months over the past 30 years. The findings showed that the return rate in the next quarter remained slightly positive, with no significant pullbacks. If history repeats itself in the short term, this is a good sign for the current risk rebound.

Yesterday, the SPX index rose by 2%, with a broad and strong uptrend across all sectors except utilities, where technology stocks surged by as much as 4.4%. Unsurprisingly, as investors have almost no reasons for concern in the short term, the cost of downside hedging has dropped to its lowest point in years.

This strong rally is not limited to the United States; the Nikkei index also reached a historic high, outperforming the SPX over the past decade (in local currency). Nearly 90% of Japan's CPI components have shown growth, and inflation in Japan is starting to become more entrenched, with capital continuing to flow into its stock market and real estate.

The U.S. economy remains in good shape (with yesterday's initial jobless claims and PMI still strong), financial conditions have eased significantly, and large publicly listed companies in the U.S. continue to make profits. Coupled with the significant wealth effect brought by generative AI and expectations for future productivity improvements, will the Federal Reserve be forced to adopt a more hawkish stance? Or have we entered a period of "standing on eternal high ground" (Fisher 1929) or "irrational exuberance" (Greenspan 1996) in the stock market? In either case, the narrative of "high interest rates lasting longer" should return, and the correlation between stocks and bonds may remain decoupled in the short term.

Unfortunately, the rising tide does not lift all boats. Due to rising financing costs and a concentration of capital allocation in AI, investors' interest in reinvestment has decreased, and the illiquid venture capital and private equity sectors have been hit hard. Nowadays, investors are more focused on cash flow and liquidity, and the private investment sector may continue to shift towards structured secondary markets and continuation fund structures. Both the market and cycles are evolving, and we must do so as well.

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