Will today's widely feared AI crisis turn out to be a no-show, too, just like the most widely anticipated recession of all time, anxiously awaited over most of the past four years? We think so.
Stock investors are increasingly worrying about an AI-led Tech Wreck, like the one in 2000 after the 1999 Tech Bubble burst. Now, many of them believe the stock market is in an AI-led Tech Bubble that may already be bursting. The pessimists are also warning that consumers are stretched and may be retrenching. Furthermore, alarmists are seeing cracks in credit markets reminiscent of those during the Great Financial Crisis (chart).
These are all legitimate concerns. Nevertheless, for now, we are not altering our 55% subjective probability that the S&P 500 should reach 7000 by the end of this year and 7700 by the end of next year. However, under the circumstances, we are lowering the odds of a meltup scenario from 25% to 15% and raising the odds of a bearish scenario from 20% to 30%.
