• Wall Street is seeing ghosts everywhere, with hedge fund net exposure collapsing to the 1st percentile even as the S&P 500 trades near record highs. Fear is building, but the index refuses to buckle.
• The AI boom is creating an extraordinary squeeze on global capital. Governments are competing with technology giants for funding, pushing real yields higher and turning the bond market into an increasingly uncomfortable neighbour for equities.
• Europe’s equity market looks surprisingly attractive at 13 times earnings, with improving profits and healthier breadth. But sovereign stress, expensive energy and tighter financial conditions remain formidable obstacles.
• The US earnings story is becoming extraordinarily concentrated. Just ten companies are expected to deliver 68% of S&P 500 earnings growth this quarter, with Micron and Nvidia alone contributing roughly one-third.
• Goldman’s Mark Wilson argues against fighting market narrowness, particularly with hedge funds so lightly positioned. But the year-end rally increasingly depends on AI spending holding up, energy prices stabilising and the bond market avoiding another inflation scare.
The question: Is Wall Street seeing ghosts that aren’t there, or is the AI machine keeping the market distracted from the risks gathering beneath it?