AI Bubble? Research Firm Says the Hype Has Already Peaked Artificially low interest rates drove billions into artificial intelligence, but independent research firm MacroStrategy Partnership warns the boom has already hit its limits. The firm, led by former UBS strategist Julien Garran, argues the AI surge isn’t just another bubble — it’s potentially 17 times larger than the dot-com crash and four times bigger than the 2008 housing collapse. Cheap Money, Bad Allocation Their analysis leans on economist Knut Wicksell’s principle that capital is best allocated when corporate borrowing costs stay above nominal GDP. Instead, a decade of ultra-low rates distorted the system, funneling trillions into misallocated assets: AI, housing, real estate, NFTs, and venture capital. LLMs at the Breaking Point The research also casts doubt on AI’s technological foundations: With no clear competitive moat, escalating costs, and weak commercial applications, MacroStrategy sees diminishing returns setting in fast. Risk of Recession Ahead The firm warns this could trigger a reversal similar to the dot-com bust in 2001. If data-center spending and wealth effects stall, the economy — already slowing — may tip into recession. Policy options for the Fed or the Trump administration could prove limited, raising the risk of a drawn-out reflation effort, like after the early ’90s S&L crisis. Where to Invest Instead MacroStrategy advises:

Wall Street Fear Could Push Stocks Higher, Says Popular Newsletter Editor Stock futures slipped as the fourth quarter begins under a government shutdown and without key jobs data. But one closely watched market voice says nervous investors may actually be setting the stage for more gains. The anonymous author of Lord Fed’s Gazette — Substack’s 13th most popular finance blog — argues that Wall Street’s so-called “smart money” remains too skittish. That hesitation, he says, will only give the S&P 500 more room to run. Lord Fed’s calls have been on point before. In August, he predicted the index’s move to 6,500 would launch a new leg higher. By September, the S&P had logged eight record closes in a month and 23 for the quarter. But hedge funds are still blinking. Goldman data shows managers cut tech exposure at the fastest pace since August as the S&P neared 6,700 — even after sitting out most of the rally. “They’re selling into strength because they’re convinced this is the top,” Lord Fed wrote. “That’s not how tops happen. That’s how bull markets extend.” His bottom line: fear is fuel. And after the latest round of selling, his 7,000 target for the S&P looks more likely than ever.

S&P 500 Heads Into Historically Strong Fourth Quarter The S&P 500 is closing out the third quarter with a 13% year-to-date gain and record highs, setting the stage for what has historically been its strongest stretch of the year, according to Bespoke Investment Group. Since 1928, the index has averaged a 2.1% return per quarter, but fourth-quarter gains have been higher at 2.9%. When the S&P enters Q4 already in positive territory, average returns jump to 4.4%, with gains in more than 83% of those years. Bespoke noted that this trend has become even more pronounced over the past 30 years. So far, 2025 has delivered steady momentum, with the benchmark on track for a fifth straight monthly gain and a third-quarter advance of over 7%. Investors are also monitoring broader economic signals: the Fed resumed rate cuts this month, GDP growth was revised up to 3.8% for Q2, and a possible government shutdown threatens to delay key labor market data. Markets started the week higher, with the S&P 500 up 0.3%, the Nasdaq Composite climbing 0.5%, and the Dow adding 0.1%, per Dow Jones Market Data.