Portfolio Manager Warns: AI Hype Fuels Stock Rally, But Fundamentals Still Matter – 15% Dip Expected

Despite the recent bull market, a portfolio manager at $17 billion asset management firm Rayliant warns that stocks are due to sink 15% because artificial intelligence (AI) hype is overshadowing critical recession warning signals. While the S&P 500 is up more than 20%, Phillip Wool says that the AI hype is distracting investors from market fundamentals and only driving a small percentage of stocks. Wool is also worried about weak market breadth and rising interest rates that threaten stocks. However, some investors see a soft landing ahead for the economy, as the labour market continues to impress and inflation has fallen to 4%. Wool expects the S&P to fall 15% in a simple downside scenario, citing recession warnings, poor market breadth, and the Treasury issuing over $1tn in new debt as contributing factors. But he adds that the economy is still hanging in there, making it less severe than a normal recession.