AI’s Productivity Drought May Be the Bullish Catalyst Wall Street Missed

Core Viewpoint - The current market conditions indicate a potential turning point driven by a rebound in US liquidity, a dovish shift in Federal Reserve policy, and increasing adoption of AI technologies, which could reshape the outlook for tech and crypto sectors [1][2][4]. Liquidity - US market liquidity is experiencing a decisive reversal after reaching a multi-year low in late October, with a significant $621 billion drain due to a six-week government shutdown, followed by a release of $70 billion back into the markets [2][3]. - An estimated $300 billion is expected to return to the market as the Treasury General Account normalizes, coinciding with a projected 90% chance of a near-term rate cut by the Federal Reserve [3][4]. Policy Easing - The end of quantitative tightening on December 1 is seen as a critical inflection point that markets have not fully priced in, suggesting that supportive monetary policy conditions are developing [4]. - The combination of returning liquidity and supportive monetary policy is believed to create favorable conditions for markets to reverse recent drawdowns [4]. AI Adoption - Cathie Wood highlights a significant gap between consumer AI adoption and enterprise productivity, suggesting that this "productivity drought" could serve as a catalyst for the next bull market in AI and crypto [2][5]. - The liquidity squeeze affecting AI and crypto is expected to reverse in the coming weeks, with market reactions indicating a positive reception to this thesis, as evidenced by an 8% rally in ARK holdings following a recent webinar [5][6].