AI wreaking havoc across software stocks, job losses might follow: Tom Lee

Core Viewpoint - The impact of AI on job markets and inflation is significant, leading to a potential disinflationary environment, which may influence the Federal Reserve's monetary policy decisions [2][6][7]. Group 1: Job Market and AI Impact - The Federal Reserve is aware that AI is causing disruptions in the software sector, which may lead to job losses in the near future [2][5]. - The stock market may not react strongly to labor reports due to concerns about future job losses attributed to AI [3][5]. - The software sector, valued at $450 billion, is facing challenges from AI, which could lead to deflationary pressures [6]. Group 2: Inflation and Federal Reserve Policy - Core CPI year-over-year is expected to drop to 2.52%, indicating a return to pre-COVID inflation levels [6]. - The Federal Reserve is anticipated to adopt a dovish stance, with potential rate cuts later in the year due to the disinflationary environment [7][6]. Group 3: Market Dynamics and Sector Rotation - The market is currently experiencing a rotation from technology stocks (MAG 7) to sectors like energy, industrials, and commodities, which are perceived as more resilient [8][11]. - A potential market drawdown of 10-20% could lead to a bullish outlook for non-U.S. markets, as they are less tech-dependent [11][12]. Group 4: Cryptocurrency Market Sentiment - The cryptocurrency market is facing challenges, with investor sentiment negatively impacted by recent price actions and market conditions [12][15]. - The shift in investor focus towards gold, driven by its strong performance, has contributed to a decline in interest in cryptocurrencies [15][16].