Core Viewpoint - The discussion around a potential bubble in the market is increasing, but Bank of America strategist Michael Hartnett indicates that the credit spread of tech stocks is at a multi-year low, suggesting that the AI-driven tech stock rally has not yet reached a dangerous level [1][4][5]. Group 1: Credit Spread and AI Bubble Concerns - The current credit spread for tech stocks is at its lowest point in 18 years, indicating that investors are not pricing in potential risks for tech companies in the credit market [4][5]. - This low credit spread contrasts sharply with typical late-stage asset bubble scenarios, which usually see a sharp rise in credit risk [5][6]. - The EPFR fund flow data supports this optimism, showing significant inflows into various asset classes, including $24.7 billion into bond funds and $19.6 billion into equities [6][7]. Group 2: Dollar Strength and Market Risks - Hartnett warns that the primary risk for investors is not a bubble burst but an unexpected strengthening of the dollar, as the consensus trade of "shorting the dollar" has become prevalent [1][11]. - If the dollar index experiences a chaotic rebound and surpasses the critical level of 102, it could trigger a collective risk-off response among investors [11]. - Despite the short-term risk of a dollar rebound, Hartnett believes the long-term trend of dollar depreciation remains unchanged, providing structural support for assets like gold [12]. Group 3: Asset Performance and Market Dynamics - Year-to-date, gold has been the best-performing asset with a gain of 41.3%, while international stocks have risen by 24.7% and the dollar index has declined by 9.2% [8][9]. - The negative correlation between a weakening dollar and rising risk assets is evident, suggesting that as long as the consensus trade of "shorting the dollar" remains intact, the macro environment for asset appreciation will continue [11]. - Although gold is currently viewed as "overbought" tactically, it remains a "underweight" asset structurally, with only 0.4% of private client assets and 2.4% of institutional client assets allocated to gold [12].

Core Viewpoint - The current credit spread of tech stocks in the US is at an 18-year low, indicating that the AI-driven tech stock rally has not yet reached a dangerous level [1][4][6] - The primary risk in the market is not a bubble burst but an unexpected strengthening of the US dollar, which could trigger a collective unwinding of the consensus trade of shorting the dollar [3][10] Credit Spread Analysis - The credit spread is a measure of the additional yield on corporate bonds compared to risk-free government bonds, and a narrowing spread suggests low perceived default risk for issuing companies [6] - The current low credit spread for tech stocks indicates that investors are not pricing in potential risks for tech companies, contrasting with typical late-stage asset bubble scenarios where credit risk rises sharply [4][6] Market Sentiment and Fund Flows - Recent EPFR fund flow data shows a continued influx of capital into various asset classes, with $24.7 billion into bond funds, $21.3 billion into cash, $19.6 billion into stocks, $5.6 billion into gold, and $0.6 billion into cryptocurrencies, reflecting overall investor optimism despite discussions of potential market corrections [7] - The performance of gold, which has risen 41.3% year-to-date, contrasts with the US dollar's 9.2% decline, highlighting the negative correlation between a weakening dollar and rising risk assets [8][9] Dollar Dynamics - The depreciation of the dollar is identified as the core driver of the current asset price increases, with central banks globally having cut rates 168 times in the past year, injecting significant liquidity into the market [9] - The consensus trade of shorting the dollar poses a risk; if the dollar index unexpectedly rebounds and surpasses the critical level of 102, it could lead to a risk-averse collective unwinding of various consensus trades [10]