Core Viewpoint - The formation of a market top is a gradual process rather than an instantaneous event, with key indicators emerging from the credit conditions of AI giants, political pressures from the public regarding living costs, and potential disruptive changes in U.S. tariff policies [1][2]. Group 1: Credit Market Dynamics - AI giants are facing severe challenges in their financing models, leading to a significant increase in bond market activity, with $120 billion in bonds issued over the past seven weeks, resulting in a widening credit spread from 50 basis points to nearly 80 basis points [3]. - The current situation mirrors the pre-burst conditions of the 2000 internet bubble, with rising risk aversion among investors [3]. Group 2: Political and Economic Pressures - Recent election results indicate strong voter dissatisfaction with affordability issues, suggesting increased government intervention to control prices, which could squeeze corporate profits [2][4]. - The political landscape is shifting, with potential implications for inflation control and budget deficits becoming critical as public anger over living costs grows [4]. Group 3: Policy Changes and Market Implications - A possible overturning of current tariff rulings by the U.S. Supreme Court could reshape market dynamics, reducing inflation expectations and creating structural opportunities in emerging markets [5]. - The shift in tariff policy may weaken the U.S. government's leverage in global influence through technology and decrease tariff revenues, while also aiding in lowering inflation expectations [5]. Group 4: Labor Market and Economic Outlook - The U.S. labor market is showing signs of cooling, with over 1 million layoffs reported this year, indicating a K-shaped economic recovery where certain groups feel poorer rather than wealthier [6]. - Structural unemployment driven by AI advancements is accelerating, and the best hedge against potential recession signals is to go long on zero-coupon bonds [6].

Core Viewpoint - The slight potential shift in U.S. tariff policy may have temporarily stabilized market sentiment, but some indicators still suggest a possibility of economic downturn [1] Group 1 - Guillermo Hernandez Sampere, the trading head at asset management firm MPPM, commented on the potential changes in U.S. tariff policy [1] - Despite the stabilization in market sentiment, there are still indicators pointing towards a possible economic decline [1]