ECONOMIC UPDATE: Will Soaring AI Stocks End up Like 2000 Dot Com Bubble?
The Trends Journal was the first magazine to forecast the 2000 Dot Com Bust in October of 1999
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“The Trend is Your Friend.”
As we had forecast back in November 2022, and as Gerald Celente and The Trends Journal has been repeating since, the S&P 500 would rise at least 16 percent in the following 12 months.
It has now hit that mark.
Our forecast was based on the trend that over the past 40 mid-term elections in the U.S., going back 60 years, the S&P had risen, on average, 16.3 percent. And we said, minus a wild card, the trend would continue.
The Trends Journal was the first magazine to forecast the 2000 Dot Com Bust in October of 1999 (when the stock-market index had soared 73 percent by the second half of that year). We say no, this artificial intelligence is real and it is just the beginning of a megatrend.
What’s driving the markets up now is not about shares that pay dividends, those shares have petered out. Instead, The Street is betting on the AI stocks which have pushed the markets higher. Indeed, in the tech-heavy AI Nasdaq sector, the composite is up 32 percent so far this year… racking up its best start of the year in 40 years.
Dot-Com This
The question being continually asked is if this AI boom is a Dot Com Bust 2023.
The Trends Journal was the first magazine to forecast the 2000 Dot Com Bust in October of 1999 (when the stock-market index had soared 73 percent by the second half of that year). We say no, this artificial intelligence is real and it is just the beginning of a megatrend.
Are many of the companies being overinvested in? Yes, some will bust, others will skyrocket… as with all sectors of life.
But again, name the business and industry and all eyes are on AI.
Indeed, in the U.S. over 11,000 Hollywood writers are on strike. With many of the big companies such as Disney and Warner Brothers losing money, the writers fear that these companies will do all they can to cut their payrolls to boost profits and have AI write for the writers.
CNBC quoted Justine Bateman, a striking member of the Writers Guild of America, who fears AI will replace real writers: “I hope I’m wrong, but I do think that the use of AI is going to take over the entertainment industry,” “And I think it’s going to be really bad.”
AI filmmaker Caleb Ward told CNBC that “It’s going to be very soon until we can literally just type in a prompt and see something as a consumer. And you don’t have to have any sort of skills as a visual effects artist or as someone in the entertainment industry.”
TREND FORECAST: We have reported extensively on the AI boom and have detailed many of its implications. Trends are born, they grow, reach old age and die. The AI trend has just been born.
While the AI bonanza will continue to boost equities, it is only one sector of the broad economy.
For example, it will not boost the dying commercial office building sector and no artificial “prompt” will pay off the $20 trillion commercial real estate debt crisis that will worsen as interest rates rise and business contracts… and much of the world sinks into recession.
In the U.S. for example, today the Commerce department reported that in the last two quarters, business spending on equipment contracted… registering its worst performance since the COVID War was fully launched in March 2020.
And on Monday, registering its longest slump since the Great Recession and hitting the lowest reading since May 2020 when the nation was fully locked down to fight the COVID War, the ISM’s manufacturing PMI marked the eighth straight decline, falling to 46.0 in June. Again, any number below 50 signals contraction, and contraction is the name of the game.
In Germany, commercial property deals have fallen 50 percent this year.
In Canada, the Financial Post reported that the commercial real estate firm CBRE says the national office vacancy rate in Canada climbed to 18.9 percent compared with 18.4 per cent in the first quarter and the suburban office vacancy rate was 17.1 per cent, up from 16.8 per cent.
Again, we had forecast these trends when politicians launched the COVID War and imposed draconian lockdown mandates that we said would destroy the lives and livelihoods of billions… and the facts show it has, and it will get worse.
Worst is Yet to Come
Over in Europe, they have had two consecutive quarters of economic contraction which makes it official that the Eurozone fell into a recession.
Yet, last week, first deputy managing director of the International Monetary Fund (aka Int’l Mafia Federation) Gita Gopinath said that there is an “uncomfortable truth” for the central banks to do what they can to bring down inflation “even if that means risking weaker growth.” In lockstep, the European Central Bank head, Christine Lagarde said “Inflation in the euro area is too high and is set to remain so for too long.” Thus, “The Club” is signaling a rise in EU interest rates despite the weak economy.
And today Wall Street was waiting for the Federal Reserve to release the minutes of its meeting to see where interest rates were going. The analysis is that the Fed will raise them at least another 50 basis points.
Therefore, as we forecast and the data shows, the higher they raise interest rates, the deeper the economy will fall. And as we have forecast, during the summer months, with people in a vacation state of mind, consumer spending, which accounts for over two-thirds of America’s GDP, will not slow down. The decline will come in late September and October when the reality of the rising rates hits consumers, the retail sector, industrial and the faltering commercial real estate sectors.