A 'Very Precarious' Time For Markets: AI Bubble, Credit Risks & Insider Selling | Jesse Felder

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You also have the potential for a bursting of the AI bubble, which could be disinflationary as well. And from that standpoint… You're downright deflationary, right? Right.
If all of this spending reverses and you get a real deflationary impulse in the economy, it could easily probably counteract the inflationary forces in the economy. Like I said, so many cross currents and very precarious time.
Welcome to Thoughtful Money. I'm its founder and your host, Adam Taggart. Wall Street's parting hard right now with stocks at all time highs. Unless a significant correction happens soon, the S&P will put in its third year of double-digit returns in a row. But pressures are building. The AI juggernaut, which is driving so much of the US economy and the market's rise these days, increasingly appears to be in bubble territory. While on the other hand, a large percentage of American consumers are increasingly struggling under the high cost of living. How will these pressures resolve in 2026? Well, to discuss, we welcome back to the program macroanalyst Jesse Felder, founder and editor of the respected market research firm, The Felder Report. Jesse, thanks so much for joining us today. Always good to be with you, Adam. Thanks for having me back. Thanks. It's a pleasure to have you back, Jesse. Lots to talk about, lots happened since the last time you've been on the program here. I've got a bunch of questions based off of some of your recent posts there at The Felder Report, but I haven't asked this question for a while, so you're a good guy to ask it to you. It's my general kicking off question, but I'd love to get a high level sense of how you're seeing the world right now. What's your current assessment of the economy and the financial markets? Yeah, it's a great question. I think that there's so many cross currents right now. It feels like more than there are always a number of them, but I think right now it feels like it's especially tricky time. We have inflation re-accelerating and at the same time, unemployment rising. So I think the economic environment is getting increasingly stagflationary with a weakening labor market and rising price pressures that are partly due to the tariffs, but also I think more probably to do with underlying macro factors such as demographics and deglobalization and these types of things that I think we've probably talked about every time you've had me on the program. We're getting increasingly stagflationary, but at the same time, the economy, GDP figures are holding up well largely due to the AI bubble. So, you know, the massive spending in capex going into data centers and all these things is now responsible for a huge percentage of the economic growth, which is kind of holding up the economy right now. And so I think you have, you know, it's a pretty precarious time. If you think inflation pressures are rising at the same time that unemployment is potentially going to continue to worsen and everything comes back to, you know, being dependent on this massive AI bubble holding the economy up, I think it's, yeah, you could argue it's one of the most precarious times for the economy that we've seen in a long time. All right, so let me ask you this. You said rising inflation but rising unemployment. At what point does rising unemployment become disinflationary? Right, where just more and more people can't afford to pay these prices so they start constricting their spending? I mean, that's a good question.
That's way above my pay grade, honestly. I'm not an economist, but you're absolutely right. If one of the inflationary factors in the economy is demographics, the fact that the share of the population that is among the workforce has been shrinking, putting more pressure on fewer workers to deliver the same amount of economic production, then to the extent that the unemployment rate rises and kind of loosens those pressures, that could help. You also have the potential for a bursting of the AI bubble, which could be disinflationary as well. And from that standpoint... Downright deflationary, right? Right. I mean, yeah, if all of this spending reverses and you get a real kind of deflationary impulse in the economy, it could easily probably counteract the inflationary forces in the economy. So yeah, it's like I said, so many cross currents and very precarious time. All right. Well, we're going to talk about a lot of these in more detail. But let me ask you this. Here you're talking as a thought in my mind that so much of the economy is being driven by the AI capex build out right now. And yes, GDP is a measurement of spending. So if money is getting spent, it's contributing to GDP. And investing in infrastructure, there are a lot worse things to invest in. I mean, you're hopefully doing a build out that's going to be generating future incremental value.