The question is not if we will have a bear market, the question is if this administration can afford to let us have a bear market.

- AI Capex is 50% of GDP. If it stops or slows down, GDP growth goes down the drain. No GDP growth = recession. Mainstreet gets hit the worst as the labor market will collapse.

- 90% of consumer spending is done by the top 10%. They are levered against their assets that allow them to keep spending because their stocks keep going up. Stocks go down? Goodbye to consumer spending as we enter an actual recession given normal consumers already are borrowing from credit cards to pay for everything.

- Social security will be wrecked over the coming 10 years. Why do you think we got the Trump Accounts? Because the administration believes in financial literacy? No, they need a replacement and having kids compound in the stock market to basically build their retirement account from birth could replace social security. That means stocks have to go up for those accounts to be worth anything and actually compound. Most 401Ks in this country are basically seen as retirement accounts. If the admin lets the market crash, people will not be able to afford retirement when social security benefits get cut into 2032.

- We are $40T in debt. Bond yields continue to go higher which means the interest expense on our debt is approaching a significant part of our overall spending. The literal only way to solve this is cut spending or grow. Repubs or Dems will not cut spending…so growth is the only answer. If the market crashes, the chances of sustained growth in the greatest tech buildout we have ever seen will be impossible and ultimately make our debt situation even worse. We have to grow.

Not saying we can’t get into some horrible bear market, but given how levered the entire economy is to AI, which is basically the entire stock market, I do think this admin will try very hard to make sure we don’t have some horrible, ugly crash. If they let it happen, everything goes down the drain and the difference between now and dotcom is that demand for GPUs is very real (no oversupply) and the difference between now and 2008 is that the potential credit issue is not in housing and banks, it’s within GPUs and there is so much demand that the hyperscalers + Nvidia + the admin could come in to make sure things don’t get as bad as then.

Maybe we could have some epic crash, but this administration really cannot afford to let that happen.

Source: amit