AI, Stressed Funding Markets & the Government Restart

Our Research — November 13, 2025

Conference Call By Alex Malitas

AI has been a dominant theme of the markets and economy all year. Funding markets have started to show signs that liquidity has dried up and the government shutdown is expected to end.

 

Transcript    Handout

 

Summary Points

  • The K-shaped economy illustrates the divergence between the stock market’s performance and consumer sentiment. The S&P 500’s upward trend contrasts sharply with the University of Michigan’s Consumer Sentiment Survey, which is near a historic low. This disparity is attributed to inflation and affordability issues, with wages not keeping pace with inflation, exacerbating economic perceptions among the public.

  • The probability of a rate cut is seen as a coin toss, reflecting the market’s divided expectations. This uncertainty underscores the broader challenges facing the Fed in balancing inflation concerns with economic growth.

  • Treasuries have entered a consolidation phase that suggests a potential breakout in interest rates. The market is at a critical juncture, with expectations of a move in interest rates, likely higher, due to increased volatility and market dynamics.

  • AI’s market concentration compares to historical instances like the 19th-century railroads. The significant role of AI-related companies in the S&P 500’s composition highlights the transformative effect of AI on economic growth and market performance.

  • The housing market’s challenges, primarily affordability issues, underscore the need for increased housing production, while also acknowledging the complex dynamics between housing as a shelter and as a speculative asset.

 

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