Wk7 MacroTechnicals - SaaSpocalypse lows are in

"There is only one side of the market and it is not the bull side or the bear side, but the right side" - Jesse Livermore

I want to start by addressing some questionably bearish narratives floating around lately - mostly around the idea that the 'AI-bubble has popped', 'it's over', and comments that says the 'US will enter a recession in 6months'.

AI Capex is still in acceleration - this implies that we are still in its early innings, and anecdotally we are still seeing a plethora of AI related investments from all over the globe. Until this Capex cycle is showing signs of peaking, I'd say the bubble/boom is far from over. Going back to the BIS article we've touched on in prior notes to provide some perspective on this, they showed that the current level of AI-capex (approx. 1% of US GDP) is just half of the Dot-com boom, and one-fifth of Japan's/Australia's property/mining booms.

With regards to a recession - I understand the narrative that growth start to gradually slow after very a strong period, but that is a huge leap from above 4% growth to negative.

For such a scenario, one would have to believe that businesses will turn far less profitable thus increasing the risks of higher unemployment, and in turn impact spending and investment. This is a scenario that even the Fed doesn't see in their latest SEP (e.g. the unemployment rate being at 4 to 4.5% for 2026 and 2027, and 3.8% to 4.5% in 2028). PMIs also maintaining a strong expansionary trend and especially Manufacturing beginning to see a rebound are not the type of signals that are synonymous with recession risks.

With those concerns put into perspective, I certainly do not think "it's over" and will be running through some charts (2 in particular) to show why I think we should be far less nervous about a further fallout in stocks, and why some heavily beaten down sectors may have finally found a floor.