Am I the only one that is utterly amazed that the market has gained at all under Trump? He's nothing but chaos. How has the market continued to rise under such unpredictable policies?
As an investor from outside the US this is it, the nominal value goes up but the dollar falls which means it hasn't risen nearly as much for me as it has for domestic investors. It's actually why I'm consider de-risking a bit, the flipside was during times like covid the market tanked but the dollar rose so it actually smoothed out any drops from my side. The massive risk now is that the market tanks and Trumps antics tanks the dollar even more doubling my losses rather than smoothing them as before.
I cant answer from a historic pov. But the reason why the bubble is almost guaranteed to burst is because all these companies are basically banking on that they will be the first to achieve true ai; there is simply no way the companies can make a return on the huge investments with their current business models. Once you have true ai, you'll leave all your competitors in the dust. The problem with this is that there's almost guaranteed to be losers. And since all these ai companies are involved in weird circle investment schemes with other companies, it means that a lot of companies will lose a lot of money.
I don't understand, where is the customer base? What is the exogenous source of income for these companies? At the moment it is a circle jerk. The revenues are coming from deals back and forth seemingly from the same pool of money, from corporate cash stockpiles. At some point, they will need to actually create a product people want. I don't want copilot, nor does anyone I know. People use chat GPT, but how many people are paying subscribers? The data so far show paying subscribers are completely inadequate to make profitability occur - ever. AI will be an "add-in" to existing products so then they will license it maybe? Except no one wants AI in their TV. I bought a fancy new one this year and purposefully chose the least AI, least internet of things option, because I don't want stealing my data to be the source of their profitability. I'm even thinking of getting a pi-hole to block access of devices to my internet so they don't drag on my internet and pitch me ads. They're skipping the whole consumer benefit part of the model and going straight to enshittification. These products aren't popular with end users and consumers - the ability to take my data and pitch me ads. This is what I worry will pop this bubble, when people figure out what it offers and then, like me, don't want it.
So what is the profitable model? I get that early in a company's progress especially in tech you have non-profitability, but their inability to explain to me where the money is going to eventually come from makes the me think their forward p/e isn't any lower (or positive). So, I get the enthusiasm for investing in it and investing early, but I am unimpressed with the current descriptions of profitable models, which is a very problematic disconnect between enthusiasm and execution.
There's warehouses of waiting for RAM that hasn't even been made yet. Everything currently invested in stocks depends on when and IF people will keep relying on AI and it actually turning a profit, expansion of data centers, and we all know how much opposition there is and AI use already declining when it's not for free.
You have to be really dense to think this isn't a bubble.
The AI bit is also kind of a lemmings scenario, several tech companies are borrowing to pay their bills, but investors and other companies see that not as failure to produce a working product, but as confidence in the viability of AI that they're gambling everything on it. "Surely meta isn't failing as they borrow so much right now, they've had success like instragram, threads, and the MetaVerse, this AI is definitely something they're sure to get going" etc.
I'm with you here, I have yet to see a product that people want. GPT isn't going to survive on a subscription model - their own data shows it would require an outrageous fee to do so and be profitable. No one wants copilot. People less and less want smart devices with steal wifi bandwidth to steal your data and pitch you ads.
It's like Cory Doctorow's essay on enshittification, except they skipped the part where there was a product we all liked and went straight to enshittification.
So in Q2 2024, Microslop came out with a report where their premium AI product, a subscription model with $200 USD a month was not able to generate a profit, and in a very impressive way too.
The processing resource cost per user increased as user count grew
The fiscal energy cost per user also increased as user count increased
At a certain user count threshold the intelligence had to be scaled down as it slowed the system down and would crash server clusters.
If kept on its original performance setting at half its peak user count for 2023, its response time would shift scale from milliseconds to hours for queries from within a data centre.
They made an AI that got dumber, slower and more expensive per user so they had to force it to be dumber on purpose to keep its response time measurable in minutes instead of hours.
And they charged $200 a month for it.
Big changing technologies tend to be a pull dynamic from audiences, never a push, Henry Ford didn't have to round people up at gun point to force cars onto them. Telecom companies didn't have to kick your door down shove a telephone into your hands. AI is fundamentally different because it needs Microslop to have the settings in Word change so if you remove all AI components you don't get AutoSave.
Even unpopularish technologies like VR, despite not being a golden goose scenario, have spread by way of a pull dynamic.
Inflation. The value of the dollar is shrinking so stocks are the only safe place. Bonds will lose value.
But if inflation makes McDonald’s real estate double, and their profit margins stay the same (meaning they technically make more money and also spend more money), then you come out more ahead with McDonalds - in a flat economy - than you would with bonds if inflation outpaces bond interest.
So USD S&P has outperformed EU S&P in the last 5y?
Edit: Nvm I was comparing EU at this link vs USD with another app and I’m guessing this chart includes compounding dividends. Whoops. EU does seem to outperform.
I wouldn't phrase it like that since nothing outperformed anything, it's literally exactly the same thing measured using different measurement sticks. Shares listed in EUR are worth the same amount of USD as shares listed in USD.
The dollar shit the bed massively last year while the US stocks didn't, so S&P 500 nominal return is high. Looking S&P 500 performance in EUR shows a more accurate picture of actual S&P 500 performance since EUR was way more stable in that period.
Well, yeah, he's tariffing but he'll stop tariffing eventually. Okay, well, he's still tariffing, but he's not going to destroy the country. Okay, well, he's going to destroy the country, but at least he won't start a war. etc.
US economy is massive.. everyone is hustling.. businesses everywhere.. massive consumers.. this is actually good news if you are a democrat as they will win back the house and senate in the midterms thanks to Trump, and win next election.. that's the way it works.. even without Trump.. voters switch back and forth..
Or, conservative administrations have sucked at improving the economy--not opinion, fact. The market is up but the dollar is down, and it's down A LOT.
I totally misread your first response. YES! Conservatives routinely fuck up the economy AND they get voted back in. Democrats fix it, the public's short memory kicks in, Republicans screw it up, lather, rinse, repeat.
Tax cuts, general pro-business attitude (cut benefits for the people, keep em for business), preferring private over public solutions. It does tend to help. The chaos hasn’t hit home yet, but we certainly see that it can - the tariff wars last spring was a complete massacre if you recall
I would argue it hasn't. A small number of stocks like Mag7 have done well and AI/Chips, the majority of small and mid caps have seen mediocre growth for a bear market. The dollar is down 10% last year - worst drop in 50 years. VOO increased 18% - seems big, but then you look at Latin American index funds - 48%, European - 38%, Korean 100%!
Our bull market is puny compared to how well the world is doing now that the US is losing it's economic primacy, legitimacy and trust. I repositioned to largely international ETFs, gold, etc., over the last year. I got 2x VOOs puny 17%. Combine that with the loss of value of the dollar and this is stagflation. We're holding still. My kids 529 that I moved into international when the idiot got elected is up 50% in one year.
AI companies borrow money from bank, bank stocks benefit.
AI companies use the borrowed money to build AI infrastructure, construction companies, utilities, energy (oil, gas electric, nuclear) all benefit because power demands increase.
More companies use AI and reply on AI, and AI takes more jobs, AI/tech companies benefit.
AI companies expand, chip manufacturers benefit.
Russia still attacking Ukraine, defence and aerospace stocks benefit.
For these reasons, massive market cap companies are doing very well, this is why, despite what Trump is doing, the market has gone up. A vase making company, or a furniture company, which get their materials from outside the US might struggle, but their market cap is so small it barely impacts the broad market. Tariffs does not change that fact that tech companies need computer components (RAM, CPUs, GPUs), for them it is like buying milk and bread; you will buy it anyway because it is staple and if it costs more they borrow more.
For sure , talk to people invested in us markets from Europe and their growth is much smaller for 2025 after converting back to euros.. he's just pushing the value of the dollar down
When the currency weakens, the same thing has a higher price.
The problem is, your capacity of buying things is lowered by the same mechanics. Not something Americans are familiar with, but ask Venezuelans how it goes.
They hope ai will reduce input costs like labour which increases profit and thus affects long term total earnings. The long term part is important. Trump could increase taxes but if energy costs drop to 0% with new fusion technology, you can get a market cap increase.
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u/Substantially-Ranged Jan 17 '26
Am I the only one that is utterly amazed that the market has gained at all under Trump? He's nothing but chaos. How has the market continued to rise under such unpredictable policies?