AI Bubble Burst-Tariff Inflation Fears Overblown

● US stocks bubble 2026 scenario- AI rally, leverage, and policy shock convergence

The “Bubble Era” You Haven’t Experienced Begins? US Stock Market 2026 Bubble Scenario (Part 1) — Key Takeaways from this Article

Key points covered in this article:

Precise analysis of current differences and similarities by comparing the time flow of past bubbles in the 1920s, 1999, and 2020.
Core risks that other YouTubers and news outlets often overlook: shadow banking and non-bank leverage, concentrated liquidity channels via ETFs and options, earnings front-loading disguised as RPO (contract asset), and the mechanism by which political and institutional shocks can reverse “interest rate patterns.”
Why “2026” could be problematic (timing logic and trigger pathways).
Step-by-step response strategies from an investor’s perspective (short-term, mid-term, long-term) and a practical checklist for AI themes.

SEO Keywords: US Stock Market, Bubble, AI, Interest Rates, Investment Strategy

1) Chronological Order: Summarizing Typical Past Bubble Patterns (Learning Points)

1920s (Second Industrial Revolution)

Ignition Point: Technological and institutional innovations like electricity, automobiles, and telecommunications spurred widespread optimism.
Spread of Leverage and Speculation: Expansion of leverage by individuals and institutions, and cycles of fear and greed.
Lessons Learned: The combination of technological innovation and monetary policy (interest rates) amplified the bubble.

1990s Dot-com Bubble

Ignition Point: The price-shattering and demand expansion of PCs and the internet, accumulated over a long period, eventually exploded.
Discrepancy with Macroeconomics: Funds flowed into specific sectors (IT) despite weak economic indicators.
Leverage Pathways: Systemic risks from derivatives and hedge funds (e.g., the LTCM case) threatened the entire market.

2020 Pandemic Rally (Localized Bubble)

Ignition Point: Acceleration of platforms, cloud, and e-commerce – a sharp rise in already ongoing trends.
K-Shaped Recovery: A few companies (major AI/cloud players) experienced a super boom, while others declined.
Characteristics: Overheating centered on specific sectors and star stocks rather than a general bubble.

Key Summary (Learning Points from Past to Present)

A true “bubble” is not simply “high valuation” but rather a structure that is difficult to sustain without someone’s liquidation (or policy shock) due to the interplay of “leverage and liquidity channels.”
Technological innovation acts as a catalyst for bubbles, but interest rate, credit, and policy shocks create their explosive conclusion.

2) Present (2023-2025): Why We Consider the “Prerequisites” Met

Optimistic Impact of Technological Innovation (Especially AI)

Fundamental shift in investment sentiment due to structural transformation in AI, cloud, and SaaS.
Increase in companies reflecting future revenue in advance through RPO (contract assets) and growing deferred revenue.
Result: Formation of a K-shaped structure where macro indicators and corporate earnings diverge significantly.

Discrepancy Between Macroeconomics and Corporate Earnings

Manufacturing and traditional industries are weak, but AI and IT sector earnings and order indicators (like RPO) remain robust.
This discrepancy leads investors to be convinced of “partial optimism” and concentrates capital.

Unconventional Expansion Pathways of Liquidity and Leverage

Leverage expanded through non-bank channels such as ETFs, prime brokerage services of securities firms, options, and individual margin accounts, rather than traditional bank loans.
So-called “ETF concentration and options leverage” obscure overall systemic risks while inducing excessive positioning in specific sectors.

Change in Monetary Policy (Interest Rate) Framing

The market has already priced in the potential weakening of the Fed’s independence and political pressure.
The market is significantly probability-weighting (pf) the timing of interest rate cuts next year (around 2026) to drive up asset prices.

Key Summary (Present)

The current US stock market possesses the “prelude to a bubble” – the prerequisites (technological innovation, K-shaped earnings, alternative leverage channels).
However, the final explosion (or correction) requires additional conditions (large-scale credit expansion, accidental inflection points in monetary policy, instability in the derivatives market).

3) Why 2026 – The Timing Mechanism (Points Often Omitted by Other Media)

Time Lag Effect of RPO and Contract Asset Effects

If RPO for SaaS and cloud companies accumulates now (2024-2025), the actual cash and monetization timing will extend into 2025-2026.
During this process, “expectations of earnings improvement” can further drive up market valuations.

Accumulating Critical Point of ETFs, Passive, and Structural Capital Flows

As passive and ETF inflows into specific AI and cloud indices accumulate, asymmetrical volatility and liquidity vulnerabilities arise in a few stocks.
The leverage pool from options and leverage can lead to a sharp reversal (large-scale liquidation) during market corrections.

Potential Synchronization of Political and International (Extra-Financial) Shocks

If mid-term elections, policy changes, and international financial instability (e.g., emerging market liquidity crisis) converge around 2026, the Fed could be forced into “accidental rate cuts.”
This is similar to how past bubbles (1927, 1998, 2020) gained momentum and continuity through a “shock (crisis) -> rate cut” route.

Critical Threshold of Shadow Banking (Non-bank Credit)

When securities firms, hedge funds, leveraged ETFs, MMFs, and conditional credit accumulate, credit shocks beyond the traditional central bank’s control could materialize in 2026.

Key Point (What Others Often Don’t Mention)

The real risk is not “who is indebted” but “how the market’s major liquidity providers react when that debt is liquidated.”
The 2026 scenario is highly likely to materialize when these accumulated structural imbalances are synchronized by an exogenous shock (or political/institutional event).

4) 2026 Bubble Scenario Development Path — Step-by-Step Timeline

Phase A (Now ~ End of 2025)

Spread of AI optimism, improvement in RPO and order indicators, increase in ETF and institutional positioning.
Rise in option and margin usage, concentration of capital in specific AI and cloud indices.
Expectations of interest rate cuts are priced into the market.

Phase B (Early 2026) — Potential Triggering Event

Occurrence of exogenous shocks (international financial shock, political shock, problems with major hedge funds/prime brokers, etc.).
The Fed and policymakers consider rapid liquidity supply and interest rate policy shifts for “market stability.”
Liquidation of leveraged positions and liquidity reversal lead to a surge in volatility.

Phase C (Mid-to-Late 2026) — Vortex (Deleveraging) or Revaluation

Initial correction in large tech stocks and ETFs (sharp decline in profit margins).
As the gap between real economic indicators and corporate earnings narrows, excessive premiums for K-shaped beneficiaries shrink.
In the long term, “selective growth stocks + value re-rating” are readjusted.

Key: 2026 is a “timing inflection point” and a period where exogenous shocks and accumulated structural imbalances can act simultaneously.

5) Investment Strategy: Time-Based / Group-Based Checklists (Practical & Specific)

Immediately (Now ~ 6 Months) — Defense and Positioning

Portfolio: Mix of core holdings (core AI/cloud) + defense (cash, short-term bonds).
Risk Management: Reduce leverage, avoid selling options/shorting, and use defensive puts (or call spreads) as insurance.
Monitor: RPO/order indicators, ETF inflow speed, sharp increases in option open interest (OI).

Short-to-Medium Term (6-24 Months) — Seizing Opportunities and Hedging

Overheated Segments: Shift to individual blue-chip stocks when ETF/index concentration is excessive.
Hedging Instruments: Gradually accumulate inverse ETFs, futures positions, and put options.
Asset Allocation: Maintain AI/cloud weighting but divide position size (exposure) (e.g., maintain average cost basis).

Long Term (24+ Months) — Opportunities After Re-rating

Post-Correction: If the fundamentals of technological innovation are maintained, “blue-chip AI platforms” present long-term buying opportunities.
Expand Value & Defensive: Gradually incorporate sectors more sensitive to the real economy (industrials, materials, financials).

Sector Recommendations (Relative)

Overweight: Infrastructure-type AI (cloud, data centers), core semiconductors (especially AI accelerators), software with license models.
Neutral: Big Tech (risk of valuation re-adjustment exists).
Underweight: New tech with excessive leverage and uncertain profitability, traditional industries with high debt.

Specific Execution Tips (Not Often Discussed Elsewhere)

If an ETF/index constitutes over 15% of your portfolio, account for “liquidity liquidation” risk.
Monitor option open interest, call skew, and PUT/CALL ratios daily to detect “leverage explosion signals” early.
Check prime brokerage/securities firm credit balances (when publicly disclosed) and MMF liquidity indicators to assess shadow banking risks.

6) The Link Between AI Trends and Stock Market Bubbles — What Else to Focus On

Why AI is More Than Just a “Tech Bubble”

Productivity and Business Model Redesign: AI reshapes cost and demand structures, reorganizing the profits of some companies long-term.
Earnings Front-Loading: Phenomenon where contract/subscription-based businesses (RPO) pull forward earnings.
Shift in Perception: A structural expectation that makes people “ignore” macroeconomics (“AI performance is more important than economic indicators”).

Key KPIs to Check in AI Themes

Actual Revenue Conversion Rate: Speed of RPO to actual revenue conversion.
Margin Sustainability: True operating profit margins considering rising AI model operating costs and cloud expenses.
Customer Churn Rate: Whether initial order expansion leads to long-term customer retention.
Infrastructure Capital Expenditure (CAPEX): Sustainability of funding for data centers and AI hardware.

Hidden Signals Investors Miss (Differentiation Points)

If the “total usage” and “average revenue per user (ARPU)” of AI services do not increase rapidly, earnings are likely to be a bubble.
When AI-related companies rapidly increase “orders (advances),” check the contract terms (cancellation/refund clauses).
As bottlenecks in the hardware and material supply chain (especially semiconductors) are resolved, valuations may become more rational.

7) Risk Checklist — Potential Trigger Events and Response Priorities

Major Trigger Events (in order of priority)

Large liquidation in derivatives/hedge funds or prime broker liquidity issues.
Political and institutional shocks (undermining Fed independence, excessive fiscal policy).
External financial crises (emerging market/global liquidity soundness shocks).
Accounting or earnings restatements by major companies (confirmation of illusory profits).

Response Priorities

1st Priority: Check and reduce leverage in positions if necessary.
2nd Priority: Secure defensive hedges with options and futures positions.
3rd Priority: Maintain a certain level of cash (liquidity for seizing opportunities).
4th Priority: Confirm “genuine earnings” within the portfolio (focus on revenue conversion and cash flow).

Conclusion — Concluding Perspective

The current US stock market is in the stage before the “full unfolding of a bubble,” having met the key prerequisites.
2026 is a “timing risk” where accumulated structural imbalances can combine with exogenous shocks to trigger a volatile market.
However, just as not all bubbles end in a simultaneous crash, companies with genuine fundamentals like AI will remain long-term opportunities.
Strategically, managing leverage, avoiding sector concentration risks, and selective investment based on verified earnings (along with hedging) are key.

< Summary >

Past bubbles (1920s, 1999, 2020) exploded due to the combination of technological innovation + interest rate/credit shocks.
The current US stock market has the “prerequisites” created by AI: optimism, RPO, ETFs, and options leverage.
2026 is a point where accumulated structural imbalances can align with exogenous shocks to trigger a bubble phase.
Practical response: Reduce leverage, dollar-cost averaging, option-based defense, and selective investment focused on earnings (revenue conversion, cash flow).
Particularly, AI themes can be turned into opportunities by strictly verifying “revenue conversion speed” and “margin sustainability.”

[Related Articles…]

*Source: [ 소수몽키 ]

– 경험하지 못한 ‘버블장’ 시작된다? 미 증시 2026 버블 시나리오(1부)

● PPI Shock Tariff Inflation Fears Overblown, 7 Investor Checkpoints

Breaking Down the News: What the PPI Shock Told Us — Why Tariff Inflation Fears Were Overblown, and 7 Things to Check in Your Investment Positions Right Now

Key Takeaways from This Article (At a Glance):

Specific figures and background of the surprise drop in the Producer Price Index (PPI).
The practical mechanism (a key point often missed by other news outlets) explaining why Trump’s tariffs are not translating to actual consumer prices (CPI).
What the sharp decline in distributor margins (trade margins) signifies about the economy and demand.
Immediate market reactions (bonds, rates, stocks) and analysis of the Federal Reserve’s policy path (interest rates).
Vulnerable and benefiting sectors, along with a practical investment checklist.
Risk scenarios and hidden players (M&A, inventory adjustments, currency and emerging market impacts).

1) Key Figures from Today’s PPI — What Was Released (Timeline: Immediately Post-Release)

PPI MoM: -0.1% (Consensus +0.3%)Core PPI MoM: -0.1% (Consensus +0.3%)Services PPI MoM: -0.2% (Services led the decline)Goods PPI MoM: +0.1%

Trade Margins: Sharp drop of -1.7%Machinery & Wholesale Margins: Sharp drop of around -3%(Summary) Margin pressure in the services sector drove down the overall PPI.

2) The Hidden Mechanism of This Decline — The ‘Real’ Point That Most News Outlets Don’t Cover

The reduction in distributor margins is not simply a matter of ‘cutting margins.’

It signifies structural demand weakness, where rising costs due to tariffs cannot be passed on to consumers.
Distributors are sacrificing margins by repricing inventory item by item or expanding promotions.
Consequently, while a decline is observed in PPI (a supply-side indicator), it serves as a precursor to weakening demand on the consumer side.
In other words, the simplistic inflation scenario of Tariffs → Cost Increase → Price Pass-Through is likely to be weakened in reality.

Additional Important Points (Not Reported by Most Media)

Margin pressure can lead to a survival crisis for small distributors, accelerating industry consolidation (M&A, closures) in the medium to long term.
Red flag for inventory buildup/drawdown: While increased promotions to quickly clear inventory can make short-term sales look inflated, subsequent inventory replenishment periods will reveal demand weakness, potentially leading to long-term performance deterioration.
Despite the PPI decline, certain items (imported intermediate goods) may still face upward pricing pressure, suggesting the possibility of ‘cracked inflation’ persisting.

3) Immediate Market Reactions (Short-Term) — How Rates, Stocks, and the Dollar Moved

10-Year Treasury Yields: Declined, but not a ‘massive crash.’
Stock Market (Immediately After Open): Mixed or slightly down for Dow, Russell, etc.; did not lead to a short-term rally (investors are in a cautious mode, awaiting tomorrow’s CPI).
Derivatives Market (Interest Rate Futures): Short-term expectations formed for a 25bp scenario (around 88%) and a 50bp scenario (around 12%) for Fed policy path.(Summary) The market’s reaction suggests that while it’s ‘good news,’ the upcoming CPI is being given more weight, leading to restraint in making excessive position changes immediately.

4) 7 Practical Insights from an Investment Perspective (Short-Term → Mid-Term → Long-Term)

1) Short-Term (1-4 weeks): Refrain from position changes until CPI is released.

It’s highly probable that the improvement in PPI will not fully translate to CPI.
Short-term trading: When volatility shrinks, option premiums may be low; be cautious with volatility buys (e.g., puts).

2) Short to Mid-Term: Relative benefit for rate-sensitive sectors (tech growth stocks, long-term bond ETFs).

The possibility of moderating inflation puts downward pressure on both short and long-term rates, leading to a re-rating of growth stocks.

3) Mid-Term (1-3 months): Exercise caution with distributors, wholesalers, and auto retail-related companies.

Profit outlooks may be revised downwards if margin pressure persists.
Recommend avoiding selective shorts or small/mid-cap distributors lacking profit momentum.

4) Mid to Long-Term: Differentiation between consumer discretionary and consumer staples.

As consumer price sensitivity increases, premium brands may weaken, while discount brands and hypermarkets may remain strong.

5) Strategic Hedging: Re-evaluate portfolios of long-term bonds (long) + TIPS (inflation-linked bonds).

If inflation doesn’t actually persist, nominal bonds might be more favorable than TIPS. Adjust proportions accordingly.

6) Monitor Corporate Earnings: Pay close attention to comments on ‘price pass-through potential’ and ‘inventory policy’ during conference calls for distributors experiencing margin pressure.

Risk of target price downgrades if unexpected margin recovery is unlikely.

7) Macro/Policy Risk: Tariff (trade policy) shocks are political variables.

Hedge some event risk with options against the possibility of large-scale tariff introductions or withdrawals.

5) Sector and Stock-Specific Checkpoints (Specific Responses)

Vulnerable Sectors (Caution): Small/mid-cap distributors, auto parts distributors, non-essential consumer retail.
Defensive/Benefiting Sectors: Utilities/Real Estate (benefit from downward rate pressure), Growth/Technology (rate-sensitive).
Opportunities: Hypermarkets/Discount Brands (benefit from price-sensitive consumers), Logistics Automation (companies improving cost structures) – however, large corporations with cost reduction capabilities will have an advantage.
Options Strategy: Protect downside with put spreads before CPI release; buy volatility when rates are unstable.

6) Macro Implications — The Fed, Dollar, and Emerging Markets (Mid to Long-Term Perspective)

Fed Stance: Signals of easing inflation pressure will be interpreted as a ‘slowing pace of monetary tightening.’
Dollar: Potential for weakness due to safe-haven demand and downward pressure on rates; however, volatility may occur depending on geopolitical factors.
Emerging Markets: Dollar weakness offers some relief, but global demand slowdown poses a risk to export-oriented emerging markets.
Inflation Expectations: Monitor changes in TIPS breakeven rates if long-term expectations do not decline rapidly.

7) Risk Scenarios and Checklist (Monitoring Points)

If tomorrow’s CPI is stronger than expected: The PPI signal was a short-term illusion, leading to a rebound in rates and the dollar.
Sudden changes in trade policy (new tariff announcement or withdrawal): Immediate re-evaluation of distributor margins and import prices.
Significant margin downgrades during earnings season: Broad weakening of consumer stocks intensifies.Data to Check (Priority Order):
Tomorrow’s CPI figures
Retail sales, consumer confidence index (weekly)
Import price index & corporate margin disclosures
Fed member remarks & interest rate futures (change in expectations)

8) Practical Investment Decision-Making Framework (Simple Rules)

1) Before the Event (Before Tomorrow’s CPI): Reduce leverage, maintain defensive positioning.2) Immediately After the Event (24-72 hours after data confirmation): Adjust growth stock and bond allocations based on rate and bond market reactions.3) Mid-Term Review (1-3 months): Re-evaluate earnings trends for distributors/consumer companies and individual companies’ pricing strategies (timing of price increases).4) Long-Term (6 months+): Sector rebalancing aligned with structural changes in consumer patterns (shift to lower prices, brand desertion).

9) Practical Checklist to Check Right Now (10-Second Check for Investors)

Does your portfolio have significant exposure to distributors/wholesalers? If so, consider reducing exposure.
Is there room to increase bond allocation? Utilize the downward rate environment.
Plan to confirm actual demand (retail sales) with data within 48 hours after the CPI release.
Set up alerts for corporate earnings updates (especially guidance).

Today’s PPI came in at -0.1% month-over-month, significantly below the consensus (+0.3%).
The decline was led by services, particularly a sharp drop in trade margins (around -1.7%), indicating that distributors absorbed tariff shocks rather than passing them on to consumers.
This signal suggests that the risk of ‘large-scale consumer price inflation’ due to tariffs is likely overblown and hints at weakening consumer demand.
Investment perspective: Relative benefits for rate-sensitive stocks (growth stocks) and bonds (long-term bonds); distributors, wholesalers, and auto retailers are vulnerable to earnings and margin risks.
In the short term, tomorrow’s CPI is key. Adjust your positions after confirming the data.

*Source: [ Maeil Business Newspaper ]

– [속보] 충격의 PPI쇼크. 관세발 인플레 공포 사그라드나 I 홍장원의 불앤베어