Dan Skelly 0.8 8 ideas

The U.S. stock market has bottomed after a 9% correction, supported by underlying productivity boom, strong earnings, geopolitical de-escalation, and a peak in volatility as indicated by the VIX decline.

AI is a persistent and key thematic driver of productivity improvements and innovation in the U.S., similar to historical innovation cycles, and will continue to be a major market narrative.

The speaker explicitly states, "Stick with the international trade... whereas the AI centric optimism has now ceded to concern, that's obviously benefiting international." He also cites "policy and fiscal tailwinds helping Japan, helping Latin America." As the "AI trade" in the US becomes crowded and faces skepticism (disruption fears), capital is rotating into undervalued markets. Europe and Japan offer a "valuation discount" combined with new fiscal catalysts that were previously absent, making them the primary beneficiaries of the US tech pause. LONG International markets as the momentum baton passes from US Tech to global value/cyclicals. Global recession or a resurgence of US exceptionalism driving the dollar higher.

The speaker highlights "defense spending and a revamping of the military industrial complex" in Europe and mentions a potential "Marshall Plan type of equivalent" for post-Ukraine recovery. Geopolitical instability is forcing a structural shift in European fiscal policy toward re-militarization. This creates a guaranteed revenue stream for defense contractors and infrastructure firms, decoupled from the volatility of consumer tech or AI software. LONG Defense (specifically with European exposure) as a fiscal policy play. De-escalation of geopolitical conflicts leading to budget cuts.

The speaker notes, "The market is efficiently and probably rightfully taking a pause on Mag 7... we have alternatives for the first time in a decade." He also acknowledges the "fade software" narrative due to AI disruption fears. While not abandoning "large cap quality adopters," the risk/reward has shifted. The massive spending ramp-up in AI without immediate ROI has created fatigue. Investors are now demanding earnings breadth rather than just AI promises, leading to a consolidation phase for these high-flyers. NEUTRAL / WATCH. The momentum factor has broken; wait for valuation compression or clearer winners in the "AI adopter" vs. "AI disrupted" debate. AI capex yields faster-than-expected revenue, reigniting the rally immediately.

Skelly states, "We have been recommending Gold for over two years and we like that trade." Yardeni notes Gold is a "very good diversifier." In a "global reflation" environment with geopolitical instability and doubts about US fiscal health/tech valuations, Gold acts as the ultimate non-correlated hedge. LONG GOLD. Real rates rising significantly or a strong dollar.