AI All That Matters Even as Yields Climb: 3-Minutes MLIV

Summary

Mark Cudmore discusses the dominance of the AI trade over the oil trade, noting that while underlying fundamentals for AI remain constructive, they are less bullish than last year and vulnerable to a narrative shift. He also comments that rising yields are not an immediate problem for equities but are eroding the background fundamentals, and that the Iran conflict remains a potential disruption. US investors have been more relaxed about Gulf tensions but are starting to turn more negative.

• The AI trade is currently more important than the oil trade for equity markets.
• Underlying fundamentals for AI are still constructive but less bullish than last year.
• A sudden change in the AI narrative could lead to a powerful market decline.
• Rising yields are not a catalyst in isolation but are eroding background fundamentals.
• The Iran conflict is the only potential offramp that could reignite oil's focus.
• US investors have been more relaxed about Gulf tensions but are turning negative.
• Energy companies can pass on costs as price setters, but the overlap with AI is limited.
• The market remains willing to buy dips in AI unless the narrative turns negative on other reasons.