Markets Weekly July 4, 2026

Summary

Joseph Wang discusses the momentum bust in AI stocks, especially Korean semiconductors and Micron, citing cracks in the AI narrative. He also reviews the 1873 financial crisis, drawing parallels to today's speculation, but notes that deflationary busts are unlikely under modern monetary policy. The S&P 500 could hit new highs before a broader correction, following historical bubble patterns.

• The AI momentum trade is showing signs of a bust, with the KOSPI index (Korean semiconductors) losing steam and US AI stocks like Micron underperforming.
• Narratives of cracks in AI demand include Meta leasing out excess compute, rising use of open-source Chinese models, and Palantir's push for openweight models.
• Jeremy Grantham's bubble pattern warns that after high-flyers lag, the S&P 500 could rally to new highs before a broader correction.
• The US jobs report showed a mixed picture, with lower headline job creation but a drop in unemployment rate driven by falling labor participation.
• Fed commentary suggests AI is initially inflationary but ultimately disinflationary via higher productivity.
• The book 1873 illustrates how speculative busts led to prolonged deflation when combined with monetary tightening, but today's elastic fiat system makes a repeat unlikely.