Here's how AI is impacting the labor market and 'HALO' trade

"The physical economy is the last place that AI reaches... Heavy Assets, Low Obsolescence... Goldman's HALO basket has outperformed capital light names by 25 percentage points." The "HALO" trade thesis rests on safety. While software and services face existential disruption, physical industries (Construction, Agriculture, Transportation) are insulated. Capital is rotating into these tangible, heavy-asset sectors as a hedge against AI obsolescence. LONG the leaders of the physical economy (Caterpillar for construction, Deere for agriculture, iShares Transport for logistics). A broader economic recession would hurt cyclical heavy industries regardless of their AI immunity.

"Salesforce, Intuit, DocuSign, Thomson Reuters they're closing this gap... [between what AI can theoretically do and what it is actually doing]." There is a massive "deployment gap" in Office, Legal, and Sales workflows. These specific incumbents are not being disrupted; rather, they are the vehicles through which enterprises are adopting AI to close that gap. They are capturing the value of the "Second Wave" of AI adoption. LONG the "Gap Closers"—legacy software platforms embedding AI into critical workflows. "Capital light" names are currently underperforming the HALO basket; these stocks may face headwinds if the market continues to favor heavy assets over software.

"Hiring of 22 to 25 year olds into AI exposed jobs has dropped 14% since ChatGPT launched. So companies are not firing people, they're just not hiring the next ones." This is a structural headwind for the staffing and recruitment industry. If the "entry-level" rung of the corporate ladder is being automated away, volume for recruiters (Robert Half) and job boards (ZipRecruiter) will permanently compress. SHORT/AVOID Human Capital firms exposed to white-collar entry-level placement. A sudden economic boom could force companies to hire regardless of AI efficiencies, squeezing shorts.