Capital investment drives the stock market higher, rendering the "economic recession" talk irrelevant

In the past two years, factors such as tariff friction, inflation concerns, and geopolitical conflicts have intertwined, and market predictions about the "next round of financial recession" have never stopped. The argument that "financial winter is just around the corner" has repeatedly emerged. But a series of core data clearly indicate that this pessimistic expectation is completely untenable - capital continues to increase investment, the US stock market rebounds strongly, the probability of economic recession hits a historic low, and the so-called "recession warning" has long been debunked.

###1、 The probability of recession hits a historic low, and pessimistic expectations are completely shattered

The market's concerns about economic recession are gradually dissipating with the release of data. According to data from trading platform Kalshi, the probability of a contraction in the US economy is only 17%, a significant drop from the peak of nearly 40% in March this year and a historic low. This data intuitively reflects that the market's confidence in the economic outlook is continuously recovering, and the previously widely circulated "recession theory" has lost its data support.

The performance of the stock market directly confirms this trend. Previously, the US stock market had emerged from one of the fastest market recovery periods in history: the S&P 500 index rose 7.5% in the past month, with a cumulative increase of nearly 17% since the market low at the end of March; The four major indexes of NASDAQ, S&P 500, Russell 2000, Dow Jones, as well as core stocks such as Google, Intel, Micron Technology, and SanDisk, have achieved six consecutive weeks of weekly gains, with significant market profitability effects.

More importantly, the rise in the stock market is not driven by foam. Wall Street Journal reporter Gunjan Banerjee pointed out that the P/E ratio of the S&P 500 has not only not increased since the beginning of the year, but has instead decreased by 4%. This means that the stock market is expected to see above average annual returns, while the valuations of target companies are synchronously falling - the core logic behind this is that the overall US economy is accelerating growth, the productivity of listed companies is significantly improving, and revenue and profits are expanding synchronously, supporting a healthy rise in the stock market.

Mike Zaccardi's data further confirms the profitability resilience of companies: the median year-on-year change in first quarter earnings before interest, tax, depreciation, and amortization (EBITDA) reached its best level in nearly four years, and the improvement in company fundamentals provided solid support for the stock market rebound.

###2、 Market concentration reaches a 30-year extreme, with two clear profit paths emerging

Despite the overall strong rebound of the US stock market, Citadel's interpretation reveals a key phenomenon: the current market rebound is highly concentrated in a few stocks, showing extreme market concentration. Data shows that in the past 30 days, only 22% of the S&P 500 constituent stocks have outperformed the overall index, setting a record low in nearly 30 years.

This means that the current market's profit making effect is not widespread, but concentrated on specific tracks. Specifically, there are only two clear ways to make money in the market: either layout the artificial intelligence track, or hold a broad-based index. If investors allocate to other industry sectors without holding index assets, they are likely to underperform the market and find it even harder to keep up with the rising pace of artificial intelligence concept stocks.

The data on the income gap is particularly intuitive: in the past two years, the S&P 500 index has accumulated a 42% increase, while excluding artificial intelligence stocks, the S&P 500 index has only increased by 16% during the same period. The 26 percentage point gap between the two fully highlights the core driving force of the artificial intelligence race and confirms the current market pattern of 'strong players always strong'.

###3、 Capital rushes into the AI race track, highlighting the long-term investment value

Although the market concentration is extremely high, it cannot be ignored that huge amounts of capital are continuously pouring into the artificial intelligence track, becoming the core driving force for the long-term rise of the stock market. For investors, the rearview mirror style approach to fund allocation is highly risky. The factors that have driven market returns in the past may not necessarily determine the future, but the scale of capital investment in the field of artificial intelligence has reached a point that cannot be ignored.

According to recent data released by a16Z, based on nominal GDP, the capital expenditure of technology companies accounts for as much as 55% of the total capital expenditure in the United States. This proportion is astonishing: in the 1960s, the capital expenditure of technology companies accounted for only 15%; In the 1990s, this proportion only reached 40%. The influx of massive capital is reshaping the landscape of the technology industry and injecting long-term momentum into the stock market.

Peter Diamandis' analysis provides the answer to capital flows: "By 2024, global enterprise AI investment will reach $252.3 billion, with private equity investment growing by 44.5% year-on-year. Private AI investment in the United States alone will reach $109.1 billion. ”Funds always flow towards the track with the strongest certainty, and artificial intelligence is currently one of the areas with the highest market certainty.

It should be noted that there is often a lag in the return on capital investment, which may take several months or even years. It is an established fact that major companies are aggressively expanding into the AI field, and when these investments will yield dividends has become the hottest controversial topic on Wall Street. However, from a long-term perspective, the scale of profits ultimately realized from these investments is likely to far exceed market expectations, and only investors who adhere to long-term investment concepts can truly grasp this wave of industry dividends.

###4、 Breaking the misconception of "May clearance" and grasping the window of bull market layout

Faced with the current market situation, many investors are still influenced by the traditional investment proverb of "clearing positions and leaving in May", believing that the stock market returns after May are not worth the risk they bear. But the data provided by Peter Mallouk of Creative Planning, a wealth planning agency, completely breaks this misconception: "The average annualized return of the stock market from May to October in history is still 7%, and 72% of the market has risen during this period

It is not difficult to conclude from all the core data that every signal in the current market points to investors actively entering the market to allocate funds and prepare for the strong continuation of the bull market. Although the market is still filled with various pessimistic noises, and some pessimists have always resisted this round of market rebound, these criticisms have no actual data support and cannot stop the long-term trend of the market.

Nowadays, companies from various industries in the United States are working together to lay a solid foundation for economic growth in the next century - from infrastructure, power systems to software systems, everything is undergoing comprehensive upgrades. Under such a trend, investors who can clearly see the direction and plan accordingly will surely reap substantial investment returns in the coming years.