Will Fed Trigger ‘1987’ Market Crash This Week? | David Woo

The AI-driven stock market bubble faces existential risks from surging 10-year Treasury yields and rising oil prices, which threaten to choke off capital expenditure. With the 10-year yield hitting 5%, the market is increasingly sensitive to the "crowding out" effect where debt-financed AI growth competes with other sectors. Geopolitical instability, particularly involving Houthi attacks and potential U.S. restrictions on Chinese AI models, further complicates the outlook. Economist David Woo argues that the U.S. government is effectively underwriting the AI boom to maintain national security dominance, yet this strategy creates a fragile equilibrium. If the 10-year yield climbs toward 5.30%, the AI trade could collapse, triggering a broader market correction. Investors must navigate this volatility by monitoring the interplay between central bank policy, energy prices, and the potential for retaliatory trade actions between the U.S. and China.