Everything Is Now Bullish for Treasuries

The potential slowdown or bursting of the AI capital expenditure (CapEx) bubble represents a momentous shift in global markets, threatening the primary driver of U.S. GDP and international stock performance over the last two years. A retraction in AI investment would likely trigger a significant downturn in economic growth and the labor market, creating a pivotal bullish turning point for U.S. Treasuries. This shift coincides with several critical factors: the market pricing in an 87% probability of a Federal Reserve rate hike, oil prices reaching cycle highs following geopolitical tensions, and 10-year yields approaching the 5% threshold. While corporate leaders may initially deny a pullback in spending, the October earnings season is expected to provide confirmation. This convergence of an AI investment cooling, peak oil prices, and aggressive Fed pricing suggests an asymmetric risk profile that favors a transition toward bullish Treasury positions.