Macro volatility is crashing across all assets. Oil volatility is down 20 points from highs, EM FX and equity volatility are also down. People are more relaxed about risk, giving retail room to run in equities. AI themes are being explored one after another, driving the index higher in slow motion. There was a meaningful rotation on Friday from hot names like Intel into heavier software names like Microsoft.

As long as oil stays in this range, equities are more relaxed. The AI theme will be played one earnings release or news headline at a time because there is no macro headline risk.

There is a lot of debate about what constitutes a bubble. There is strong earnings visibility but no visibility on the repeatability of that earnings strength. The trajectory of growth is up for debate, but the power of earnings momentum is very strong. This results in drastic rotations between companies making money now (Nvidia, TSMC, Samsung, Hynix) and speculative plays on software and quantum computing.

The AI capex boom is a once-in-a-generation move. The question is whether it sustains over the rest of the decade or is a one-off. There are also questions about whether data centers can actually be built given capacity constraints in power, water, and real estate.

EM central banks have a different problem set. They need to convince their populations that inflation is under control, so they have been more aggressive in raising rates and messaging around inflation. This is driving more FX volatility and weakness compared to the calm in G7 markets. This seems to be a macro-mega trend where smaller countries without AI are struggling.

On Friday, India struggled versus a big pop in Korea, illustrating this divergence.