Shilling: 'Fads' Fueling Market, Even as Growth Slows

Nvidia's CEO has declared that his company's chips, powering AI's rise, threaten to disrupt virtually every major industry, he noted. 

"Some Wall Street analysts believe Nvidia is the leading supplier of a boom that could rival the introduction of personal computers, mobile phones and the Internet — or be even bigger! Rivals such as Advanced Micro [Devices], Amazon, Google, Microsoft and Meta threaten Nvidia's lead," Shilling added.

While suggesting with some sarcasm that Shakespeare is "finished" due to AI's ability to mimic human text, the economist said, "we note the zeal for Nvidia only partly in jest because it is so reminiscent of other fads of recent years."

Shilling also said inflation is not hot enough to force the Federal Reserve to tighten credit but not low enough to spur the central bank to ease interest rates. The Fed's 2% inflation target should keep interest rates up this year, he said.

"Excess savings from pandemic stimuli is exhausted and U.S. consumers are increasingly financially-stressed. High house prices have killed a sector that's usually an economic spur. The leading indicators index, the inverted yield curve and other reliable indicators point to a recession," he wrote.

Shilling also continues to suggest that investors:

• Long the U.S. dollar against other major currencies as the world's premier safe-haven.
• Long Treasury bonds, which have rallied since mid-February and should rise when the Fed eases credit.
• Switch Asian investments from China to India.
• Hold extra cash to prepare for later economic and financial market strength.