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1. The U.S. Economy depends on AI spending.

Growth has become so dependent on AI-related investment and wealth that if the boom turns to bust, it could take the broader economy with it.

Business investment in artificial intelligence might have accounted for as much as half of the growth in gross domestic product, adjusted for inflation, in the first six months of the year.

Rising AI stocks are also boosting household wealth, leading to more consumer spending, especially in recent months.

"It's certainly plausible that the economy would already be in a recession" without the AI boom, said Peter Berezin, chief global strategist at BCA Research.

2. Technicals suggest the S&P 500 is oversold.

3. Bitcoin is a sentiment indicator for the Nasdaq100.

The crypto-led momentum selloff doesn’t bode well for the Nasdaq 100. Bitcoin has turned out to be an effective gauge of retail investor sentiment, marked by heavy outflows from sector funds last week. According to Bank of America strategists led by Michael Hartnett, crypto, credit, dollar, private equity are all trading at “peak liquidity,” and hinting that the Fed needs to cut. They see “bubbly animal spirits driven by mass rate cuts past two years and belief more coming in 2026.”

4. Rotation is the name of the game as the S&P 500 health care sector rallied to the highest level in over a year.

5. European defense is oversold.

The German defence budget is likely to rise regardless of the outcome of Russia-Ukraine negotiations: Germany’s defence budget was c€67bn in 2024 and its current plan is to increase this to c€180bn in 2030.

This remarkable increase is driven by several factors.

First, the belief that Russia now poses a major long-term threat to European security, even if the Russia-Ukraine war can be settled.

Second, the US has made clear it no longer wants to subsidise Europe’s defence.

Third, of the major European nations, Germany made the biggest cuts to its defence budget during the 1990-2021 peace dividend era. This has left it with a weakened military that urgently needs to be recapitalised.

Last but not least, if Ukraine is forced to accept a “bad” peace deal we might even see Germany (and other European countries) accelerate defence spending.

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