Richard Bernstein, global macro chief at Janus Henderson, suggests that the recent downturn in AI-related stocks may lead to lower borrowing costs for small-cap companies. He argues that the current market correction helps reprice capital, as funds previously concentrated in the AI data center sector may redistribute across the broader economy.
Market data shows a significant decline in chip stocks, which recently experienced an eight-session losing streak, marking a 16-year record. Furthermore, a major chip ETF closed nearly 14% below its October peak. Bernstein notes that as long-term interest rates fluctuate, small-cap stocks have shown some recent gains, though overall performance remains volatile.
Bernstein highlights that the Federal Reserve is actively tightening monetary policy to combat inflation. He points to rising consumer, producer, and import price indices as evidence of persistent inflationary pressure. According to his analysis, core import prices are currently increasing faster than core consumer prices, a trend not seen in the last 30 years.
The broader market environment remains challenging, with Goldman Sachs data indicating that the median S&P 500 stock is trading 16% below its peak. While Bernstein acknowledges that the current market shift may not benefit the tech sector, he anticipates that future market leadership will likely emerge from outside the dominant industries of the past few years.
