A.I. Disruption, Not Deflation & Status of the Bull Cycle

• AI is no longer a monolithic beta trade; the market is now rewarding winners and punishing losers, leading to derating for some mega-cap tech.
• Dispersion in returns is significant, with some S&P 500 components up double digits while others are down, making it a stock picker's market.
• The current market rotation appears to be seeking insulation from AI disruption, favoring real economy stocks, value, and Europe, with Latin American emerging markets offering opportunities due to diverse sector exposure and falling inflation.

The AI trade is evolving from a monolithic beta play to a more discerning market. Investors are no longer giving a 'free pass' to mega-cap tech companies on AI spending, demanding clear returns on investment. This shift is causing dispersion in returns and favoring active stock picking, with a rotation into 'old economy' sectors and emerging markets.