Good morning, investors. I’m beginning to feel like a broken clock but the stock market once again proved it does not care about traditional macro data.

Long-time readers know I lean on this phrase more and more: AI is the new macro.

Stocks set new records the same day a traditional macro red flag started flashing.

The S&P 500, Nasdaq Composite and Dow all closed at all-time highs Thursday despite the Federal Reserve’s preferred inflation gauge touching a three-year high, economic growth being revised down, and the labor market showed fresh weakness.

In effect, stocks shrugged off a classic cocktail of stagflation signals.

Specifically:

The above presents a textbook checklist for the stagflation that just a few months ago former Fed Chair Jerome Powell said wasn’t in his outlook.

And yet investors ignored all this to instead focus on the much more dramatic, splashy and economically significant variable that is AI.

AI is the new macro, as I’ve repeated for over a year now.

Despite a flood of data that conventional wisdom would categorize as negative, stocks rallied after positive AI-related news and earnings updates from Palantir, Snowflake, Oracle, ServiceNow and other players exposed to the AI trade.

More intriguing is that this marked the first inflation report under the new Fed Chair Kevin Warsh, an AI-bull who has said AI will mostly be a deflationary force and boon for productivity.

While that may be true long-term, the near-term setup still includes a mixed if not weakening labor market, a strained consumer, an oil shock and accelerating inflation.

Every traditional macro input points in one direction, yet the most powerful monetary policymaker in the world has AI on his side helping push back.

What’s troubling in this moment is that for perhaps the first time in history, the bull and bear case may both be right.

Staying on top of markets that hit a new all-time high seemingly every week, a never-ending news cycle and volatility that’s frankly...volatile is a lot of work.

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📈 Dell stock soared 31% after crushing earnings. Shares skyrocketed after hours, and the company notched 88% year-over-year revenue growth in the most recent quarter, riding a demand boom for its AI computer servers. (CNBC)

🤖 Anthropic raised $65 billion at a $965 billion valuation, eclipsing OpenAI for the first time. The Series H round was led by Altimeter, Dragoneer, Greenoaks, and Sequoia, with the company reporting a $47 billion revenue run rate. (WSJ)

🗓 May 29, 2018: Italy's political crisis sparked a global selloff as the Dow plunged 472 points and the 10-year Treasury yield tumbled 17 basis points, the biggest one-day drop since the Brexit vote.

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