3-26-26 Will AI Trigger the Next Great Depression?

Top-line market context

• Overall market: roughly -7.5% from the peak and about -3% year-to-date. Market internals are weaker: ~40% of individual stocks are in a bear market (more than 20% off highs).
• Earnings: analyst estimates are being marked down, contributing to the corrective process and trimming valuations.
• Macro growth: New York Fed and Atlanta Fed GDP trackers ≈ 2% (moderate growth).
• Geopolitical/idiosyncratic risk: Iran-related headlines are moving oil, gold, bonds and stocks day-to-day. Higher oil raises recession risk by pressuring consumer spending.

Assets, sectors and instruments mentioned

• Indexes/indicators: S&P 500 (reference), 200‑day moving average (key resistance/support), 20‑day moving average, momentum/relative-strength indicators.
• Commodities: Oil (Brent), Gold.
• Sectors: Energy, Consumer Staples, Utilities, Technology, SaaS/CRM, Financials (private credit).
• Companies referenced: Nvidia; Walmart; Salesforce; ServiceNow; Amazon; Facebook/Meta; SpaceX; Anthropic.
• Other: Private credit funds (gating issues), bonds (safe-haven flows), gold, shorts and cash as risk management tools.

Key numbers, levels and timelines

• Market drawdown: ~7.5% off the highs; ~3% YTD.
• Breadth: ~40% of stocks down >20% from peaks.
• Quarter-end flows: roughly $62 billion of rebalancing buying support expected through the quarter-end, which may temporarily underpin markets.
• Technical level: clearing above the 200‑day moving average could allow a move to “around 6,700” before hitting the 20‑day moving average (presented as an example technical roadmap).
• Oil: $60–$70/barrel cited as an important range for easing market stress by restoring flow/infrastructure.
• Portfolio planning example (Lance Roberts): target hurdle rate of 6% annual return used to size positions.

Risk, portfolio construction and trading framework

Start by setting a target (hurdle) return for the portfolio and construct allocations to meet that objective rather than chasing a benchmark.

1. Position sizing and risk measurement

   • Measure beta (regression vs. an index, usually the S&P 500) to gauge relative volatility and sensitivity to market moves. Beta is an average and has limitations (a rear‑view mirror).
   • Consider position volatility relative to your overall portfolio and goals.
   • Avoid concentrated positions that exceed tolerated risk.

2. Use a mix of tools

   • Combine technical indicators (momentum, RSI, relative strength, moving averages) with fundamental analysis.
   • Avoid overloading on indicators — choose a balanced, consistent set you understand.

3. Trade execution and risk-management rules

   • Sell into strength and buy into weakness; take profits when positions become extremely extended.
   • Make slow, incremental adjustments: raise cash, rebalance, reduce exposure progressively during overheating or corrections.
   • Rotate exposures (e.g., higher-beta to lower-beta) but recognize rotation can be time-dependent and may be a poor trade if lower-beta sectors are already overbought.
   • Other levers: add shorts, trim positions, move to cash/fixed income depending on objectives.

Technical monitoring

• Watch the 200‑day moving average as key resistance/support; oversold/overbought momentum can persist for long periods.
• Look for positive divergence (improving relative strength while prices stabilize) and momentum buy signals before adding risk.

AI, employment and macro risk narrative

Observations

• Firms with higher AI adoption show larger year-over-year declines in average hourly earnings and higher output per worker — signaling potential wage suppression and productivity gains.
• Scenario pieces model fast, disruptive adoption causing large white‑collar displacement; rebuttals (Citadel, Jim Bianco) emphasize slower diffusion and historical precedent that technology adoption typically takes time.

Key conclusions and guidance

• AI is likely to affect repetitive entry-level and menial tasks first; complex and higher-skilled roles are less immediately replaceable.
• Adoption speed (diffusion) matters: slower diffusion gives labor and markets time to adjust; rapid, immediate displacement is considered unlikely by some practitioners.
• Trust, regulation, security and legal liability will slow full replacement of critical systems (e.g., CRMs, legal counsel).
• New jobs and industries will emerge over time; the net long-term economic effect is uncertain and may be less catastrophic than doomsday narratives.

Private credit and financial stability

• Private credit funds have been in the headlines for gating investors. A weekend newsletter will provide a deeper analysis and assess whether private credit is analogous to 2008 subprime risk.
• No definitive conclusion was offered in the show; subscribers are directed to the newsletter for detailed analysis.

Explicit recommendations, cautions and market behavior guidance

• Do not overreact to daily headlines — markets are headline-driven now and many events are temporary.
• Be cautious rotating solely into low-beta sectors now because many have already outperformed and are extended (e.g., staples, utilities, energy).
• Recognize quarter‑end flows (~$62B) could provide short-term support; technical clearance above the 200‑day MA would be constructive.
• Manage position sizing deliberately: set return goals, diversify, control concentration, and use slow adjustments instead of panic trades.
• Watch oil prices and infrastructure/flow indicators as a key input for inflation, consumer spending and market direction.
• Beware simplistic narratives predicting immediate widescale economic collapse from AI or other single factors; focus on diffusion speed, policy responses and labor-market adaptation.

Performance and market metrics highlighted

• Market: ~ -7.5% from highs; ~ -3% YTD.
• Breadth: ~40% of stocks down >20%.
• GDP tracking: ≈ 2% (New York and Atlanta Fed).
• Quarter‑end rebalancing buying estimated at ~$62 billion.

Disclosures and disclaimers

• No explicit “not financial advice” disclosure was read in the subtitles. Hosts repeatedly urged caution and individualized portfolio planning and directed listeners to the firm’s commentary/newsletter for further detail.

Presenters, sources and related resources

• Presenter/Host: Lance Roberts (Real Investment Advice / RIIA Advisors)
• Guest: Michael Leewitz (appears as Michael on show)
• Other contributors/mentions: Danny Ratliff; Sarah Banger (upcoming tax webinar); Jim Bianco (rebuttal cited); Citadel Research (rebuttal cited); “Catrini/Citrini Research” (AI scenario article referenced; name spelled variably in the transcript).
• Companies referenced: Nvidia, Walmart, Salesforce, ServiceNow, Amazon, Facebook/Meta, SpaceX, Anthropic.
• Related resources: Daily market commentary and a weekend newsletter on realinvestmentadvice.com (private credit deep dive scheduled for the weekend).