Vuk is more bullish than bearish on US equities, especially the S&P 500, over the next year, even though he expects volatility and a pullback first.
He thinks liquidity and politics matter more than valuations right now — and both are lining up in favor of higher asset prices.
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2026 starts weak, ends strong
- Likely correction early in the year
- Followed by a grind higher to new all-time highs
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Double-digit gains are possible by year-end
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This looks more like 1997–1998 than 1999–2000
- Meaning: the bubble may inflate further before it bursts
Bottom line:
“It’s very hard to be bearish when both monetary and fiscal policy are pumping liquidity.”
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Aggressive Fed easing ahead
- Expects 100–150bps of rate cuts
- Thinks policy rates could fall below 3%, possibly toward 2%
- Believes markets are underpricing how aggressive the Fed will be
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Political incentives favor asset inflation
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Trump administration wants:
- Strong economy
- Strong stock market
- Midterm election success
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Expects loose fiscal policy + monetary easing at the same time
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AI investment keeps growth alive
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Massive spending on:
- Data centers
- Power infrastructure
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Mag7 earnings still benefiting
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Growth holding up better than feared
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Recent sell-offs look like profit-taking
- Late-2025 weakness = positioning + fear, not a trend break
- Similar panics earlier were followed by strong rallies
- S&P 500 could reach 7,600–8,000
- Liquidity drives equities, crypto, and real assets higher
- No recession in base case
Two main risks:
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Recession risk during rate cuts
- Recessions often start after cutting begins
- If the labor market keeps weakening, cuts won’t help in time
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AI bubble burst
- Mag7 are highly correlated
- AI stocks dominate index returns
- A ~10% drop in AI leaders could cascade into a broader bear market
- That scenario could look like 2022 or even 2002
In that world:
- Rates go to zero for bad reasons
- Liquidity returns, but after markets fall hard
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Acknowledges:
- Extreme valuations
- Bubble dynamics
- Meaningful downside risk
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Still believes:
- Odds favor continued pumping
- Liquidity + politics overpower fundamentals for now
Vuk thinks the market is in a late-cycle liquidity-driven bull market: expect turbulence and scary pullbacks, but as long as policy keeps easing, the path of least resistance is higher — until the AI bubble finally breaks.
Vuk is net bullish on the S&P 500 over the next 3–12 months, but he doesn’t think it will be a smooth ride. His base case is “down first, then up”: a scary correction early on, followed by the market recovering and grinding to new highs later in the period.
His core framework is that policy-driven liquidity matters more than “fair value” right now:
- Fed easing is the big catalyst. He expects rate cuts to continue and, in his more bullish scenario, to become much more aggressive than markets expect (potentially a very large easing cycle if inflation keeps cooling and the labor market softens).
- Growth is holding up better than feared. He points to strong recent GDP readings/estimates and argues that AI-related capex (data centers, power infrastructure) plus resilient consumers can keep activity firm even as rates fall.
- Politics/fiscal incentives may support risk assets. He believes the policy mix could tilt pro-market, reinforcing the “liquidity bid” for equities.
- Late-2025 weakness looks like positioning/profit-taking, not a regime shift. In his telling, recent wobbling is more of a reset than the start of a durable bear market.
He flags two main ways this goes wrong:
- A recession emerging during the cutting cycle. He stresses that recessions often begin after the Fed starts cutting—so if the labor market rolls over, cuts may be reactive rather than supportive.
- An AI/Mag7-led unwind. Because the index’s gains have been heavily driven by AI-linked mega-caps and correlations have risen, he thinks a drawdown in those leaders could cascade from a normal correction into a deeper bear move.
He’s essentially saying: expect volatility and possibly an early drawdown, but unless the labor market cracks hard or the AI complex breaks decisively, the path of least resistance remains higher over the medium term because easier money + investment spending + political incentives can keep the bull market alive.
- Leaning bullish, not complacent
- Playbook: “dip first, then rip”
- early correction / scary volatility
- followed by a grind to new highs and double-digit upside over the medium term
- Fed easing = the main tailwind
- expects an aggressive cutting cycle (order of 100–150 bps over 2026)
- thinks markets may be underpricing how far/fast policy can ease (potentially <3%, maybe toward ~2%)
- Politics + liquidity
- expects pro-market fiscal posture alongside easier money (midterm-year incentives)
- framing: “hard to be bearish” when both fiscal + monetary add liquidity
- Growth holding up (for now)
- AI-related capex (data centers/power) = real-economy support
- recent GDP strength + resilient consumer backdrop → reduces odds of an immediate macro air-pocket
- Late-2025 weakness = not a trend break (in his view)
- reads the wobble as profit-taking / positioning, not the start of a durable bear market
- Recession risk during the cutting cycle
- his warning: recessions often begin after cuts start
- watchpoints: rising unemployment, weakening job creation, consumer fragility
- AI “bubble-burst” risk = index concentration problem
- Mag7/AI correlation rising → systemic spillover risk
- even a “routine” drawdown in leaders could cascade into broader SPX downside
- tail risk framing: could start to resemble 2022 (or worse-style unwinds)
- Bias: stay constructive on SPX over the next 3–12 months
- Tactics implied: expect/accept drawdowns, but his base case treats them as buyable as long as liquidity remains the regime
Moderately Bullish / Risk-On (Overweight SPX)
with expectation of an early-period pullback and elevated volatility.
“He expects a near-term shakeout, but with Fed cuts + political liquidity, SPX’s path of least resistance is still higher—until the AI leaders finally crack.”
Vuk is net bullish US equities over the next year, but not in a straight line. His core expectation is a shaky start (pullback / correction risk), followed by a liquidity-fueled recovery that ultimately pushes the S&P 500 back toward new highs.
Key framing: policy + liquidity + politics matter more than valuation in this window.
- 2026 starts weak, ends strong
- Likely correction early in the year
- Followed by a grind higher to new all-time highs
- Double-digit gains are possible by year-end
- This looks more like 1997–1998 than 1999–2000
- Meaning: the bubble may inflate further before it bursts
1) Rate cuts are the main tailwind
- Easing cycle continues
- Market already pricing near-term cuts (he expects them to be delivered)
- His bias: cuts could be more aggressive than consensus
- He’s repeatedly anchored on a “heavy” easing path as the fuel for risk assets
2) Political incentives favor asset inflation
- Trump administration wants:
- Strong economy
- Strong stock market
- Midterm election success
- Expects loose fiscal policy + monetary easing at the same time
3) Growth is holding up better than feared
- Macro backdrop still constructive
- Strong-ish GDP prints / nowcasts in his discussion
- AI-driven capex cycle supporting activity
- Data centers, power infrastructure
- Helps justify “resilient growth + easing” (a very equity-friendly mix)
4) Pullbacks read as positioning / profit-taking, not a regime change
- Late-2025-style wobbles = “scary” but not necessarily the start of a durable bear market
- His mental model: corrections happen, but liquidity pulls the index back up
1) Recession risk can rise during rate cuts
- If the labor market deteriorates quickly:
- Consumer spending weakens
- Cuts shift from “stimulus” to “damage control”
2) AI / Mag7 concentration = market fragility
- If the AI complex breaks:
- High correlation across the leaders → selling can cascade
- Even a “normal” drawdown in the biggest names can drag the whole index into something uglier
His line in spirit: rate cuts are bullish—unless they arrive because something breaks.
Expect turbulence and a possible early pullback, but Vuk’s base case remains that easing policy + resilient growth keep the S&P 500 biased upward over the next 3–12 months—unless the labor market cracks or the AI-led trade unwinds hard.