Video · 2026-07-20 · 39m · 6 moments

What Are the Two Main Risks Right Now?

✦ AI generated

timeline · colored by role

Claim◆

The market is broadening without damage to the headline index, which is exactly what you want to see.

Yurian explains that the MAG7 are losing their mojo while the equal-weighted S&P is rising, with 71% of stocks above their 200-day moving average, and the broadening is happening without hurting the headline index.

transcript

Yurian Timmer: Since June 2nd, the S&P has not made a new high. It's down about half a percent. The AI space within the S&P is down 15%. The Cosby index in Korea is down 22%. The equal weighted index is up two and the X ai space within the S&P is up five. 71% of stocks in the S&P are above their 200 day moving average. The broadening is happening without damage to the headline index.

extends · 1gives example · 1supports · 1

Prediction◆

The two main risks remain concentration risk and term premium risk.

Yurian argues we are in an era of fiscal dominance where rate scares replace growth scares, and the risk is that yields rise from here, making bonds more correlated with equities and raising the hurdle rate for stocks.

transcript

Yurian Timmer: We're in an era of fiscal dominance. When we get a scare, it's a rate scare, not a growth scare. The term premium is about 69 basis points. The risk is that yields might go up from here. If the yield on the bond were to go from four and a half to five, the stock market needs to compete with that by lowering its PE or raising its yield.

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Mechanism

Semiconductor earnings have tripled over the last year, and their forward PE is 14, which is super low — but we have to assume this is structural, not cyclical.

Yurian notes that semiconductor earnings tripled in a year, pushing their forward PE to 14, but warns that buying cyclicals on low PE is a classic value trap; the bull case depends on AI being a structural, not cyclical, boom.

transcript

Yurian Timmer: Semiconductor earnings have tripled over the last year. Their PE is actually at 14 times the next two years of earnings, which is super low. Semiconductors historically are a cyclical sector. Anyone in the value space will know that buying a cyclical sector because the PE is low is the ultimate trap because it just tells you that earnings are high. We have to assume that semiconductors are not cyclical but more structural because the AI boom is structural.

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Example

The fast money is not loyal to anything — it just wants price to go up, and it will amplify any move.

Yurian traces the hot money rotation from Bitcoin to gold to semiconductors, noting that each move had a fundamental catalyst, but the fast money then amplifies it beyond what fundamentals justify.

transcript

Yurian Timmer: The fast money is not loyal to anything. They just want price to go up. When liquidity is ample, they'll jump on any train that's moving. Bitcoin peaked at 126,000 just at the time that gold had really been on the move. The fast money was not making any money on Bitcoin so they moved over to gold. Then the Iran conflict happened and gold was for sale, and at that same time the semis were moving, so the fast money just jump shifts.

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Claim

The antidote to concentration risk and an overcrowded boom is owning diversified, high-payout-ratio companies that pass through their earnings.

Yurian recommends diversification and rebalancing, pointing to European banks and US financials as examples of high-payout, low-correlation assets that offer income and are beneficiaries of the AI buildout through their data advantages.

transcript

Yurian Timmer: European banks are only 11% correlated to the MAG7. They have a payout ratio of 88%, a yield of 7%, and their payout is growing faster than the MAG7. Within the S&P, financials have an 84% payout ratio and a 5% yield. They are potentially one of the biggest beneficiaries of the AI buildout because who has better data than the big banks? That is the antidote to concentration risk and an overcrowded boom.

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Context◆

The current AI boom resembles the internet boom of the late 1990s structurally, but the critical difference is that valuations are compressing, not expanding — you cannot call it a bubble.

Yurian draws parallels between the post-1994 rate reset / 1998 LTCM crisis / 2000 bubble and the post-2022 rate reset / 2025 tariff tantrum / AI boom, but notes that tech sector PE went from 36 to 70 in the 90s, while today it went from 22 to 21 — earnings are growing faster than prices.

transcript

Yurian Timmer: Going back to 98 to 2000, the PE on the tech sector went from 36 to 70. It doubled. This time it's gone from 22 to 21. It's a totally different story. The internet bubble was entirely valuation unsupported by anything else. This one the earnings are so big that the valuations are actually going down instead of going up. You can't call it a bubble under those circumstances unless you can argue the quality of the earnings are poor.

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Highlight slides

Broadening without damage to the headline index✦ from: The market is broadening without damage to the headline index, which is exactly what you want to see.What broadening looks like✦ from: The market is broadening without damage to the headline index, which is exactly what you want to see.Fiscal Dominance: Rate Scares Replace Growth Scares✦ from: The two main risks remain concentration risk and term premium risk.The Two Risks: Concentration & Term Premium✦ from: The two main risks remain concentration risk and term premium risk.AI Boom vs. Internet Bubble: Valuation Compression✦ from: The current AI boom resembles the internet boom of the late 1990s structurally, but the critical difference is that valuations are compressing, not expanding — you cannot call it a bubble.Why This Is Not a Bubble✦ from: The current AI boom resembles the internet boom of the late 1990s structurally, but the critical difference is that valuations are compressing, not expanding — you cannot call it a bubble.

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