Markets flipped the Over / Back switch emphatically into We’re So Back mode heading into the long weekend, as the S&P500 and Nasdaq reversed much of the selloff from the prior few weeks and bitcoin reclaimed the $90,000 level, moving up as much as 17% from recent local lows. At least some of the improved sentiment was driven by tacit – but increasingly explicit – acknowledgments by the Trump administration that we are on the road to making AI too big to fail, as Crypto and AI Czar David Sacks highlighted how critical the AI capex buildout has been to the US real economy avoiding recession, while solemnly warning that “we can’t afford to go backwards.” President Trump himself followed up with an executive order establishing the “Genesis Mission,” which inaugurates a broad array of new AI initiatives and lays the groundwork for more slush funds budget allocations to ensure the United States emerges victorious in a program the administration views as comparable to the Manhattan Project. Further buoying sentiment this week were growing rumors that longtime Polymarket favorite Kevin Hassett – an outspoken inflation dove, close Trump ally, and former advisor to Coinbase – is likely to get the nod as the next Fed Chair. Meanwhile, the US’s key banking regulators moved even closer to exempting Treasuries from statutory leverage ratio calculations, potentially reopening a valve for federal debt absorption that has been partially closed off since the 2008 financial crisis. With Treasury Secretary Scott Bessent assuring his CNBC audience that the US won’t enter recession next year, the plan to run it hot to defeat America’s key geopolitical rivals (and / or to get reelected, depending on your perspective) appears to be taking shape more clearly by the week, and we continue to think that points to one ultimate outcome for hard assets.

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~econ