Back Research Notes The Great Divergence: LEI Screams Recession, AI Powers Ahead Published on June 29, 2025 By Jordi Visser In this week’s video , I explore the growing disconnect between traditional economic signals and the accelerating rise of artificial intelligence. While the Leading Economic Index (LEI) continues to flash clear recession warnings, driven by continued weakness in manufacturing, new orders, and job creation, markets are being pulled higher by a narrow group of AI-driven companies. Without AI and the digital economy, the U.S. would likely already be in a recession. Instead, we’re witnessing a bifurcated economy where exponential innovation is masking broad-based weakness. The video also dives into a deeper structural theme: the death of capitalism as we knew it . AI is reducing the demand for labor, dismantling the corporate ladder, and concentrating growth in companies that no longer need to hire. This is creating rising frustration among younger generations facing debt, unaffordable housing, and stagnant wages. At the same time, political leaders are floating extreme policies—from Trump’s call for 1% interest rates to expanded tariffs—as they try to adapt to a system under stress. With robotics advancing, power grids stretched, and crypto adoption rising, investors must rethink everything. The long is AI. The short is the past. Timestamps: (00:00) — Markets rally on ceasefire headlines, but structural bearish risks persist despite new all-time highs. (01:16) — AI is driving the divergence: NDX breaks out while small caps and market breadth remain weak. (02:45) — This rally is not driven by the Magnificent 7 alone; AI-related names like Micron are leading the second wave. (05:41) — The economy is in a recession everywhere except AI—LEI is deeply negative, with weak job growth outside healthcare and leisure. (09:33) — Leading indicators like manufacturing hours, new orders, and the yield curve continue to deteriorate. (12:33) — We’re only in the earliest phase of AI—moving from chatbots to reasoning, inference, and robotics. (14:27) — Trump’s push for 1% interest rates and short-term debt issuance points to fiscal dominance and hidden money printing. (19:11) — The youth labor crisis is intensifying: debt-laden, underemployed, and locked out of home ownership. (24:01) — Humanoid robots are in their “pre-iPhone moment” and advancing rapidly—Apptronik, Figure, and others are leading. (30:51) — Power is the next bottleneck: China leads in electricity generation, and whoever wins the energy race will win the AI race. (32:12–36:00) — Bitcoin and crypto are part of the solution: monetary debasement, tokenization, and AI-driven instability are fueling adoption. A 10–40% portfolio allocation is no longer radical—it’s becoming necessary. Watch the full video here