What It Means When Caterpillar Becomes an AI Play
China closes the year with its PMI data flashing renewed positive momentum — good news for the commodity complex and resource-based currencies.
Key Takeaways
Santa Rally Stalls: Well, after three straight days of slippage, the Santa rally has gone nowhere. The S&P 500 today actually sits below where it closed back on December 11th, despite the strong seasonal influences (ditto for the KBW Bank Index).
Bullish Sentiment Near Peak Levels: Market Vane bullish sentiment, pressing against 70%, is near the very high end of the historical band. Everybody is all in and all at the same time as we move into 2026 — save for Warren Buffett (sitting on cash) and Jamie Dimon (buying bonds).
AI Power Boom Builds Risk Across Sectors: Things have reached such a nutty point where Caterpillar’s power and energy business has overtaken everything else the manufacturer does in terms of sales growth across all divisions… who needs to build excavators when power generation from power-hungry AI projects is all the rage? If this AI trade ever does reverse course, there will be reverberations across virtually every area of the market, perhaps save for Consumer Staples, REITs, and Health Care.
