Strange! Everyone is focused on employment data, but they are ignoring the fact that the market is already paying the price for an impending "AI Great Depression."

Recently, there’s an interesting phenomenon: market bets on the Federal Reserve cutting interest rates have extended all the way to 2027. This seems disconnected from the current solid employment and stubborn inflation data we see.

Some analysts suggest that this may not be based on the current economic reality but rather a collective bet on AI disrupting the future. Deutsche Bank’s research team believes that investors are pricing in easing policies beyond what the fundamentals support. Underlying this is a hidden concern: the market fears that AI will massively impact the labor market in the future, even though this risk has not yet materialized.

The conflict in the Middle East has driven up energy costs, causing some traders to narrow their expectations for rate cuts this year. But interestingly, the overall market expectation for easing hasn’t disappeared; it’s just been pushed further out to 2027. The bond market clearly reflects this contradiction: regardless of how economic data changes, expectations for rate cuts remain stubbornly persistent. This indicates that participants are already pricing in an uncertain “AI disruption era.”

This phenomenon has been characterized by strategists as a classic “peso problem.” The term originates from the 1970s, when markets consistently priced Mexican assets at a discount because traders were worried the peso might suddenly devalue significantly. Although the devaluation didn’t happen immediately, investors had to assign a probability to this potential “black swan” event.

Today, concerns about AI’s impact on the labor market are producing a similar effect in the bond market’s expectations for Federal Reserve policy. Even when current data doesn’t support significant easing, the market still extends rate cut expectations into the distant future.

This structural expectation bias reveals an underlying narrative: when the market believes that AI could trigger large-scale layoffs, business failures, or even a recession at some point in the future, this belief will keep downward pressure on interest rate expectations. It reduces the sensitivity of rate cut expectations to macroeconomic data.

Within this framework, even if the economy remains resilient, investors tend to maintain their easing bets because they are essentially buying insurance against a “future recession triggered by AI.” Geopolitical factors can marginally adjust the timing of rate cuts, but the long-term easing expectations built around the AI narrative remain one of the dominant logic.

This means that the current movements in the interest rate markets can no longer be simply explained by current inflation or employment reports. For assets like $BTC and $ETH, which are highly sensitive to global liquidity, understanding this market psychology of “pricing in future risks” may be more crucial than closely watching monthly CPI data.

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