Why Wall Street Rallies While Main Street Struggles
AI booms, freight slumps, and inequality hits new highs, the forces driving a widening disconnect.
📬 In today’s issue, we dive deeper into:
PART I:
1. Charts Of The Week (AI buildout, remote work plateau, widening pay gap, freight slump)
2. Wall Street’s Rally vs. Main Street’s Pain
3. Algorithms, Retail Flows, Fading Fear
4. AI Boom as GDP Driver, Risks if Spending Slows
PART II:
5. The Rundown (Nvidia $100B AI bet, TikTok $14B deal, Buffett exits BYD, new Trump tariffs, Meta–Google talks)
6. On the Horizon (Fed speakers, JOLTS, ADP, jobless claims, U.S. jobs report, light earnings)
7. Reading Recommendations (Interactive Brokers & Peterffy’s fortune, S&P beaters, AI hype vs. payoff, dividend standouts)Charts Of The Week
AI data center construction is exploding, with annualized spending hitting $41 billion through July, nearly overtaking office construction and up 2,200% since 2014. David Einhorn warns of potential capital destruction from the boom, while Sam Altman insists that even hundreds of billions may look too small in hindsight. The shift reflects investors preferring data centers over offices postpandemic, and with massive projects from Nvidia, OpenAI, Oracle, SoftBank, and Meta underway, spending is set to accelerate further.
Return-to-office mandates are hitting a wall, with major employers like Paramount, AT&T, Microsoft, and Amazon tightening policies but seeing little change in behavior. Data shows Americans have spent about a quarter of their work time at home since 2023, barely budging despite stricter rules, and the Fed notes some firms are quietly trimming headcounts through attrition tied to these mandates.
The pay gap between the highest and lowest earners reached 526% in August 2025, the second-highest level in at least five years. Since May 2021, that gap has increased by 98 percentage points, and while it was around 480% in late 2020, it dropped briefly in early 2021 before climbing steadily again. The recent hiring slowdown has disproportionately hurt low-income workers, worsening the divide even as their wages have grown.
The chart shows that U.S. freight activity has slipped into recession territory. The Cass Freight Index fell -9.3% year over year in August, marking its lowest reading since 2020. This index, which tracks North American freight shipments, has now logged 28 straight months of decline, reflecting a deep and prolonged slowdown. Over the past three years, shipments are down 20%, a drop comparable only to the 2008 Financial Crisis. The data highlights how sharply goods movement in the U.S. has weakened.
Wall Street’s Rally vs. Main Street’s Pain
You’ve probably heard it a thousand times on social media, in the news, maybe even at your uncle’s Sunday BBQ, “People are losing their jobs, the economy feels like it’s being held together with duct tape, and everyone keeps arguing if we’re in a recession or just warming up for one”. Yet, almost like clockwork, the stock market keeps hitting all-time highs week after week.
Most of the explanations you hear are the same recycled lines. “The stock market is not the economy.” “It’s all controlled by the rich.” “The Fed will swoop in and cut more rates.” Nothing new there. You’ve heard it a million times. I’m not here to repeat that. I want to dig into the real forces at play and actually break down why this disconnect exists, and then share where I see the markets heading over the next year. So buckle up, these are things you’ve probably never even heard of.
Algos Don’t Care About Your Recession
Let’s talk about fun and exciting algorithms. At their core, algorithms are just sets of rules written in code, step-by-step instructions that tell a computer what to do. In the stock market, that means “if this happens, then buy,” or “if that happens, then sell.” Nothing magical, just machines following rules at lightning speed.
They started out as small assistants. Their job was to help big funds move money without swinging prices around too much. Think of them like interns, fetching coffee, filing papers, doing the small stuff no one else wanted to deal with. But over the years, these interns got smarter. They learned how to scan charts, spot patterns, and trade across dozens of markets at once. Before long, the interns weren’t just helping, they were running the office.
Today, roughly 70% of all trades in the U.S. are fired off by machines. So when stocks suddenly shoot up or tank in seconds, it’s not a trader at a desk hitting buy or sell. It’s code moving billions before you can even blink.
High-frequency trading changed everything. Instead of humans making a handful of trades, machines began firing off millions each day. Picture a casino floor that never sleeps, screens glowing, trades flying, action everywhere. The market became louder, faster, and more fragile. The 2010 Flash Crash showed what happens when the machines all trip at the same time. Prices collapsed in minutes, then snapped back just as quickly.
Over the past few years, the behavior has shifted. Headlines that once shook markets barely move the needle. Job losses, weak earnings, slowing GDP stuff that should matter gets brushed aside. Even major global scares don’t spark the reaction you’d expect. Earlier this year, tensions between Israel and Iran escalated so far that commentators were calling it the closest thing to “World War III.” News outlets went wall-to-wall, but the market barely blinked. The programs stayed locked in on flows and volatility.
Artificial intelligence has pushed them even further. Entire funds are now managed by AI. One ETF, AIEQ, was built on IBM’s Watson and has outperformed the S&P 500 at times. BlackRock has already swapped human stock-pickers for self-learning systems. The old image of investors debating in a boardroom has been replaced by machines adjusting models in real time.
That’s why stocks keep running even when the economy feels broken. Machines don’t care that much about layoffs. They don’t see people struggling to pay bills. They follow rules, patterns, and signals and right now, those signals are still flashing green.
Fear Is Fading, FOMO Is Building
Let’s talk about retail. September usually drags the sector down. For the past five years, it has averaged a 4.9% drop. Traders circle it on the calendar, analysts repeat the stat, and most people treat it as inevitable. This year that story broke. Retail is up 3.9% in September. August was even stronger, climbing 7.3% when history shows it normally sits flat.
That momentum says a lot. Consumers are still out there spending. There’s a shift in behavior. Cash feels weaker, prices keep climbing, and people would rather use their money than hold it. Back-to-school season, late-summer travel, everyday shopping, it all shows up in the data. If that strength carries into the holidays, September’s curse might not show up at all. November has always been retail’s sweet spot, averaging nearly a 10% gain, and strong spending into that season would only add more fuel.
Positioning tells its own story. Traders came into the Fed’s September meeting loaded with protection. Long volatility trades were crowded, hedges were everywhere, and the tone was defensive. The meeting passed, nothing blew up, and now that protection is being pulled back. The unwind doesn’t sit quietly in the background, it creates pressure in the opposite direction. As hedges come off, buying flows into the market. Fear fades, and momentum builds.
Flows confirm the shift. Retail investors, mom-and-pop buyers have poured nearly $23 billion into S&P 500 stocks over the past 30 days. That’s one of the biggest buying sprees on record and looks eerily similar to the surge we saw in February before the sell-off.
Hedge funds are leaning in as well, scooping up tech stocks at one of the fastest paces ever tracked. When retail is throwing money at the market and hedge funds are piling into tech at the same time, it adds fuel most people don’t see coming.
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