Analysts expect a continued dollar-centric market where most G10 currencies move in tandem against the dollar, keeping dollar correlations high. However, they are bearish on cross-correlations (e.g., involving Sterling and Euro), anticipating greater divergence between non-dollar currencies, which presents an opportunity for investors.

With both US and European economies growing robustly, the direct EUR/USD currency pair is largely neutralized. A more effective strategy to gain exposure to Europe's strengthening growth is by investing in higher-beta, pro-cyclical currencies like the Scandinavian Kroner, which are less impacted by broad US dollar movements.

The AI boom's economic impact extends beyond direct investment. With AI plays driving 80% of stock market gains, a powerful 'wealth effect' is created. This disproportionately benefits the top 10% of earners, who in turn drive the majority of US consumer spending, fueling the broader economy.

If AI is truly transformational, its greatest long-term value will accrue to non-tech companies that adopt it to improve productivity. Historical tech cycles show that after an initial boom, the producers of a new technology are eventually outperformed by its adopters across the wider economy.

With dollar correlations at elevated levels, finding cheap, clean directional expressions against the dollar is challenging. Sophisticated traders are creating bearish dollar baskets that mix G10 currencies (AUD, NOK) with Emerging Market currencies (HUF, ZAR) to achieve greater pricing efficiency.

For the first time in years, leading-edge tech is incredibly expensive. This requires structured finance and massive capital, bringing Wall Street back to the table after being sidelined by cash-rich tech giants. The chaos and expense of AI create a new, lucrative playground for financiers.

Instead of betting on which AI models or applications will win, Karmel Capital focuses on the infrastructure layer (neocloud companies). This "pick and shovel" strategy provides exposure to the entire ecosystem's growth with lower valuations and less risk, as infrastructure is essential regardless of who wins at the top layers.

The AI investment case might be inverted. While tech firms spend trillions on infrastructure with uncertain returns, traditional sector companies (industrials, healthcare) can leverage powerful AI services for a fraction of the cost. They capture a massive 'value gap,' gaining productivity without the huge capital outlay.

According to Keith McCullough, historical backtesting reveals the rate of change of the U.S. dollar index is the most critical macro factor for predicting performance across asset classes. Getting the dollar right provides a significant edge in forecasting moves in commodities, equities, and other global markets.