Wall Street Strategists Warn AI Bubble Poses Greater Market Risk Than Fed Hikes

Wall Street strategists increasingly warn that the artificial intelligence (AI) boom's sustainability, not Federal Reserve rate hikes, poses the primary risk to the current bull market. The Fed, following its June 2026 meeting, held interest rates steady but signaled potential future increases, driving the 2-year Treasury yield to 4.177%, its highest since February 2025, as markets anticipate prolonged higher rates. SoFi Chief Market Strategist Liz Thomas notes reduced Fed communication allows markets to focus on other drivers, emphasizing AI investment as a crucial bull market pillar. Wells Fargo's Scott Wren suggests the Fed will maintain current rates (3.5%-3.75%) until late 2027, longer than initial market expectations. Societe Generale's Albert Edwards highlights that while AI-driven asset price increases boost household wealth, a reversal could destabilize consumption and corporate investment, underscoring the market's dependence on the AI rally.