When Bipan Rai kicked off his latest episode of Open Outcry Podcast1, he went solo—and you can feel why. “There’s a lot going on today,” he says, and he’s not exaggerating. We’re looking at uneven growth, inflation that won’t quite settle down, massive AI-driven investment, a steady bid for bonds, and investors piling into bearish bets on the U.S. dollar.
This isn’t a neat, one-line forecast. It’s a layered argument. Rai pushes back on the easy narrative that stronger growth automatically means stronger markets. He questions how durable tech leadership really is. And he reframes the dollar story in a simple but sharp way: this isn’t about dumping America. It’s about “hedge America, not sell America.”
This isn’t a doom story. It’s not a boom story either. It’s about concentration—who’s growing, who’s benefiting, and who isn’t. That’s what Rai calls a “fractured expansion.”
The Data: Looks Good… Until You Zoom In
Start with January’s jobs report and CPI. On the surface, things look fine.
Payrolls were “fairly strong.” CPI showed “subtle hints of the slow disinflation story playing out.” Put those together and, as Rai puts it, that “should be music to the ears of the FOMC.”
But then you look closer.
Most of the job gains? Healthcare. “Healthcare jobs added about just north of 120,000 jobs to the economy. That accounted for the lion’s share of the gains in the month of January.”
That’s not broad-based momentum. That’s concentration.
Inflation tells a similar story. Headline numbers cooled thanks to food and energy. But “the core print was still a bit firmer,” with shelter costs easing slowly and transport services picking up.
So yes, inflation is coming down—but unevenly.
Markets still expect the Fed’s first cut around June or July. Rai doesn’t see much in this data to change that. “None of these prints change the temperature all that much.” A 25-basis-point cut is still the base case. The bigger question is timing, especially with geopolitics in the mix.
The Bigger Picture: A “Fractured Expansion”
Zoom out, and Rai sees a broader pattern. Growth isn’t collapsing. Inflation isn’t spiraling. But neither is evenly spread.
He describes the current environment as “characterized by uneven growth… paired with slow disinflation progress.” Then he puts a name on it: “We characterize this macro regime as something being akin to a fractured expansion.”
That phrase does a lot of work.
The economy is expanding—but in pieces. Some sectors hum. Others stall. Some households benefit. Others feel squeezed. And markets are starting to price that reality.
AI: Productive, Powerful… and Narrow
On AI, Rai is clear: the productivity boost is real.
“There’s no doubt that AI will raise the productivity profile for the US economy. I think that’s fairly clear. You can achieve more output via fewer hours worked, which is the traditional definition of productivity.”
But here’s the part he thinks markets may be underestimating:
“The problem here… is the fact that those gains in productivity are unlikely to be broadly distributed.”
In other words, AI might make the economy more efficient—but the benefits may flow to a “narrow set of market participants.” That reinforces what he calls a “K-shaped economy.”
That matters for investors. If GDP prints 3% or higher—but most of it is coming from AI-heavy capital spending—does that lift the whole market equally? Or just the companies already leading?
Tech and communication services have carried the market for years. Yet both sectors are down year to date, even with solid earnings. Rai’s take? “Positive CapEx news at this point is fully priced.” Add in concerns that AI could disrupt legacy software models, and valuations start to look stretched.
Multiples are still high. Some reset may be needed.
AI is powerful. But markets don’t reward power forever if the price is already baked in.
Bonds Are Sending a Message
Meanwhile, the bond market is doing something interesting.
Rai points to a “relentless bid… when it comes to US duration.” Yields further out the curve have fallen. That’s not panic. It’s caution.
He links it to “the precision of the defensive nature that we’re seeing in the equity market and the corresponding risk-off flow.”
In plain terms: if equity leadership is narrow and late-cycle risks are rising, investors hedge. Duration becomes that hedge.
Again, concentration shows up.
How to Position: Stay In, But Get Smarter
Q4 GDP is expected around 3%—down from 4%, but still solid. Rai isn’t obsessing over the headline. He wants to know what’s driving it.
“What we’re going to be focused on is understanding how much of that growth is going to be led by CapEx and AI concentrated.”
If growth is concentrated, the late-cycle story strengthens.
So what do you do? Rai isn’t calling for an equity exit. He’s suggesting refinement. Tilt toward quality. Consider equal-weight exposure to reduce mega-cap dependence.
Stay invested—but don’t be complacent.
The Dollar: Extreme Positioning, Tactical Opportunity
Then there’s the dollar.
Institutional investors are heavily bearish. Positioning data shows it clearly: “investors are just incredibly bearish to the US dollar right now.”
And in FX, extremes rarely last.
“When positioning gets this extreme… what you want to do is you want to fade it near term.”
That means: don’t pile onto dollar hedges at these levels. If the dollar rallies, use that strength to layer in hedges later.
Most importantly, Rai draws a sharp distinction:
“It’s not a sell-America story in our minds… This is primarily about really foreign institutional investors hedging America. So it’s hedge America, not sell America.”
Treasuries are bid. Equities are consolidating—not collapsing. This is risk management, not capital flight.
A Subtle Structural Question
There’s one more layer. Some investors worry we may be shifting away from the traditional “hub and spoke model with the US dollar in the middle.”
If that’s true, hedging demand could become more structural.
Rai doesn’t fully endorse that view. But he acknowledges the concern. And that, too, fits the fractured expansion theme: even currency regimes may be less stable than they once seemed.
The Through Line: Concentration
Jobs. Inflation. AI. Tech leadership. Bond flows. Dollar positioning.
The same pattern keeps showing up.
- Growth continues—but it’s uneven.
- Inflation cools—but selectively.
- Risk appetite exists—but with guardrails.
Markets aren’t euphoric. They’re not panicking either.
They’re hedging.
And in Rai’s framework, that’s exactly how a late-cycle, fractured expansion behaves.
In the end, his message is measured. AI may boost productivity. GDP may stay above trend. The Fed may cut this summer.
But unless growth broadens, the fractures remain.
This isn’t about abandoning the U.S. It’s about managing exposure to it.
Footnote:
1 Rai, Bipan. BMO Global Asset Management. "The Open Outcry Podcast: The State of the US Market: Fed Policy, AI,…." BMO ETF Dashboard, 26 Feb. 2026.
