Capital Economics warns the AI equity boom may be ending, points investors to defensive sectors

The research firm sees the S&P 500 falling to 6,500 by the end of 2027 if the AI trade fades, and names real estate and consumer staples as the best places to shelter Capital Economics has a message for anyone riding the artificial intelligence rally: think about where you would go if the ride ends. In a research note published Thursday, the firm said traditional defensive sectors, including real estate and consumer staples, “remain the best bet” as safe havens if the AI momentum trade stumbles. The note does not claim that a crash is guaranteed. Capital Economics leaves open whether the AI trade is a bubble at all. Its argument is narrower and more practical: whatever happens, investors still have places to hide. The 6,500 forecast and what drives it The headline number is the S&P 500 target. Capital Economics forecasts the index will eventually fall to 6,500 by the end of 2027. The firm describes two routes to that destination. In the first, air keeps leaking slowly out of the AI trade. In the second, the AI bubble bursts outright. The 6,500 target also marks a sharp contrast with the mood of mid-2026. Index targets at that point ranged between 7,000 and 8,250. A forecast...