Fed's Bowman warns a shortfall in AI returns could spark a stock selloff

On November 11, 2026, Federal Reserve Governor Michelle Bowman delivered a written speech to the Council on Foreign Relations in Washington in which she warned that a stock market correction could be triggered if returns on AI investments fail to materialize. Bowman identified the risk of disappointing AI returns as a potential trigger for a sharp correction in equity valuations, and cautioned that private long-term interest rates could rise substantially. She also raised concerns about the rapid expansion of AI-related debt, pointing to the fast-growing AI-linked liabilities in corporate bonds, private credit, and project finance.

Bowman added that inflation continues to run above expectations, and signaled support for another rate hike at the December meeting. Her remarks were consistent with inflation data released the same day: according to the U.S. Department of Labor, core inflation rose 0.3% month-on-month in October, beating forecasts. Earlier that same day, two other Fed officials struck a hawkish tone as well: Federal Reserve Governor Christopher Waller called for the December meeting to consider a 50-basis-point hike, while Dallas Fed President Lorie Logan said at least two more rate increases were needed, 25 basis points each. The market now awaits the December Federal Reserve meeting to see whether those proposed tightening steps are ultimately taken.