Bob Diamond Predicts a Normal Pullback, Not the Start of a Bear Market

Bob Diamond says the turbulence hitting global markets in recent days looks more like a “healthy correction” than the start of a prolonged downturn, arguing that investors are simply struggling to recalibrate expectations around massive technological shifts. The former Barclays Plc chief executive now at the helm of Atlas Merchant Capital doesn’t see the pullback sliding into a bear market.

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“We’re watching risk assets get repriced,” Diamond said. “From my perspective, this feels like a constructive reset rather than the early stages of a bear market.” The S&P 500 has fallen more than 3% so far this month, putting it on track for its weakest performance since March. Volatility has jumped as well, underscoring the unease rippling through markets.

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Much of the pressure has stemmed from a sharp selloff in the world’s biggest technology companies, which has reignited long-running debates about artificial intelligence specifically, whether the technology is generating tangible revenue and profits fast enough to justify the extraordinary levels of capital pouring into AI infrastructure.

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From Diamond’s vantage point, the bigger picture still looks promising. “What I’m comfortable with is taking a multi-year view two, three, five years on AI’s economic impact,” he said in an interview on Television from Singapore, where he was attending the New Economy Forum.

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According to him, the long-term benefits of AI remain underappreciated.
“I believe AI will ultimately help ease inflationary pressures,” he said. “It will be hugely important for global productivity, and I think many investors are struggling right now with how to value that.”

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Diamond also pointed to another issue weighing on markets: aggressive fiscal spending. Pandemic-era stimulus, government investment programs and rising structural deficits have driven sovereign debt levels to historic highs. In his view, this buildup is “a dark cloud” hanging over global financial markets, even if investors are more focused on AI and corporate earnings in the near term.

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Market anxiety has been evident in the VIX Wall Street’s well-known fear gauge which recently climbed above 24. That’s not only above the psychologically important 20 level that often signals investor concern, but also the highest reading in about a month. Elevated volatility suggests traders are becoming more cautious, though not necessarily panicked.

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Diamond reiterated that, despite the short-term noise, he and his team remain optimistic about the transformative role AI will play across industries and economies.
“We as a group are very, very positive about what AI can bring more productivity, lower inflation, stronger global growth,” he said. “There are numbers behind data center demand and infrastructure investment that people don’t fully grasp yet.”

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His comments reflect a growing divide in markets. On one side are investors who believe AI’s potential remains colossal and underpriced. On the other are those who worry that the sector has overheated, with valuations and capital expenditures rising faster than realized earnings. The recent wave of volatility has brought those tensions to the forefront.

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Even so, Diamond argues that the current pullback is far from unusual. Periodic corrections, he says, are part of healthy market functioning particularly during moments of rapid technological change. If anything, he believes the recent repricing may help reset expectations to more sustainable levels as companies refine their AI strategies.

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“The market is trying to sort through what AI means, how quickly the benefits will come, and how to value companies building the infrastructure,” he said. “That kind of uncertainty isn’t a signal of structural weakness it’s just the process of discovery.”

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Going forward, investors may continue to see heightened volatility as markets digest earnings, macro data and AI-related developments. But Diamond maintains that the foundational drivers of long-term economic growth remain intact, and that technology especially artificial intelligence will be a key force shaping the next decade.

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“AI’s impact is going to be profound,” he said. “Markets may be confused right now, but the long-term direction is clear.”

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