Fed official Warsh expects artificial intelligence to boost prosperity despite near-term turbulence

If policymakers move to actively manage the transition through targeted support for displaced workers, retraining programs, or sectoral stabilization measures, this could reduce near-term volatility and allow AI-beneficiary equities to sustain gains without the sharp corrections that uncertainty typically triggers.

Absent coordinated policy response, the 'bumpy' transition would likely persist as a baseline condition—AI and productivity-linked equities would continue to attract capital on long-term fundamentals while labor-intensive and disrupted sectors experience episodic weakness, creating a bifurcated market dynamic that neither resolves nor dramatically worsens.

If labor displacement accelerates faster than anticipated or triggers social/political backlash that constrains AI deployment or imposes regulatory friction, the near-term turbulence could deepen into a broader confidence shock, putting downward pressure on both growth-sensitive equities and the AI-premium valuations that currently embed the long-term prosperity narrative.