After the last week that left global investors scratching their heads, markets are back in the green — but the question is whether this bounce has real legs.

The Dow Jones managed to finish up 64 points on Friday after spending most of the session in the red. The S&P 500 rose slightly, but last week as a whole was tough going: the Nasdaq slid more than 3 per cent, the S&P 500 lost 1.7 per cent, and the ASX fell 1.2 per cent.

Much of that weakness was driven by doubts over whether the AI investment boom is delivering the profits corporate America has been promising. There’s growing speculation that spending on artificial intelligence is outpacing the returns so far being generated, sparking a re-think among some investors.

Adding to the gloom, consumer sentiment in the United States has slumped to one of its lowest readings on record. The University of Michigan’s latest survey points to a population unsettled by Washington’s ongoing government shutdown, which has left more than 30,000 federal employees on hold and even forced the cancellation of hundreds of flights due to air-traffic control disruptions.

The shutdown has also jammed the flow of key economic data, leaving policymakers and traders flying blind. U.S. Federal Reserve Chair Jerome Powell even described the economy as being “in a fog”, acknowledging the uncertainty that comes when essential indicators aren’t being released.

That fog is thickening around the inflation outlook. U.S. CPI data due later this week will be closely watched, though economists aren’t sure how much of it will reflect the effects of the shutdown.

Back home, local data will focus on consumer and business confidence, with October’s jobs figures due Thursday. The labour market remains the key counterweight to inflation. Economists expect unemployment to edge up slightly, and that could influence the Reserve Bank’s next move. Rate cuts, once tipped for early 2025, are now more likely mid-year — unless job losses accelerate.

For now, investors are enjoying a brief rally. But with uncertainty swirling around inflation, interest rates, and economic growth both here and abroad, it’s fair to ask: is this surge built on substance or sentiment?