CoreMacro
| US
US macro analysis on the Fed, the consumer, and fiscal policy, and the investment calls that follow.
As long as the AI boom keeps booming, all other investment considerations will remain on the back burner. However, if the AI trade fizzles, this would expose deep-seated problems within the global economy, which could very well lead to an economic downturn as early as next year.
We are increasingly being asked if higher for longer interest rates could help spur consumption by boosting interest income. This report examines household income and balance sheet data to see if they might.
The most vulnerable households have whittled down their real debt balances while achieving significant real wealth gains. The combination has made consumption more resilient to income hiccups than in past cycles.
Although the multi-decade surge in the value of households’ equity holdings has made US activity more vulnerable to a stock selloff, the latest income, spending and employment data suggest that consumption growth can carry on at a 2% inflation-adjusted pace.
Against the earnings-versus-everything-else market backdrop, stellar earnings are easily outweighing elevated oil prices, rising yields and the increased probability that the Fed may hike rates before the year is out. US allocators should remain invested in equities.
We take stock of earnings, AI capex and the labor market and explain why we think the repeated new highs in the S&P 500 are justified.