Economy
June 2026
We expected AI to roll on but had a more nuanced view on the U.S. consumer.
We thought we were in the early innings of the AI build and implementation, making the massive spending a continued catalyst for the U.S. economy, with the impact felt not just within technology, but across the broader AI supply chain.
We had a more nuanced view of the U.S. consumer. Our concerns centered less on the durability of the labor market and more on a consumer that we thought would feel increasingly beleaguered under the weight of higher energy prices, weak real wage growth, and little housing market improvement.
Even with those headwinds, though, we expected continued resilience, not just because the labor market remained intact, but also because of the wealth effect: ongoing stock market gains combined with the housing gains of prior years.
Net-net, we saw AI carrying the economy, with the consumer begrudgingly along for the ride.
Since then
Resilience was indeed the name of the game this summer.
Concerns continued, particularly around negative real wage growth, modestly elevated delinquencies, and uneven spending. But the labor market held the line, with the supply and demand for jobs largely in equilibrium. Meanwhile, in the growing AI world, spending did indeed continue, with Big Tech tapping capital markets as their cash flow collapsed under their aggressive build-out plans.
The largest surprise over the course of the summer was the steadily higher yield curve, which appeared to react less to inflation concerns — though those persist — and more to the massive government debt load, concerns around the supply and demand for U.S. Treasuries, and uncertainty around the future path of rates.
September 2026
We expect summer dynamics to continue but are uneasy about the yield curve.
With no indication that AI spending will slow, we expect the capex cycle to continue to circulate through the economy in the near term, benefiting companies within industrials, utilities, manufacturing, and technology.
