Our economic outlook for the United States

While our base case continues to anticipate a modest growth environment, recent data call attention to emerging upside risks worth monitoring. Chief among these is a surge in business investment, particularly in AI-related capital expenditures (capex). This wave of tech-driven capex has provided a meaningful backstop to 2025 GDP, with early data suggesting that growth otherwise would have been significantly weaker. If this momentum continues, supported by favorable financial conditions, only moderate tariff pass-through, and fiscal support, more positive growth scenarios could materialize.

However, downside risks remain, particularly in the labor market, where job creation has been subdued. More importantly, the supply side of the economy is evolving rapidly in ways that add uncertainty. Immigration trends and the anticipated productivity gains from AI are reshaping labor and output dynamics rapidly, making it increasingly difficult to distinguish cyclical fluctuations from structural shifts, and introducing uncertainty around the sustainability of recent growth surprises. This evolving landscape warrants close attention, especially as policy and investment responses adapt to these new realities.

We continue to monitor the U.S. government shutdown, although historically there has been no clear relationship between shutdowns and market returns. Economic effects have largely depended on the duration of shutdowns.