The economic trajectory of the United States has been impressive, driven by fiscal policies and consumer spending. However, as fiscal support decreases and immigration slows down, there may be a shift in the landscape.
Europe, on the other hand, has been dealing with weak growth, which may lead to more aggressive cuts by the European Central Bank. This could boost the housing market and consumer confidence. Market expectations have changed, with the US growth narrative being upgraded throughout the year.
Other major economies like Germany and China could adopt expansionary fiscal policies, leading to a convergence in growth rates. The political dynamics surrounding President-elect Trump's second term are different from his first. Rising inflation and voter dissatisfaction complicate the economic agenda. Trump may need to temper his approach to avoid alienating voters concerned about rising prices.
The dominance of the technology sector, particularly the "Magnificent Seven," has been a major driver of US economic exceptionalism. However, concerns arise about the sustainability of current valuations and the timeline for monetizable returns on AI investments. The concentration of power among tech companies requires monitoring of any risks that could impact their outlook.
The interplay between fiscal policies, political realities, and sector dynamics will shape the future trajectory of US growth and its position in the global economy.