We are monitoring the unemployment rate in the Philippines and India for any signs that AI is reducing the need for outsourced workers in corporate America. So far, there are no signs of AI replacing offshore workers, see chart below.
There are a lot of conversations in markets about the “Sell America” trade, i.e. the trade in which prices of US stocks, bonds and the dollar fall at the same time. But counting the number of days when this has happened shows no signs of 2025 and 2026 being anything special. In fact, the chart below shows that there has been no particular “Sell America” trade for the past 25 years.
The bottom line is that the US remains the most dynamic and innovative economy in the world, delivering the best and most steady returns for domestic and global investors.
Markets are too focused on the near-term challenges from higher oil prices, see chart below. The real trade-off for investors is 4 to 6 weeks of instability, paying off 50 years of stability in oil markets, supply chains and geopolitics. The Gulf region will be more stable and even more closely integrated with the global economy. For the Fed, the rise in inflation because of higher oil prices is temporary, and once the conflict is over, Fed cuts will be priced in again and long rates will come down again.
While the yield on software loans has increased significantly, yields on loans more generally have actually been going down, see chart below.
This suggests that the distress in software is largely idiosyncratic, rather than driven by a broad-based macro deterioration in credit conditions.
When the Fed began hiking in 2022, traditional rate-sensitive sectors like office construction rolled over quickly. But data center construction continued to surge, as investors and hyperscalers judged that AI-driven returns would exceed the higher cost of capital.
In effect, one of the traditional channels through which monetary tightening slows activity, a pullback in commercial construction, has been partially offset by structurally strong demand for digital infrastructure.
High expected returns and strategic capacity needs in data centers help explain why tighter monetary policy has cooled the economy less than in past cycles.
Combined with the positive growth impulse from the One Big Beautiful Bill, we expect economic growth to remain firm through 2026.
There are no signs of a slowdown in corporate earnings expectations, see chart below.
After a rate-driven repricing that began in 2022, real estate valuations have adjusted meaningfully while underlying fundamentals have remained intact. With capital values reset, supply constrained and income growth resilient, 2026 may represent a favorable point in the cycle to reengage with private real estate.
Key Takeaways:
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The Standard & Poor’s 500 (“S&P 500”) Index is a market-capitalization-weighted index of the 500 largest U.S. publicly traded companies by market value.
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Recessions are occurring less frequently, see chart below. For investors, this means full-blown credit cycles occur less often.
Between recessions, investors should prepare for sector-specific cycles, such as the current downturn in software, where one or two subsectors face distress while the rest of the economy is fine.
The bottom line is that credit opportunities arise not just during recessions, but also when there are sector-specific cycles during expansions. Examples are the energy credit cycle from 2014 to 2016, the brick-and-mortar retail cycle from 2016 to 2019, the commercial real estate cycle from 2022 to 2024 and the software cycle since late 2025.
The share of financial wealth in bank deposits is 51% in Japan, 37% in Germany and 11% in the United States, see chart below.
The bottom line is that there is enormous potential for consumers to put more money into yield products.
More than 4,500 objects were launched into space in 2025, up from 600 in 2019.
