Capex

The US is not out of the woods when it comes to inflation, which means that it is too early to conclude that the Fed can stop raising rates. Any further increase in inflation risk would prompt us to turn more cautious on stocks.

Positive economic surprises have delayed the onset of recession in the United States. But tighter monetary and fiscal policy, slowing global growth, and a looming rebound in policy uncertainty and geopolitical risk suggest that investors should buy insurance while it is cheap.

The AI craze could further lift stock prices, boost capex, and delay the onset of the next recession. Looking further out, reaping the profit windfall from AI may take longer than many investors expect.

The crisis hitting regional and local banks in the US is adding to oil-price volatility and gold demand. The crisis arguably is fallout from the Fed’s aggressive monetary policy tightening, and contributes to the upending economic relationships that reliably informed policy, investments and forecasts in the past. This feeds into higher price volatility, which reduces liquidity in the short run, and impedes capex in the long run, which limits future supply growth.