Strong GDP, Inflation, and Growth: OBBBA and AI Boost Economy

This madness right here is a big reason why GDP is a useless financial metric in today's world. Financial services account for 21 percent of the value added to GDP in the US (compared to 11 percent for manufacturing and traditional industrial activity), yet GDP by definition ignores income generated from returns off of financial assets. Global derivatives notional value exceeds 27x world GDP, and daily forex trading is thousands of times larger than trade-related flows...and all of that activity is invisible to GDP. On the other end, depreciation (replacing of end of life or destroyed assets) represents 17 percent of GDP, up from 12 percent in 2000. So between financialization and depreciation, just over 63 percent of our $29T GDP represents actual growth. But wait! Healthcare costs drive an additional 17 percent of GDP (call it "human depreciation"). And then there are net interest payments (thanks to our massive government debt) which are another 3 percent of GDP. So in reality, only about 41 percent of US GDP reflects actual net new growth. So from $29T, only $12T is net new growth. Our economy today is a thin industrial base (only 11 percent of GDP) underneath a massive financialized layer, where every dollar generated has a long line of financial structures each extracting pennies. And interestingly enough, both political parties have openly abandoned domestic manufacturing in favor of accelerating this financialization of the economy. If you don't own assets, you don't have much of a future.

Analyzing the Q3 GDP Growth: Implications for Markets and Investment Strategies The third-quarter Gross Domestic Product (GDP) report showed a robust annualized growth rate of 4.9%, significantly exceeding market expectations. This surge was primarily driven by strong consumer spending, increased government expenditures, and a rebound in private inventory investment. While indicating economic resilience, it also sparks debate about potential inflationary pressures and the Federal Reserve's monetary policy trajectory. The surprisingly strong GDP growth has created a mixed sentiment in the market. Initially, there was a positive reaction, with equities seeing gains due to the perception of a strong economy. However, concerns quickly arose regarding the 'higher for longer' interest rate narrative, as robust growth could give the Federal Reserve more reason to maintain or even hike rates to combat inflation. This has led to increased volatility in bond yields and a cautious stance among some investors, balancing optimism about economic strength with apprehension about monetary tightening. Source - https://lnkd.in/dYA6rP9z

"Space for monetary easing is available given the drop in inflation due to GST cut and growth below aspiration." - RBI Governor RBI kept the rates and Monetary Policy stance unchanged. 2 members were in favour of change in stance to accommodative.   RBI Governor further guided that space for monetary easing is available given the drop in inflation due to GST cut and growth below aspiration.   Inflation : FY 26 inflation revised lower from 3.1% to 2.6%. Jan- March 26 inflation revised lower from 4.4% to 4% April – June 26 inflation revised lower from 4.9% to 4.5%.   GDP FY 26 GDP growth revised higher to 6.8% post strong 1st Quarter Growth However given the global uncertainty, Q1 FY 27 growth lowered from 6.6% to 6.4%   As per RBI Monetary policy report, GDP growth for FY 27 is pegged at 6.6% and inflation at 4.5%   Both growth and inflation projections are revised lower for April- June 2026.   For Debt Market, this was a much better policy outcome as compared to Aug 2025. The yields are higher by ~ 20 bps from Aug 2025 policy   Between now and Dec 2025, we will have incremental Fed rate cuts and RBI will have more clarity on the US tariff/growth front.   We believe RBI average Q1 FY 27/ FY 27 inflation to be lower than RBI projections opening up space for monetary easing in Dec 2025.   Todays policy hints towards incremental space for monetary easing and rules out any reversal in rates till March 2027   Rates being higher as compared to Aug 2025 and with scope for further easing, merits investors to increase duration and continue to select funds basis one’s investment horizon.

In a week marked by renewed S&P 500 volatility stemming from reignited tariff talks and the ongoing challenge of a government shutdown that continues to delay crucial government reports, investors and analysts have increasingly turned to secondary economic indicators for a timely view of the U.S. economy. These reports, which have taken on a larger precedence in the absence of official federal data, offer a mixed but informative picture. My latest article highlights data from a handful of releases and assesses the state of small business sentiment, industrial health, and the evolving housing sector. Read more: https://lnkd.in/emTh_W-y #Housing #Manufacturing #SmallBusiness #EconomicIndicators #GovernmentShutdown VettaFi

In a shifting economic landscape, U.S. markets continue to reflect a delicate balance between optimism and caution. Consumer spending remains a critical pillar of growth, even as forecasts suggest its expansion may slow, from a robust pace in recent years to a more modest ~1.4 % real growth in 2025, with tariffs and rising interest rates posing headwinds.  Meanwhile, consumers are increasingly selective: trading down in some categories while splurging on others, reflecting an evolution in habits born during the pandemic. Yet the road ahead is not without risk. Inflation pressures, tightening credit conditions, and policy uncertainty threaten to erode consumer confidence and restrict capital flows.  Delinquency rates on credit and auto loans are rising, particularly among lower-income households, and high tariffs exacerbate cost burdens.  Against this backdrop, investors and policymakers must adopt adaptive strategies that respond to volatility while capturing long-term opportunities. Looking ahead, investment in high-productivity sectors (such as AI, automation, and infrastructure) may offer durable upside, especially if supported by coherent fiscal and regulatory frameworks.  On the policy side, maintaining monetary flexibility, targeting structural reforms (labor, education, infrastructure), and deploying fiscal stimuli wisely will be crucial in fortifying resilience. The coming years will test how effectively the U.S. weaves strategy with agility in navigating uncertainty. risks & U.S. policy strategies. #Finance #ConsumerTrends #USEconomy #RiskAnalysis #Investing #Policy #MarketOutlook https://lnkd.in/d9Usmd7c

The outlook for Macroeconomic environment at start of Q3FY26 is as follows for the next 12months: Inflation: The consumer inflation may average below the lower bound of RBI’s tolerance bound of 4%, often breaching the 3% mark. Fiscal Deficit: The fiscal situation of the central government may remain comfortable as the tax collections remain steady and revenue expenditure is controlled further. Lower GST rates, slowing exports may not have material impact and a budget target of 4.4% may be achieved. Rates: Expect benchmark yields to average in the 6.25% +/- 25bps range. The RBI may ease a little more as fiscal concerns ease and prices remain stable. Deposit and lending rates may stabilize around current levels. Liquidity may remain comfortable in the forthcoming busy season as government spending accelerates. Current Account: Expect current account balance to stay negative as import growth continues to outpace exports. The deficit may average around 1.25% to 1.5% for 2HFY26. Savings: Household savings may continue to grow at a slower pace as real wage growth remains poor. Aggregate corporate savings though may be higher due to continued deleveraging and rise in free cash flows. Investment: The government investment expenditure may sustain at current pace. Private capex may not see material recovery in 2HFY26. Overall, investment growth may be below expectation. Exchange Rate: USDINR may average close to INR87.5 +/- 1 range. Growth: The real GDP growth for FY26 may average around 6.5% despite a slower global economy. Overall, macroeconomic outlook is stable.

Why Australian shares fell in September - while US shares rose   September showed how interest rate expectations between countries can move markets in opposite directions.   In the US, the Federal Reserve System lowered interest rates for the first time in a year, and investors are now pricing in further cuts before year-end.   That lifted confidence and valuations - particularly for growth and tech stocks already buoyed by the AI boom.   In Australia, a higher-than-expected inflation figure led investors to expect rates would stay higher for longer, keeping pressure on borrowing costs, spending, and earnings forecasts.   That weighed on banks and consumer sectors, pulling the ASX lower.   In short:   • Higher rates can lead to lower share prices, as investors shift toward fixed income and valuations fall.   • Lower rates can lead to higher share prices, through stronger investment, higher valuations, and rotation out of fixed income.   To learn more about why interest rates are so important for share prices (and what the discount rate is), take a look at our latest insights article, available below. https://lnkd.in/eghGbdyv

Government Shutdown Effects Rather than the usual scheduled first week of the month packed with major economic data, the government shutdown left investors mostly in the dark. Several key reports were not released. The latest economic data collected by private companies caused little reaction. As a result, mortgage rates ended the week down slightly, near their lowest levels of the year. In the past, government shutdowns have had little lasting impact on mortgage markets. That said, the longer the shutdown, the greater its effects will be. In the short run, the most noticeable aspect is the delay in the release of economic reports from government agencies, including key labor market and inflation indicators. In addition, the collection of government data has stopped, meaning that economists may have some doubts about the accuracy of the reports for October whenever they do come out. Yes, and given the corrupt administration we now have, there are additional reasons to doubt the accuracy of any Trump administration data. It is best look to payroll companies such as ADP and others not under subject to partisan manipulation by Trump’s lackeys. Also worth noting, private companies are the source of a reasonable amount of labor market data, but they can provide little information about inflation. Longer-term, investors primarily will be watching to see if there is a permanent reduction in government jobs, which could lead to less consumer spending and slower economic growth. Two significant economic reports released this week by the Institute of Supply Management revealed mixed results. The ISM national services sector index unexpectedly fell to 50.0, the lowest level since May, and the national manufacturing index increased to 49.1. Readings above 50 indicate an expansion in the sectors and below 50 a contraction. Service companies continue to outperform, but higher tariffs on foreign goods may provide a boost to manufacturing companies over time. The latest report on consumer confidence published by the Conference Board revealed that consumers remain concerned about the impact of higher tariffs and the government shutdown. The index dropped sharply in June to 94.2, well below the consensus forecast of 96.0, and the lowest level since April. The decline was seen across nearly all age and income groups. In particular, the outlook for the labor market weakened. The share of consumers viewing jobs as plentiful fell for the ninth straight month to the lowest level since February 2021.

A policy-grounded explainer on how consumer spending affects the economy through income, prices, employment, trade balances, and monetary-fiscal coordination. #ConsumerSpending https://lnkd.in/gtkRRh5i

📈 Sectors Looking Attractive Now ✅ Auto & Consumer: Backed by festive demand and GST benefits. ✅ Financials (Banks/NBFCs): Credit growth is healthy; valuations reasonable after recent corrections. ✅ Infrastructure & Capital Goods: Strong government spending pipeline continues. ⚠️ Be Cautious With 🚫 Over-valued mid & small-caps (some are still overheated). 🚫 Global-sensitive sectors like IT (facing pressure from U.S. slowdown and weak tech spending). 🚫 Aggressive short-term trades — volatility remains high.