US Growth Tailwinds and Inflation Risks (with Tom Keene, Paul Sweeney)

1/8/2026 11:05:50 PM	medium term up	20 days later	+0.46%	+0.46%

3/27/2026 7:30:29 PM	long term cautious down	60 days later	-15.09%	+7.54%
3/27/2026 1:02:36 AM	short term up	7 days later	+9.26%	+9.26%
3/3/2026 6:19:39 PM	short term up	5 days later	+26.94%	+26.94%
1/8/2026 11:05:50 PM	short term cautious down	5 days later	+4.91%	-2.45%

Asks Torsten Slok for an update on real and nominal GDP in the US, 12 months forward.

Tom Keene

Torsten Slok

The US has three important growth tailwinds: the AI boom, the 'one big beautiful bill' (government spending), and the industrial renaissance (reshoring manufacturing). These are firing significantly. GDP over the next 12 months should grow at roughly 5% nominal and 2-2.5% real.

The AI boom is strong, the government bill is very strong for the next 2-3 quarters, and ISM manufacturing is accelerating as trade war uncertainty recedes.

Asks if this growth is just a set of stimuli.

Tom Keene

Torsten Slok

The AI spending boom is key and is initially inflationary. Hyperscalers alone are spending about $700 billion on buildout, driving up prices for semiconductors, labor, energy, and construction workers.

This inflation is not just from the government bill but also from how long the AI boom continues.

Asks if the year's inflation is transitory energy-driven or something more.

Paul Sweeney

Torsten Slok

Inflation will be above 3% for both headline and core for at least the next 12 months. This is the core problem for the FOMC, as 11 of 12 voting members have said they are not cutting rates, and rising inflation makes it complicated to lower them.

The AI spending boom could last several years, tariffs put upward pressure on inflation, and energy prices also contribute.

Asks about risks to the outlook, specifically leverage or illiquidity shadows.

Mentions a headline about Blackstone private credit fund capping investor redemptions at 5%.

Tom Keene

Torsten Slok

The number one risk is the Strait of Hormuz remaining closed, which could spike oil prices. The second risk is inflation, which has even more upside if the Strait remains closed. The third risk is AI, which creates challenges whether it succeeds or fails.

These three areas (energy prices, inflation, AI) are what we spend a lot of time looking at.

Asks if AI can improve productivity enough for the economy to grow despite stalled population growth from current immigration policy.

Paul Sweeney

Torsten Slok

It will take longer because the AI spending boom is initially inflationary, and we will probably not see much initial productivity gains. The question is whether the endpoint is dramatically or modestly higher productivity.

The level of investment deployed today relative to the end result is the key discussion.

Asks about work-from-home as an efficiency and productivity boost, referencing Nicholas Bloom at Stanford.

Tom Keene

Torsten Slok

Nick Bloom has shown that working from home actually increases productivity. It's not only about AI; it's about how capital and labor work together to increase total factor productivity.

AI is one of those tools that helps capital and labor work better together.

Asks if Europe can do what the US is doing.

Tom Keene

Torsten Slok

Europe is not enjoying the AI boom, the government spending, or the industrial renaissance. None of these tailwinds exist in Europe. The US growth drivers are also not sensitive to interest rates, which is unique.

Interest-rate-sensitive sectors like housing and autos are not doing well, but the sources of US growth are unique and not present in Europe, Canada, or Australia.

Asks how Europe is missing the AI story, given they missed the technology boom of the last 30 years.

Paul Sweeney

Torsten Slok

Europe lacks a flexible labor market (difficult to hire/fire), which reduces risk-taking. They also need more access to venture capital and long-term capital, as financial markets are less developed.

This is particularly pronounced in Germany and France and has been a problem for decades.

Asks about Deutsche Bank learning to stop chasing America, referencing an FT article.

Tom Keene

Torsten Slok

Europeans are beginning to recognize that something needs to change, especially in financial markets. Solvency II rules are too rigid and not supportive of growth.

They need to invent their own Anthropics, OpenAIs, and SpaceXs, which requires a more flexible labor market and changes to capital rules.

States that the US has a heritage of failure, bankruptcy, and Hayekian clearing of the market, and Europe does not.

Tom Keene

Torsten Slok

Bankruptcy laws in the US give a second chance, while in many European countries you owe money for decades. This is key to economic dynamism.

Europe is moving in the right direction but not fast enough, as the US is ahead, especially in AI.

Asks if young people in Europe are pushing for change and adaptation of new technologies.

Paul Sweeney

Torsten Slok

There is an emerging venture capital and entrepreneur industry in Europe, but there are many vested interests and a desire not to dismantle existing structures like trade unions.

The transition from the old world to the new world is slow.

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