Some of you may remember Ian Dury’s 1970s classic Reasons to be Cheerful, Part 3. He lists some little things that made him smile. And for the first time in a long time, we tapped our feet to a slightly different rhythm. For quite some time we have been warning about premature optimism. While we’re not jumping for joy yet, we are revising our U.S. growth forecasts upward. We are also seeing tentative signs that the eurozone economy is bottoming out. And since beggars cannot choose, we cling to such wavering signs of hope.
Let’s move on to the first part: The American economy has simply continued to surprise us with its unexpected resilience. It still seems like a small economic miracle – or a conundrum – that the rise across the spectrum of lending rates has barely affected the real economy, at least not yet. We are throwing in the towel on the recession and believe that the American consumer would rather take advantage of his savings than reduce spending.
In the second part, the more structural shift in investments also appears to be supporting the US economy. It appears to be the result of the Inflation Reduction Act and AI hype creating a gold rush in which seemingly almost everyone bought several shovels. Instead of recession fears, the term “Goldilocks” has appeared more frequently in recent weeks.
To be clear, there are still enough risks. Just think about the delayed impact of monetary policy tightening and potential financial stability issues, as currently illustrated by recent renewed fears in smaller US banks.