The primary risk to the economy is a deteriorating labor market. A further increase of just a few tenths of a percentage point in the unemployment rate would trigger the "Sahm Rule," a historical regularity that reliably predicts recessions. This could spark a negative feedback loop in consumer confidence and spending.
China's robust export sector is overcompensating for its weak domestic property market. This is projected to create a current account surplus equal to 1% of global GDP—a historical record—which will act as a significant headwind for its trading partners, particularly industrial economies in Europe like Germany.
The US is seeing solid GDP growth without a corresponding tightening in the labor market. This isn't due to economic weakness, but a significant rise in productivity (from 1.5% to over 2%) which allows the economy to expand faster without needing more workers, driving a wedge between GDP and job growth.
Goldman Sachs projects 2.5% US growth, significantly above the market consensus of under 2%. This optimistic, contrarian view is based on factors the market may be underappreciating: the removal of tariff drags, ongoing fiscal support from tax cuts, and the delayed effects of easier financial conditions.
Contrary to a popular narrative, the surge in AI investment has not yet contributed measurably to US GDP growth. This is because the investment largely consists of imported goods, creating a neutral GDP effect, and accounting rules misclassify key semiconductor components as intermediate goods rather than final investment.
Unlike equities, credit markets face a growing risk from the AI boom. As companies increasingly use debt instead of cash to finance AI and data center expansion, the rising supply of corporate bonds could pressure credit spreads to widen, even in a strong economy, echoing dynamics from the late 1990s tech bubble.