Tag: GDP

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Which of the AI bubble indicators are we already seeing? Should we be concerned?

Bubble in AI

We’re already seeing multiple classic bubble indicators: extreme valuations (Buffett Indicator, Shiller CAPE), record retail participation, AI-driven hype, and surging margin debt—all pointing to elevated risk.

Key Bubble Indicators Already Present

📈 Buffett Indicator (Market Cap to GDP) This ratio is at historically high levels, suggesting stocks are significantly overvalued relative to the economy. Warren Buffett himself has warned investors may be “playing with fire”.

📊 Shiller CAPE Ratio Another respected valuation metric, the cyclically adjusted price-to-earnings ratio, is also elevated—indicating unsustainable earnings multiples and potential for correction.

🧠 AI-driven speculation The rally is heavily concentrated in AI and tech stocks, with some analysts calling it a “toxic calm” before a crash. Search volume for ‘AI bubble‘ is at record highs, and billionaire Paul Tudor Jones has issued warnings.

📉 Retail investor frenzy A record 62% of Americans now own stocks, with $51 trillion at stake. This surge in retail participation is reminiscent of past bubbles, where optimism outpaces caution.

📌 New market highs The Nasdaq, S&P 500, and Dow have hit dozens of new highs in recent months. While bullish on the surface, this pace of gains often precedes sharp reversals.

💸 Margin debt and risk appetite Risk-taking is accelerating, with margin debt climbing and speculative behavior increasing. Analysts note this as a historically bad sign when paired with euphoric sentiment.

What’s Not Yet Peaking (But Worth Watching)

IPO and SPAC volume: While not at 2021 levels, any surge here could signal speculative excess.

Corporate earnings vs. valuations: Some firms still show strong earnings, but the disconnect is widening.

Narrative dominance: AI optimism is strong, but hasn’t fully eclipsed fundamentals—yet.

How far away are we from the AI bubble popping?

Will it deflate slowly or burst?

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Paxos – A PayPal Crypto Partner Mints $300 Trillion in Stablecoins—A Glitch of Galactic Proportions

Stablecoin Glitch

In a surreal twist that briefly defied economic logic, Paxos—the blockchain infrastructure firm behind PayPal’s PYUSD stablecoin—accidentally minted $300 trillion worth of digital dollars in a technical mishap.

The error, reportedly spotted on Ethereum’s public ledger Etherscan, triggered a wave of astonishment across crypto circles before Paxos swiftly burned the excess tokens and issued a statement clarifying the blunder.

Technical error?

‘This was an internal technical error. There is no security breach. Customer funds are safe’, Paxos assured, adding that the root cause had been addressed.

To put the scale of the error in perspective: $300 trillion is more than double the estimated total GDP of the entire planet. And we trust these people and systems?

It’s a sum that could theoretically buy every publicly traded company several times over—and still leave room for a few moon bases. Fortunately, the minting was part of an internal transfer and never entered circulation.

Who is in charge?

PYUSD is designed to be a dollar-pegged stablecoin, backed by U.S. dollar deposits and short-term treasuries. Its promise of 1:1 redemption relies not on algorithmic magic but on real-world reserves and third-party attestations.

The incident, while resolved in under 20 minutes, underscores the fragility of trust in digital finance—especially when automation meets scale.

The crypto community, already wary of stablecoin transparency, seized on the event as a cautionary tale.

While no funds were lost and no users affected, the episode raises questions about auditability, protocol safeguards, and the symbolic weight of ‘minting’ in a decentralised economy.

In an era where digital assets are increasingly mainstream, even a fleeting glitch can ripple through markets and headlines.

Thin air

Paxos may have burned the tokens, but the spectacle of $300 trillion conjured from code won’t be forgotten anytime soon.

Hey, let’s go make some money!

We can ‘print’ dollars too… can’t we?

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UK economy grew slightly in August – very slightly – tax increases are coming

UK Economy

The UK economy recorded modest growth in August 2025, expanding by 0.1% according to the Office for National Statistics (ONS).

This slight gain follows a revised contraction of 0.1% in July 2025, underscoring the fragile nature of the recovery as the government prepares for next month’s Budget.

Manufacturing led the charge, growing by 0.7%, while services held steady. However, consumer-facing sectors and wholesale trade continued to drag, reflecting persistent cost pressures and subdued household confidence.

Over the three-month period to August 2025, the economy grew by 0.3%, offering a glimmer of resilience despite broader concerns.

Chancellor Rachel Reeves faces mounting pressure to address a projected £22bn shortfall. It always appears to be a £20-22 billion hole – it must be a ‘magical’ figure.

She has signalled potential tax and spending adjustments to ensure fiscal sustainability, though uncertainty around these measures may dampen business and consumer sentiment in the near term.

Some economists have warned that slowing wage growth and elevated living costs are likely to constrain household spending, with sluggish growth expected to persist.

Meanwhile, the IMF forecasts the UK to be the second-fastest-growing G7 economy this year, albeit with the highest inflation rate.

As Budget Day looms, the government’s challenge remains clear: stimulate growth without deepening the cost-of-living strain.

Tax increases are coming, despite government manifesto promises to the contrary.

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Markets on a Hair Trigger: Trump’s Tariff Whiplash and the AI Bubble That Won’t Pop

Markets move as Trump tweets

U.S. stock markets are behaving like a mood ring in a thunderstorm—volatile, reactive, and oddly sentimental.

One moment, President Trump threatens a ‘massive increase’ in tariffs on Chinese imports, and nearly $2 trillion in market value evaporates.

The next, he posts that: ‘all will be fine‘, and futures rebound overnight. It’s not just policy—it’s theatre, and Wall Street is watching every act with bated breath.

This hypersensitivity isn’t new, but it’s been amplified by the precarious state of global trade and the towering expectations placed on artificial intelligence.

Trump’s recent comments about China’s rare earth export controls triggered a sell-off that saw the Nasdaq drop 3.6% and the S&P 500 fall 2.7%—the worst single-day performance since April.

Tech stocks, especially those reliant on semiconductors and AI infrastructure, were hit hardest. Nvidia alone lost nearly 5%.

Why so fickle? Because the market’s current rally is built on a foundation of hope and hype. AI has been the engine driving valuations to record highs, with companies like OpenAI and Anthropic reaching eye-watering valuations despite uncertain profitability.

The IMF and Bank of England have both warned that we may be in stage three of a classic bubble cycle6. Circular investment deals—where AI startups use funding to buy chips from their investors—have raised eyebrows and comparisons to the dot-com era.

Yet, the bubble hasn’t burst. Not yet. The ‘Buffett Indicator‘ sits at a historic 220%, and the S&P 500 trades at 188% of U.S. GDP. These are not numbers grounded in sober fundamentals—they’re fuelled by speculative fervour and a fear of missing out (FOMO).

But unlike the dot-com crash, today’s AI surge is backed by real infrastructure: data centres, chip fabrication, and enterprise adoption. Whether that’s enough to justify the valuations remains to be seen.

In the meantime, markets remain twitchy. Trump’s tariff threats are more than political posturing—they’re economic tremors that ripple through supply chains and investor sentiment.

And with AI valuations stretched to breaking point, even a modest correction could trigger a cascade.

So yes, the market is fickle. But it’s not irrational—it’s just balancing on a knife’s edge between technological optimism and geopolitical anxiety.

One tweet can tip the scales.

Fickle!

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Buffett Indicator surges past 200% – raising alarm bells on market valuation

Warren Buffett

The so-called ‘Buffett Indicator’—a stock market valuation metric championed by Warren Buffett—has surged past 200%, reigniting concerns that equities may be dangerously overvalued.

The ratio, which compares the total market capitalisation of U.S. stocks to the country’s gross domestic product (GDP), now sits well above the threshold Buffett once described as “playing with fire”.

Historically, the Buffett Indicator has served as a broad gauge of whether the market is trading at a premium or discount to the underlying economy.

100%

A reading of 100% suggests that the market is fairly valued. But when the ratio climbs significantly above that level, it implies that investor optimism may be outpacing economic fundamentals.

200%

At over 200%, the current reading suggests that the market is valued at more than twice the size of the U.S. economy. This level is not only unprecedented—it’s also well above the peak seen during the dot-com bubble, which ended in a dramatic crash in the early 2000s.

Buffett himself has warned in the past that when the indicator reaches extreme levels, it should serve as a ‘very strong warning signal’. While he has not commented on the current spike, the metric’s ascent has prompted renewed scrutiny from analysts and investors alike.

Some argue that the indicator may be distorted by structural changes in the economy, such as the rise of intangible assets and global revenue streams that aren’t captured by GDP alone.

Others point to low interest rates and persistent liquidity as reasons why valuations have remained elevated.

Do not ignore the warning

Still, the psychological impact of the 200% mark is hard to ignore. It suggests that investors may be pricing in perfection—expecting strong earnings growth, low inflation, and continued central bank support. Any deviation from this ideal scenario could trigger a sharp revaluation.

For long-term investors, the Buffett Indicator’s warning may not signal an immediate crash, but it does suggest caution. Diversification, disciplined risk management, and a clear understanding of valuation metrics are more important than ever.

As markets continue to defy gravity, the Buffett Indicator stands as a quiet sentinel—reminding investors that even the most exuberant rallies are tethered to economic reality. Whether this is a moment of irrational exuberance or a new normal remains to be seen.

But as Buffett once said, ‘The stock market is a device for transferring money from the impatient to the patient’.

It’s just a matter of ‘time’

🔍 How It Works

Formula:

Buffett Indicator=Total MarketCap/GDP

Interpretation:

Below 100%: Market may be undervalued

100%–135%: Fairly valued

Above 135%: Overvalued

Above 200%: Historically considered ‘playing with fire’, according to Buffett himself

🚨 Current Status (as of late September 2025)

The Buffett Indicator has surged to 218%, breaking records set during the Dotcom bubble and the COVID-era rally.

This extreme level suggests that equity values are growing much faster than the economy, raising concerns about a potential market bubble.

The surge is largely driven by mega-cap tech firms investing heavily in AI, which has inflated valuations.

🧠 Why It Matters

Buffett once called this “probably the best single measure of where valuations stand at any given moment.”

While some argue the metric may be outdated due to shifts in the economy (e.g., rise of intangible assets like software and data), it still serves as a powerful warning signal when valuations soar far above GDP.

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India’s GDP: High growth amid global headwinds

GDP India

India’s economy continues to defy gravity, posting a robust 7.8% year-on-year GDP growth in the April–June quarter of 2025—the fastest pace in five quarters.

This surge, driven by strong domestic consumption, infrastructure investment, and a booming services sector, beat market expectations and reaffirmed India’s position as the world’s fastest-growing major economy.

Government-led infrastructure spending has catalysed private investment and job creation, while the digital economy—powered by fintech and e-commerce—continues to expand India’s economic footprint.

Manufacturing grew by 7.7%, and services soared by 9.3%, with government services hitting a 12-quarter high.

Yet, external pressures loom. The reintroduction of U.S. tariffs, particularly under a potential Trump administration, could dampen export momentum and strain trade relations.

Rising oil prices and geopolitical tensions in Asia further complicate India’s economic outlook. Despite these risks, the Reserve Bank of India has held steady, managing inflation and currency volatility with precision.

India’s GDP growth isn’t just a number—it’s a narrative of resilience and reinvention. From a service-dominated model to a more balanced mix of manufacturing, tech, and green energy, the country is repositioning itself as a global economic force.

The challenge now lies in sustaining this momentum while navigating fiscal constraints and global uncertainty.

📈 Chart Highlights

QuarterGDP GrowthAction
Q2 20246.5%U.S. signals tariff reintroduction
Q3 20246.9%India negotiates trade deals
Q4 20247.2%U.S. imposes limited tariffs
Q1 20257.8%India expands export incentives

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Another new high for the S&P 500 as Wall Street keeps on giving

S&P 500 at new all-time high!

The S&P 500 has notched yet another all-time high, closing at 6501.86 on 28th August 2025

This surge reflects broad investor optimism, driven by strong corporate earnings and expectations of a more accommodative stance from the Federal Reserve.

With tech, healthcare, and financials all contributing to the rally and the indices continued momentum.

Wall Street keeps on giving

Another high for the S&P 500. The index added 0.32% Thursday and closed above the 6,500 level for the first time. Asia-Pacific markets had a mixed performance on Friday 29th August 2025, with Japanese stocks declining as core consumer prices in Tokyo showed slower growth in August.

S&P 500 one-month cart as it hist new all-time high on 28th August 2025

U.S. second-quarter GDP – revised higher than expected. The economy grew at an annualized rate of 3.3%, according to the Commerce Department’s second estimate, surpassing the initial estimate of 3.0% and the Dow Jones consensus forecast of 3.1%.

Two customers made up 39% of Nvidia’s second-quarter revenue. According to Nvidia’s financial filing this week (August 2025), the customers could be either cloud providers or manufacturers, but not much else is known about their identities.

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UK GDP 0.3% for Q2 – still anaemic – despite the sunny weather – August 2025

Not so sunny! UK GDP figures anaemic

The UK economy (GDP) grew by 0.3% in the second quarter of 2025, outperforming forecasts of just 0.1% growth (not difficult).

This marks a slowdown from the robust 0.7% expansion seen in Q1, but June’s rebound helped offset weaker activity in April and May 2025.

📊 Key Highlights:

  • Monthly growth: +0.4% in June, following a slight dip in May.
  • Sector drivers: Services led the charge, with gains in computer programming, health, vehicle leasing, and scientific R&D. Construction also rose, while production dipped slightly.
  • Updated data: April’s contraction was revised to show a milder decline than previously estimated.

💬 Expert commentary:

  • Economists caution that the momentum may not last, citing a softening labour market and inflationary pressures.
  • The Bank of England recently cut interest rates to 4%, aiming to balance inflation control with economic support.
  • Chancellor Rachel Reeves welcomed the figures but stressed the need for deeper reform to unlock long-term growth.

Despite the sunny headline, analysts remain wary of headwinds from global weakness, tax changes, and cautious consumer sentiment.

The outlook for Q3 is more muted, with hopes of a sharp rebound likely to be tempered.

Data from the ONS

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U.S. GDP surges 3.0% in Q2 — but what’s driving the rebound?

U.S. GDP

After a lacklustre start to 2025, the U.S. economy posted a surprising comeback in the second quarter, with GDP rising at an annualised rate of 3.0%, according to data released today.

The sharp upswing follows a 0.5% contraction in Q1, catching analysts off-guard and fuelling speculation about the durability of the recovery.

📈 A Rebound Built on Consumers and Imports

At the heart of the turnaround lies a 1.4% increase in consumer spending, led by strong demand in sectors like healthcare, finance, and automotive sales.

But what really moved the needle was a dramatic collapse in imports — down 30.3%, reversing the Q1 surge and effectively boosting the GDP calculation.

While exports and business investment both shrank modestly, the overall picture was buoyed by domestic strength and favourable trade math.

💰 Inflation Retreats — Temporarily?

The Personal Consumption Expenditures (PCE) Price Index, a key measure of inflation, ticked up just 2.1%, down from 3.7% in the previous quarter.

The Core PCE, which excludes volatile food and energy prices, landed at 2.5%, easing pressure on the Federal Reserve to act aggressively.

Yet policymakers are watching warily. A surge in tariffs—particularly those scheduled for August—could distort prices and consumer behaviour in the months ahead.

🧠 Fed and Market Implications

The GDP bounce gives the Federal Reserve some breathing room, but not total confidence. Investment weakness and subdued export activity could signal structural fragilities beneath the headline growth.

With tariff uncertainty, election-year dynamics, and a cautious jobs market all in play, rate policy may stay frozen until the economic picture becomes clearer.

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UK economy contracts in May 2025 amid global tariff trade turmoil

UK GDP squeezed

Britain’s economy shrank by 0.1% in May 2025, marking its second consecutive monthly decline and casting fresh doubt over the strength of the post-pandemic recovery.

The latest figures from the Office for National Statistics defied analyst expectations of modest growth, underlining deepening concerns within the Treasury and among business groups.

The drop was largely driven by a sharp 0.9% fall in production output, particularly in oil and car manufacturing, alongside a 0.6% decline in construction activity.

These weaknesses come despite a slight uptick in services, which rose by 0.1%, buoyed by gains in legal services and software development.

Summary

🏭 Production output fell by 0.9%, led by declines inl oil and gas extraction and car manufacturing.

🏗️ Construction dropped 0.6%, reversing April’s gains.

🛍️ Services eked out a 0.1% rise, with legal services and computer programming offsetting a sharp fall in retail.

Finance Minister Rachel Reeves faces increasing pressure as her economic reboot agenda collides with rising domestic costs and global headwinds.

April’s national insurance hikes and Trump’s aggressive tariff policy have created economic drag, despite the UK having brokered a swift bilateral trade agreement with the U.S.

The three-month growth rate stands at 0.5%, but economists now predict a meagre 0.1% expansion for the second quarter.

With inflation edging back above 3% and interest rate cuts looming, the government must navigate a delicate balance between stimulus and stability.

The first official Q2 GDP estimate will be released on 14th August 2025, with markets braced for further volatility.

UK GDP figures February through May 2025

Month% Change in GDPKey Drivers/Comments
February+0.5%Strong services and frontloaded activity pre-tariffs
March+0.2%Moderate growth, tax rise concerns begin
April–0.3%Domestic tax hikes, Trump tariff shock
May–0.1%Production –0.9%, construction –0.6%; weak manufacturing
UK GDP figures February through May 2025

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UK economy shrank in April 2025

UK flag on a squeezed bottle

The UK economy contracted by 0.3% in April 2025, a sharper decline than the 0.1% forecast by economists, according to the Office for National Statistics (ONS).

The unexpected downturn has raised fresh concerns about the country’s economic resilience amid rising costs and global trade tensions.

April’s contraction was driven by a combination of domestic and international pressures. A significant rise in employers’ National Insurance contributions, coupled with increases in water, energy, and council tax bills, placed added pressure on businesses and households.

Simultaneously, newly imposed U.S. tariffs, introduced by President Trump, led to the steepest monthly drop in UK exports to the United States on record.

Services and manufacturing, which together form the backbone of the UK economy, both saw declines.

Legal and real estate sectors were particularly affected, following a surge in house sales in March 2025 ahead of stamp duty changes. Car manufacturing also faltered after a strong first quarter.

Despite the monthly setback, UK GDP still grew by 0.7% over the three months to April 2025, suggesting some economic activity may have been pulled forward earlier in the year.

Chancellor Rachel Reeves reportedly acknowledged the figures were ‘clearly disappointing’ but reaffirmed her commitment to long-term growth through strategic investments in infrastructure, housing, and energy.

While April’s figures may not signal an immediate crisis, they underscore the fragility of the UK’s recovery.

With UK inflation still above target and interest rates elevated, the UK government faces a delicate balancing act to sustain momentum without stifling growth.

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Debt and trade issues weaken UK growth – so says the OECD

UK growth

The latest OECD report presents a cautious outlook for the UK economy, predicting slower growth amidst global uncertainties and domestic fiscal challenges.

The UK’s GDP is projected to grow by 1.3% in 2025 and 1% in 2026, reflecting a slight downward revision.

According to the OECD, trade tensions, particularly U.S. tariffs, are disrupting global supply chains and weakening business confidence.

At the same time, consumer sentiment remains low, and business investment is expected to decline, counteracting the benefits of recent government spending initiatives.

A significant concern highlighted in the report is the UK’s public finances. The OECD warns that the government’s limited fiscal buffers could leave the economy vulnerable to future downturns.

It suggests targeted spending cuts and tax reforms, including a reassessment of council tax bands to reflect updated property valuations.

Debt interest

The OECD has warned that high interest payments on government debt and trade tensions are weighing on the UK’s economic growth. The UK’s fiscal position is described as having ‘very thin’ margins, meaning there is little room for unexpected financial shocks – of which there have been many.

Despite these hurdles, the UK is expected to outperform some major European economies, including France and Germany. However, the UK government face a complex challenge, balancing growth stimulation with fiscal responsibility.

The OECD encourages the government to accelerate infrastructure investments and enhance productivity to ensure long-term economic resilience.

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China’s retail and industrial growth slows amid ongoing tariff driven economic uncertainty

China retail data

China’s economy showed signs of slowing in April 2025, with both retail sales and industrial output missing expectations.

Retail sales grew 5.1% year-on-year, falling short of analysts’ forecasts of 5.5% growth. The slowdown reflects weak consumer sentiment, driven by deflationary pressures and uncertainty in the housing market.

While categories like gold and jewellery (+25.3%) and furniture (+26.9%) saw strong growth, car sales stagnated at just 0.7%.

Industrial production expanded 6.1% year-on-year, down from 7.7% in March 2025. The decline was largely attributed to tariff trade war tensions, which have disrupted exports.

However, fixed-asset investment rose 4% in the first four months of 2025, signalling continued infrastructure spending.

Despite the slowdown, China remains confident in achieving its 5% GDP growth target for the year. The government has introduced stimulus measures, including interest rate cuts and liquidity injections, to stabilise the economy.

With global trade uncertainties and domestic economic challenges, China’s policymakers face a delicate balancing act to sustain growth while addressing structural weaknesses.

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Moody’s Downgrades U.S. Credit Rating Amid Rising Debt Concerns

U.S. credit rating downgrade

Moody’s Investors Service has downgraded the United States’ sovereign credit rating from Aaa to Aa1, citing concerns over the country’s growing debt burden and rising interest costs.

This marks the first time Moody’s has lowered the U.S. rating, aligning it with previous downgrades by Standard & Poor’s (2011) and Fitch Ratings (2023).

The downgrade reflects the increasing difficulty the U.S. government faces in managing its fiscal deficit, which has ballooned to $1.05 trillion – a 13% increase from the previous year.

Moody’s analysts noted that successive administrations have failed to implement effective measures to curb spending, leading to a projected U.S. debt burden of 134% of GDP by 2035.

Market reactions were swift, with U.S. Treasury yields rising and stock futures sliding as investors reassessed the risk associated with U.S. assets. The downgrade could lead to higher borrowing costs for the government and businesses, potentially slowing economic growth.

Despite the downgrade, Moody’s emphasised that the U.S. retains exceptional credit strengths, including its large, resilient economy and the continued dominance of the U.S. dollar as the global reserve currency.

However, without significant fiscal reforms, further credit rating adjustments may be inevitable.

Time to print some more money…

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UK first quarter GDP better than expected at 0.7%

UK GDP up!

The UK economy has defied expectations, recording a 0.7% increase in GDP in the first quarter of 2025 – better than the forecast of 0.6%.

This surge places Britain ahead of economic heavyweights, including the United States, Canada, France, Italy, and Germany.

A key driver of this growth has been the service sector, which demonstrated resilience amid global economic uncertainty. Production also experienced a boost, further solidifying the UK’s standing as an economic force.

Chancellor Rachel Reeves was quick to praise the achievement, citing the government’s commitment to fostering stability and investment.

However, economists are watching closely as Britain navigates potential challenges ahead, particularly in light of the latest global trade tariffs imposed by Donald Trump in April.

These new restrictions could slow growth in the coming months, but for now, the economy is holding firm. However, the UK – U.S. tariff deal is likely to lessen the overall impact and present a further improvement in the second quarter.

With businesses continuing to adapt to shifting market conditions, the UK’s better-than-expected performance is a welcome sign.

Data source: Home – Office for National Statistics

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Signs of weakness in the U.S. economy – is a recession coming and is the United States causing harm to global economies?

Cracking world economies

The U.S. economy is showing cracks as multiple indicators suggest that growth may be slowing.

With GDP shrinking by 0.3% in the first quarter of 2025, concerns about an impending recession have intensified among analysts and investors.

A key driver of this economic downturn is the ongoing trade uncertainty, which has prompted businesses to stock up on imports before new tariffs take effect.

While some experts argue this is a temporary setback, others caution that prolonged trade conflicts could stifle growth for months to come.

Resilient labour market

Despite these concerns, the labour market has remained resilient, with unemployment hovering at 4.2%. However, signs of strain are emerging – job openings have declined, and layoffs have picked up in certain industries.

If hiring slows further, consumer spending could weaken, adding pressure to the economy.

Inflation remains another point of concern. Rising costs of goods and services have strained household budgets, leading to reduced discretionary spending.

The Federal Reserve, which has maintained high interest rates, is carefully assessing whether policy adjustments are needed to prevent a sharper downturn.

On Wall Street, sentiment is divided. Goldman Sachs estimates a 45% probability of a recession, while J P Morgan suggests the likelihood could be as high as 60%.

Some economists believe strategic trade deals and government intervention could avert a full-blown recession, but the margin for error is slim.

Does it really matter if there is to be a recession – it will likely be short lived. It will not please the U.S. President Donald Trump.

While uncertainty clouds the future, one thing is clear – the U.S. economy is at a pivotal moment. Whether policymakers can stabilise growth or if the nation is headed towards a deeper slowdown will depend on the next few quarters and the outcome of Trump’s tariffs.

Tudor Investment Corporation

Paul Tudor Jones, the founder of Tudor Investment Corporation, recently shared his outlook on the U.S. economy, and his perspective isn’t exactly optimistic.

He believes that U.S. stocks are likely to hit new lows before the end of the year, even if President Trump dials back tariffs on Chinese imports.

Jones pointed out that the combination of high tariffs and the Federal Reserve’s reluctance to cut interest rates is putting significant pressure on the stock market.

He reportedly noted that even if Trump reduced tariffs to 50% or 40%, it would still amount to one of the largest tax increases since the 1960s, potentially slowing economic growth.

The billionaire investor also warned that unless the Fed adopts a more dovish stance and aggressively cuts rates, the market is likely to continue its downward trajectory.

He reportedly emphasised that the current economic conditions – marked by trade uncertainty and tight monetary policy – are not favourable for a stock market recovery.

Interestingly, Jones also expressed concerns about artificial intelligence, stating that AI poses an imminent threat to humanity within our lifetime.

Maybe AI will start running hedge funds too…?

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U.S. Economy Contracts in Q1 2025 Amid Trade Policy Uncertainty

U.S. GDP

The U.S. economy shrank by 0.3% in the first quarter of 2025, marking the first contraction since early 2022.

The decline was largely driven by a surge in imports, which soared 41.3%, as businesses rushed to stockpile goods ahead of President Donald Trump’s newly imposed tariffs. Imports subtract from GDP calculations, contributing to the negative growth figure.

Despite the contraction, consumer spending remained positive, increasing 1.8%, though at a slower pace than previous quarters. Private domestic investment also saw a sharp rise of 21.9%, fueled by a 22.5% increase in equipment spending, likely influenced by tariff concerns.

The Federal Reserve faces a complex decision ahead of its upcoming policy meeting. While the negative GDP growth may push the central bank toward interest rate cuts, inflation remains a concern, with the U.S. Personal Consumption Expenditures (PCE) price index rising 3.6% for the quarter.

Markets reacted cautiously, with stock futures slipping and Treasury yields climbing. As the Trump administration navigates trade negotiations, economists warn that continued uncertainty could weigh on future growth prospects.

Next up, U.S. employment data.

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UK economy shows welcome signs of resilience with positive GDP growth and inflation relief

Union Jack flag and stocks charts

The UK economy displayed unexpected resilience in February 2025, with GDP growing by 0.5%.

This figure has exceeded market expectations and provided a welcome boost to UK economic confidence. The growth was fueled by robust activity in the services and manufacturing sectors, which helped counterbalance ongoing challenges in other areas.

February’s performance marks a recovery from the flat growth seen in January 2025, underscoring the adaptive capacity of businesses and consumers alike.

Adding to the positive momentum, the Consumer Prices Index (CPI) inflation rate eased to 2.6% in March 2025, down from February’s 2.8%.

The decline in inflation reflects a combination of factors, including falling fuel costs and stable food prices, which have alleviated pressure on household budgets.

This marks the lowest inflation level since late 2024 and aligns with the Bank of England’s goal of achieving price stability.

The interplay of stronger-than-expected GDP growth and easing inflation suggests a cautiously optimistic outlook for the UK economy.

While challenges persist, such as global economic uncertainties and lingering effects of Brexit, these latest figures indicate a potential turning point, despite the Chancellors autumn and spring ‘budgets’.

The UK government and market participants will be watching closely to see if this positive trend continues into the coming months.

See: Office for National Statistics (ONS)

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Trump’s tariff gambit will most likely damage an already fragile looking U.S. economy

Broken

President Donald Trump is to begin the biggest gamble of his second term – ‘Liberation Day’ wagering that broad-based global hitting tariffs on imports will instigate a new era for the U.S. economy.

The concern right now is no one outside the administration knows quite how those goals will be achieved, and what will be the price to pay.

Basically, tariffs are a tax on imports and, theoretically, are inflationary. In practice, though, it doesn’t always work that way.

The U.S. economy is showing potential signs of stagflation where growth is slowing, and inflation is proving stickier than expected.

Trump’s Liberation Day is here – we will see what that actually means in practice.

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UK government borrowing higher than expected in February 2025

UK borrowing up!

In February 2025, UK government borrowing reached £10.7 billion, significantly exceeding the £6.5 billion forecast by the Office for Budget Responsibility (OBR)

This marks the fourth-highest borrowing figure for February since records began in 1993. The unexpected rise in borrowing has intensified pressure on Chancellor Rachel Reeves ahead of her upcoming Spring Statement.

The increase in borrowing is attributed to higher public sector spending, which totaled £93 billion for the month, driven by social benefits and investment expenditures.

Meanwhile, government receipts, primarily from taxes, rose to £87.7 billion but failed to offset the spending surge.

Over the financial year to date, borrowing has climbed to £132.2 billion, surpassing the OBR’s earlier projection of £127.5 billion for the entire fiscal year.

Economists warn that the higher-than-expected borrowing could challenge the Chancellor’s fiscal rules, which aim to reduce debt as a share of GDP by 2029/30.

With limited options, Reeves faces tough decisions, including potential spending cuts and tax adjustments, to maintain fiscal discipline.

The borrowing figures underscore the delicate balance between managing public finances and addressing economic pressures.

As the Spring Statement approaches, all eyes are on the Chancellor’s strategy to navigate these challenges while maintaining economic stability.

The Chancellor has allowed herself to be backed into a corner.

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Bank of England holds interest rate at 4.5%

UK interest rate

The Bank of England (BoE) has decided to maintain its base interest rate at 4.5%, following its latest Monetary Policy Committee (MPC) meeting

The Bank of England has warned economic and global trade uncertainty has ‘intensified’ as it held UK interest rates at 4.5%.

This decision, supported by eight out of nine committee members, reflects the Bank’s cautious approach amidst ongoing economic challenges.

The move comes as inflation remains above the Bank’s 2% target, with the UK Consumer Prices Index (CPI) inflation recorded at 3% in January 2025. Rising energy costs, water bills, and transportation fares have contributed to the persistent inflationary pressures.

Despite these challenges, the UK economy has shown mixed signals, with a slight GDP growth of 0.1% in the final quarter of 2024, followed by a contraction of 0.1% in January 2025.

The BoE’s decision to hold rates steady aims to balance the need to control inflation while supporting economic stability. Governor Andrew Bailey reportedly emphasised the importance of monitoring both global and domestic economic developments closely (that’s useful then – what a good idea).

The MPC’s cautious stance reflects concerns over global trade uncertainties and the potential impact of geopolitical tensions.

While the decision provides some relief to borrowers, it leaves savers and businesses navigating a landscape of economic uncertainty.

Analysts predict that the Bank of England may consider rate cuts later in the year, depending on inflation trends and economic performance.

For now, however, the focus remains on maintaining stability in a forever fast challenging environment.

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China announces 7.2% increase in defence spending and targets around 5% growth for 2025

China has unveiled plans for 2025, announcing a 7.2% increase in defence spending alongside a GDP growth target of around 5%

These decisions, revealed during the annual National People’s Congress in Beijing, reflect the nation’s strategic priorities amid a challenging and fast changing global landscape.

The 7.2% rise in defence spending mirrors last year’s increase, underscoring China’s commitment to modernizing its military capabilities. With a defence budget of approximately 1.78 trillion yuan ($245.7 billion), China maintains the world’s second-largest military budget, though it remains significantly smaller than that of the United States.

The funds are expected to support advancements in high-tech military technologies, including stealth fighters, aircraft carriers, and nuclear capabilities. This move comes as China navigates heightened tensions with the U.S., territorial disputes in the South China Sea, and concerns over Taiwan.

On the economic front, the target of around 5% GDP growth signals a cautious yet determined approach to sustaining economic momentum.

This figure aligns with last year’s target and reflects the government’s focus on addressing domestic challenges, such as a sluggish property market and subdued consumer spending, while countering external pressures like trade tensions with the U.S.

Premier Li Qiang emphasized the importance of boosting domestic consumption and fostering innovation to achieve this goal.

China’s dual focus on defence and economic growth highlights its efforts to balance national security with economic stability.

However, the path forward is fraught with uncertainties, including geopolitical tensions and the need for structural economic reforms.

As the world watches, China’s ability to navigate these challenges will shape its trajectory in the years to come.

China says

‘Tariff war, a trade war or any other type of war’ – China says it’s ready to fight U.S. until the end.

Ominous!

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Japan ekes out economic growth of 0.7% in 2024

Japan growth

Japan’s economy showed modest growth in 2024

The economy expanded by 0.7% in the fourth quarter, which was higher than market expectations of 0.3%. However, for the full year, Japan’s GDP growth was just 0.1%, a significant slowdown from the 1.5% growth seen in 2023.

Exports played a key role in boosting economic growth during the fourth quarter, while domestic demand remained relatively weak.

The Bank of Japan has been gradually raising interest rates, signalling a move away from the long-standing policies aimed at combating deflation.

It’s a mixed picture, but there are some positive signs, especially with the increase in business spending and a rebound in inbound consumption

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‘Unimaginable’ billionaire wealth surged in 2024 as Oxfam predicts the emergence of five trillionaires within the next 10 years

Wealthiest and poorest

In 2024, billionaire wealth surged to unprecedented levels, with a staggering $2 trillion increase in just one year, according to an Oxfam report.

This rapid growth has led to predictions that the world could see at least five trillionaires within the next decade.

To place this in some context it is has been calculated that there are approximately 150 countries with a GDP of less than $1 trillion. This includes many smaller economies and developing nations.

So, 5 single human beings will likely hold more wealth ‘individually’ than approximately 150 separate countries. One person will be worth more than an entire country!

Oxfam report

The Oxfam report highlights the stark contrast between the wealth of the world’s richest individuals and the persistent poverty faced by millions.

The report reveals that the wealth of billionaires grew three times faster in 2024 compared to the previous year.

This surge in wealth has been attributed to various factors, including booming stock markets, lucrative investments, and favorable economic policies.

However, this concentration of wealth in the hands of a few has raised concerns about growing inequality and its impact on society.

Oxfam‘s findings emphasize the urgent need for bold economic reforms to address this disparity. The report calls for higher taxes on the super-rich and the abolition of tax havens to ensure a fairer distribution of wealth.

It also highlights the importance of investing in public services, such as healthcare and education, to improve the quality of life for all citizens.

Out of whack wealth

The growing concentration of wealth among billionaires has significant implications for global inequality. While the number of people living in poverty has remained largely unchanged since 1990, the wealth of the richest individuals has skyrocketed.

This disparity underscores the need for policies that promote economic fairness and reduce inequality.

The surge in billionaire wealth in 2024 serves as a stark reminder of the growing concentration of wealth and the urgent need for economic reforms.

By implementing policies that promote a fairer distribution of wealth and investing in public services, we can work towards a more equitable society. The emergence of trillionaires within the next decade should be a wake-up call for policymakers to address the root causes of inequality and ensure a better future for all.

World’s most wealthy climbed from $13 trillion to $15 trillion in just 12 months

The combined wealth of the world’s most wealthy rose from $13 trillion to $15 trillion in just 12 months, the global charity said Sunday. It marks the second largest annual increase in billionaire wealth since Oxfam records started.

Meanwhile, the number of people living in poverty has barely changed since 1990, the charity said, citing World Bank Data.

1% of people own nearly 45% of all wealth

The richest 1% of people own nearly 45% of all wealth, while 44% of humanity are living below the World Bank poverty line of $6.85 per day, the data showed.

First trillionaire by 2027 is predicted

Elon Musk, CEO of Tesla and now close ally of Trump, is on track to become the world’s first trillionaire by 2027, according to a report from Informa Connect Academy.

Musk is currently worth about around $440 billion according to the Bloomberg Billionaires Index.

Biden warning

Outgoing U.S. President Joe Biden warned of the rise of an “oligarchy taking shape in America of extreme wealth, power and influence.”

“People should be able to make as much as they can, but pay – play by the same rules, pay their fair share in taxes,” Biden said in his farewell address.

Oxfam

Oxfam is trying to urge governments to commit to ensuring that the incomes of the top 10% are no higher than the bottom 40% worldwide.

Global economic rules should be adjusted to allow for the break-up of monopolies, and more corporate regulation and global tax policies should be adapted to ensure that the rich pay their fair share, according to the charity.

Money that is flowing to the bank accounts of the super-rich instead of much-needed investment in teachers and medicines is “not just bad for the economy — it’s bad for humanity,” said Oxfam’s Behar.

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EEK! Only 0.1% growth for the UK

Tepid UK GDP

The U.K. economy grew by just 0.1% in the fourth quarter according to a preliminary estimate from the U.K.’s Office for National Statistics (ONS) released Thursday 13th February 2025.

Economists had expected the country’s GDP to contract by 0.1% over the period.

The services and construction sectors contributed to the better-than-expected performance in the economy, up 0.2% and 0.5% respectively, but production fell by 0.8%, according to the ONS.

Sluggish growth

The UK economy recorded zero growth in the third quarter, accompanied by lacklustre monthly GDP. There was a 0.1% contraction in October 2024 followed by a 0.1% expansion in November 2024.

On Thursday 13th February 2025, the ONS that growth had picked up in December, with an estimated 0.4% month-on-month expansion attributed to growth in and production.

Sluggish and a recent decline in inflation prompted the Bank of England to implement its interest rate cut of the year last week, reducing the benchmark rate to 4.5%.

The central bank indicated that additional rate cuts are anticipated as inflationary pressures diminish. However, it noted that higher energy costs and regulated price changes are projected to increase headline inflation to 3.7% in the third quarter of 2025.

Pressure

The expectation is that UK underlying inflationary pressures will continue to decline. The Bank of England expects the inflation rate to return to its 2% target by 2027.

The bank also halved the U.K.’s economic growth forecast from 1.5% to 0.75% this year.

Poor economic performance will add additional pressure on U.K. Chancellor Rachel Reeves, whose fiscal plans have been criticised for increasing the tax burden on businesses.

Critics say the plans, which increase the amount that employers pay out in National Insurance (NI) contributions as well as a hike to the national minimum wage, could harm investment, jobs and growth. This appears to be coming to fruition.

Chancellor Reeves defended her ‘dire’ Autumn Budget reportedly saying the £40 billion of tax rises were needed to fund public spending and that she is prioritising economic growth.

A poor start – 0.1% is an anaemic growth percentage!

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First interest rate cut for India since 2020

India interest rate

The Reserve Bank of India (RBI) has cut its benchmark interest rate by 25 basis points to 6.25%, marking the first rate cut since May 2020

This decision comes amid concerns over a slowdown in the world’s fifth-largest economy.

The central bank forecast real GDP growth for next fiscal year at 6.7%, and inflation rate at 4.2%.

The RBI’s Monetary Policy Committee (MPC) cited the need to support economic activity as the primary reason for the rate cut. The Indian economy has been experiencing sluggish growth, with GDP expanding at a slower pace than expected.

Data driven

The latest data shows that the economy grew by just 5.4% in the September quarter, the slowest rate in seven quarters. This slowdown has been attributed to tepid urban consumption and sluggish manufacturing.

Inflation, which had been a major concern for the RBI, has shown signs of easing. Retail inflation dropped to a four-month low of 5.22% in December 2024, providing the central bank with some room to focus on growth rather than solely on price stability.

RBI Governor Sanjay Malhotra, in his first monetary policy review, reportedly stated that inflation is expected to further moderate in 2025-26.

Benefits

The rate cut is expected to benefit borrowers, including homeowners and small businesses, by making borrowing cheaper. However, it may also lead to lower returns on fixed deposits, posing a challenge for savers, especially senior citizens who rely on interest income.

The government’s recent budget, which included sweeping income tax cuts, is also aimed at putting more money in the hands of consumers and boosting spending.

Together with the rate cut, these measures are expected to provide a much-needed stimulus to the economy.

While the rate cut is a positive step towards reviving growth, it also underscores the challenges facing the Indian economy.

The RBI will need to carefully monitor inflation and other economic indicators to ensure that the measures taken do not lead to unintended consequences such as higher inflation.