The 3 things holding up the US economy and their downside risks

Economic Overview - The recent CPI report is described as "Swiss cheese," indicating it is incomplete and lacks comprehensive data [1] - Core commodities prices, excluding energy and food, are rising at a rate of 1.4%, which is unusual as this category typically deflates over time [2] - Services prices, excluding energy, are increasing at a slower pace of 3%, indicating a disinflationary trend, particularly driven by shelter cost disinflation [3][4] Inflation and Consumer Sentiment - The government has limited levers to reduce prices, with alleviating tariff cost pressures being a key mechanism to ease inflationary pressures on consumers [9][10] - The affordability crisis is influenced by both prices and wages; if wages rise faster than prices, consumer spending can be supported despite higher costs [8] Economic Growth Projections - The U.S. economy is expected to grow by 1.9% next year, supported by three fragile pillars: affluent consumers, AI investment, and asset price appreciation [11][14] - There is a risk of a potential AI-related bubble that could negatively impact stock market confidence and consumer spending, leading to reduced investment and hiring [12][13] Investment Trends - Investment in AI is anticipated to grow, not just among major players but also among firms integrating AI into their strategies, which will drive stronger growth in those sectors [16] - The economic outlook is characterized by increasing polarization, with affluent consumers and AI-focused businesses driving most spending and investment [17]