Can anything stop the US economy?

Rob Armstrong (0:06)

Pushkin. Inflation, high interest rates, an AI bubble, bad sentiment, tariffs, a lousy housing market, and most recently, war. This year, the United States economy has faced all of those things and kept on ticking. Today on the show, what does it take to slow down the American economy? This is Unhedged, the markets and finance podcast from the Financial Times and Pushkin. I am Rob Armstrong, coming to you from the Center of the Universe, New York City. I am joined by the other half of the Unhedged newsletter, Aiden Reiter.

Aiden Reiter (0:49)

Good morning.

Rob Armstrong (0:50)

How did we get here, man? So, I mean, the thing that's most amazing to me looking back is, like two years ago, the federal funds rate went from basically zero to basically four, four plus.

Aiden Reiter (1:04)

Four plus. We're still four plus.

Rob Armstrong (1:05)

Yeah, and we're still at four plus, and everybody, us included, is thinking, this is going to be bad. At some point, you have some kind of crisis. When you have that big, that quick increase in interest rates, something's going to crash.

Aiden Reiter (1:23)

Yeah. There were definitely bad things in that period, right? Inflation's bad.

Rob Armstrong (1:27)

We did have little micro scares. We had the Silicon Valley Bank and a couple of other banks blew up, but the machine didn't break. There was some hissing noises and some creaking, but the machine didn't break.

Aiden Reiter (1:39)

Yeah. The steady ship US kept on sailing.

Rob Armstrong (1:42)

Yeah. That's incredible. Of course, that came in the footsteps of inflation, which was a whole nother challenge.

Aiden Reiter (1:47)

Yeah. It had a lot of societal and political impacts for sure.

Rob Armstrong (1:50)

Yes.

Aiden Reiter (1:51)

But in terms of the broader US economy, it continued to choke.

Rob Armstrong (1:54)

It certainly cost the Democrats the presidency.

Aiden Reiter (1:57)

Yes. And a lot of pain and a lot of families that we shouldn't over look.

Rob Armstrong (2:02)

But the measure as a whole, the economy charged through that.

Aiden Reiter (2:05)

And ahead of all of our peers in the developed world.

Rob Armstrong (2:07)

Yeah. And we never went to high unemployment. I mean, that's the ultimate statistic for the economy. We're a four and a bit percent unemployment rate economy still. Other horrors. I remember you and I thinking in January that when DeepSeek came out and it had made this for like $12, it had made an AI model that was as good as what Google and Microsoft had or appeared that way. And we thought, good lord, the AI boom is what is supporting both the stock market, the Magnificent Sevens share prices, and to a real extent, the real economy because people were shoveling billions on top of billions into data centers and chips and Nvidia and everything else. And we thought, wow, we're going to fall off a cliff here when people realize you don't need to spend all this money.

Aiden Reiter (2:58)

Yeah, but that rut lasted maybe a day and a half.

Rob Armstrong (3:00)

Yeah, it was funny. We were listening, I remember we were like, okay, we wrote this in a note. Okay, we're going to listen to first quarter tech results, and they're going to tell us they're cutting their data center budgets and they're reorienting towards something else. Nope.

Aiden Reiter (3:14)

No.

Rob Armstrong (3:15)

Armstrong and Reiter, wrong again.

Aiden Reiter (3:18)

It seems like a streak.

Rob Armstrong (3:21)

Okay. Then, while all this is happening, President Trump gets elected, and more than half of the country, companies, consumers, investors decide everything is terrible. I mean, it is a partisan effect, but not totally, and so all our measures of sentiment fall through the floor.

Aiden Reiter (3:41)

Yeah. I mean, near-historic lows and sentiment of falling across the board, not just among Democrats and independents who might not like tariffs or the Trump administration. It's Republicans, it's wealthy people, poor people, the whole gambit.

Rob Armstrong (3:53)

And company surveys where people are like, how's business? They're like, getting worse, actually.

Aiden Reiter (3:57)

Yeah. Every signal from sentiment was flashing red.

Rob Armstrong (4:00)

Red. Not orange, red.

Aiden Reiter (4:03)

Red.

Rob Armstrong (4:04)

And when it's the CEO surveys and the corporate capital expenditure expectations surveys and the hiring expectations surveys, this is the stuff that scares you, right? Not like asking Joe Sixpack on the street, how are things. I know Joe, he's a grouchy bastard. You can't get a nice word out of him. But when the companies are saying this, it's a huge deal.

Aiden Reiter (4:28)