Despite a shift in global trade policy and economic uncertainties, the American economy experienced accelerated growth in the third quarter, reaching 4.3 per cent. This occurred even as the administration boycotted the Group of 20 summit and implemented tariffs, diverging from previous US advocacy for liberalisation and free markets.
Global Economic Performance
The global economy as a whole saw respectable growth of 3 per cent. China demonstrated resilience in the face of American protectionist measures, successfully offsetting a roughly 30 per cent decrease in exports to the United States by increasing trade with Europe and Southeast Asia. This agility resulted in China’s trade surplus exceeding US$1 trillion for the first time.
The Rise of AI and Capital Markets
Capital markets played a significant role in driving growth, particularly in the artificial intelligence sector. Stock market indexes saw substantial gains, with the Nasdaq increasing by 21 per cent and the S&P 500 by 17 per cent. Nvidia achieved a historic valuation, becoming the first US company to reach US$5 trillion. OpenAI also announced a US$1 billion deal with Disney.
Financing for AI companies appeared readily available, even for those with limited revenue or established business models. A notable trend was the resurgence of self-financing, exemplified by Nvidia providing funds to OpenAI to facilitate purchases of Nvidia products.
Debt, Deficits, and Interest Rates
Despite ongoing debts and deficits in developed nations, the anticipated rise in borrowing costs did not occur. In fact, interest rates concluded the year at a lower level than expected.
Concerns arose regarding the fiscal stability of countries like France and Britain, but these were largely contained as both governments took steps to reassure markets, at least in the short term.
Frequently Asked Questions
What was the GDP growth rate in the US?
The American economy accelerated real GDP growth to 4.3 per cent in the third quarter.
How did China respond to US tariffs?
China offset a roughly 30 per cent drop in exports to the United States by increasing shipments to Europe and Southeast Asia.
What happened with interest rates?
The much-anticipated general increase in borrowing costs did not materialise; in fact, interest rates ended the year lower.
Looking ahead, the sustainability of these trends remains uncertain. Market reactions to future economic data and policy changes could influence whether these gains continue, or if the factors that supported them begin to shift. A possible next step for investors may be to reassess risk tolerance in light of these developments.
