Citadel’s factor-based growth model shows US growth equities priced at roughly +2 standard deviations above historical norms, reflecting aggressive market expectations of continued expansion. This further reiterates the narrative of strong and resilient economic growth in the US given fiscal impulse, AI infrastructure investments, eased FCI, and robust earnings growth and expectations.
The only concern I have is that the current frenzy in AI, equities, and overall macroeconomy in the US is extremely concentrated and is driven by a handful of companies/industries, which jeopardizes the K-shaped trend that started to develop in 2025.
As inflation is picking up on both the supply side (higher fuel & food prices) and the demand side (a boost in aggregate demand, as described above), lower-income households are likely to see the financial burden weighing even more heavily on their pockets. I wrote a note on bifurcation in the consumption and investment in the US economy earlier this year, and the trend is only getting worse. The ultimate concern here is that as growth in wages lags behind inflation rates and savings deteriorate, lower-income households will start to cut their expenditure on both necessities and discretionary items, which will suppress earnings for retail, food, travel, and other businesses.
The bottom line is that the seemingly expansionary state of the US economy, combined with higher inflation and a higher-for-longer monetary environment, is putting the rally in equities at risk in the long run unless AI-related benefits spill over to the broader economy and all income groups. Even if this happens, it will take time to be seen and absorbed.
In other words, aggregate US growth metrics remain strong, but the distribution of that strength is highly skewed. AI-related capital expenditure and infrastructure buildout are doing the heavy lifting, while the average household and non-AI businesses are exposed to the same macro environment but are capturing little of the upside. This is not a broad-based expansion; it is a sector-concentrated impulse with asymmetric distributional consequences.
By Amir Kh.
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