Torsten Slok

Well, and if you go back and look at the tick data for net foreign purchases of U.S.

assets, you saw that in April of last year during Liberation Day, things were absolutely chaotic.

It was indeed the case that the rest of the world was sell America.

But since April, for the data we now have from May up until November, it was very, very strong inflow of data into rates, in particular credit, and also, of course, into equities.

Well, and to the issue about AI, given AI is so prominent in the equity market and now AI is also becoming a bigger weight in the public IG index.

And by the way, AI is also hugely in venture capital.

Two thirds of venture capital is AI.

How do you think about the construction of portfolios at the moment when you suddenly have, when you look holistically at asset allocation, one factor, namely AI, that is everywhere?

Absolutely.

And a very important point when we talk about the Fed is that that also is because we simply have that the forces that are driving GDP are actually not very interest rate sensitive because most of the forces that are driving the boom in AI and the energy build out

have been coming because of equity valuations being so high.

Now there's more in the change in the capital structure towards also more debt issuance, but for the last several years, no matter what the Fed funds rate did, we had a really strong boom in AI, and that was driving the economy forward and continues to drive the economy forward because this strength is coming from sources that are much less interest rate sensitive than traditional components of GDP.

Absolutely.

GDP growth can come from three sources, capital, labor and productivity.

And the key issue is if productivity is strong, that can more than dominate the other forces of growth, especially when labor is now contributing less because immigration is being restricted.

So that means that the requirements coming from total factor productivity or productivity are really significant because that needs to deliver a lot of growth now that we have less growth coming from the labor side.

Absolutely.

And you go around Europe and you talk to a lot of people who are, of course, saying, oh, my God, what's going on?

This is confusing.

This is chaotic.