Analysts at Wells Fargo have dubbed the US economy “K-shaped,” likening it to a dual tango of growth and decline where some sectors are thriving while others are stuck in place, unable to find their rhythm. According to Ohsung Kwon and his team, the spectacular launch of ChatGPT at the end of 2022 acted as a powerful catalyst. Major firms investing heavily in artificial intelligence ramped up production by 5.5%, transforming into beacons of success.
However, the situation is far more troubling on the flip side. Small-cap companies, which are often the backbone of job creation, have seen a staggering 12.3% decline in real income per worker. This stark reality underscores the so-called “dark side” of the K-shaped economy.
Industries that rely on advanced AI technologies are outpacing traditional cyclical sectors. While traditional sectors may simplify life, they contribute far less to economic momentum. Meanwhile, gold is experiencing a notable resurgence, climbing higher on waves of stimulus. US Treasury bonds, on the other hand, remain stagnant.
In summary, this K-shaped economy seems to favor those who have already achieved success, while others are left waiting for interest rates to drop to at least 3% to rejoin the dance. Against this backdrop, investors are advised to stick with the “winners,” at least until rates alter the game and the economy finds a way to move in unison.
