Editor’s Note: Big announcement at the Transcript! This past week, our lead author, Erick Mokaya, and his wife welcomed their first child, Andreas. Please join us in wishing the whole Mokaya family joy, health, and plenty of sleep in this exciting new chapter!
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Macro
The macro economy remains remarkably resilient. Consumers continue to spend, and growth has broadly held up better than many expected.
“We continue to see the U.S. consumer as a source of strength in the economy.” - Capital One Financial (COF 0.00%↑) CEO Richard Fairbank [Jul 28 – We Are So Back]
However, labor markets appear to be softening, especially for younger workers and for roles exposed to AI. This softening is helping to cement the market’s expectation that the Fed will move to loosen policy soon.
“Employment growth has slowed because of weaker growth in labor supply and a softening in labor demand. The uptick in the unemployment rate relative to the start of the year suggests that demand has fallen by a bit more than supply and that the downside risks to employment are rising.” - Fed Vice Chair Philip Jefferson [Oct 6 – Just a Blip]
Still, the traditional macro economy feels almost like a secondary narrative this quarter for capital markets. Everything seems to be taking a backseat to AI. Tech companies’ capital expenditures have now become one of the largest contributors to GDP growth
“There is, across the entire economy, a real surge in business investment taking place right now, and in artificial intelligence & other areas in the technology space that is helping to propel growth we saw in today’s GDP number.” – Citadel Founder Ken Griffin [Sep 29 – Doing Pretty Well]
International
China’s economy appears to be re-emerging from a long period of malaise. The Chinese consumer may be showing more signs of positivity. China’s tech companies are certainly competing in the AI race and preparing to spend alongside US peers. Nvidia had been angling to sell into the Chinese market, but there are signals that Chinese tech companies will prioritize other sources of GPUs.
“Eddie Wu at Alibaba said between now &…the end of the decade, [China will] increase their data center power by 10x.” – Nvidia (NVDA 0.00%↑) CEO Jensen Huang [Sep 29 – Doing Pretty Well]
“I’d much rather have them use American chips than Huawei become a real competitor, 100%. I’d rather see Nvidia chips used by every country in the world than to see Huawei take South America, Africa & Asia with it.” – Citadel Founder Ken Griffin [Sep 29 – Doing Pretty Well]
Europe’s economy does not appear to be rebounding quite as fast as many had hoped. Structural issues around competitiveness may be holding back economic growth in the region.
“Europe has gone from 90 per cent US GDP to 65 per cent over 10 or 15 years. That’s not good. You’re losing..If you fragment the economic alliances, Europe eventually goes back to every country for itself.” – JPMorgan (JPM 0.00%↑) CEO Jamie Dimon [Jul 14 – Open Windows]
Financials
Capital markets are wide open again. Bank executives are bullish on M&A pipelines, IPO activity, and credit markets. Even with rates elevated, confidence in dealmaking has returned.
“...the markets are wide open. We are seeing continued strong engagement with our corporate clients, particularly in our banking business as it relates to M&A activity, the IPO pipeline is strong with a lot of dialogue that should manifest itself into 2026.” – Citigroup (C 0.00%↑) CFO Mark Mason [Sep 15 – The Anchor of Strength]
Deregulation momentum in Washington has fueled renewed enthusiasm for crypto. “Crypto treasury” companies have become hot stocks, which is perhaps a sign that capital markets are experiencing frothiness usually seen in the latter innings of an economic cycle.
“We did, for example, see a significant acceleration in the average time to close on M&A deals in the second quarter as one example of a leading indicator on potential changes in that regulatory environment that we believe will be ongoing.” - Lazard (LAZ 0.00%↑) CEO Peter Orszag [Jul 28 – We Are So Back]
Consumer
The consumer remains bifurcated, but strong. High-income households are driving discretionary spending, while lower-income cohorts are showing more caution. Still, as long as labor markets hold together, household balance sheets look healthy and consumption should maintain momentum.
“There’s also a little bit still that bifurcation of the U.S. consumer economy. We have been speaking about it for several quarters now that the top end does much better than the lower end income segments in the U.S. So that’s overall, I think, the picture.” – Booking (BKNG 0.00%↑) CFO Ewout Steenbergen [Sep 23 – Lower Rates]
The housing market remains sluggish. Higher rates continue to freeze existing homeowners in place, and renovation activity has slowed in turn. Yet spending on live entertainment, dining, and travel remains buoyant.
“In 2025, the mortgage market in the United States is down in the neighborhood of 10%. That’s about $100 million of negative revenue pressure for us in 2025. Over the last 4 years, that’s over $1 billion of revenue pressure that we’ve had to work through. We’ve never seen that in our lifetimes. The mortgage market over 20, 30, 40 years moves around a few points. It’s never gone down 50%.” – Equifax (EFX 0.00%↑) CEO Mark Begor [Sep 23 – Lower Rates]
Technology
AI remains the dominant force across capital markets and the general economy. Tech company investment in AI infrastructure is climbing into the trillions. The consensus is that this is a transformative technology, but even the most enthusiastic proponents seem to believe that we are likely in some sort of a bubble—albeit a productive one. Those proponents argue that there will be winners and losers, but the long-term benefits from the infrastructure buildout will justify the costs.
“If you look at most other major infrastructure buildups in history—you know, whether it’s railroads or fiber for the internet in the dot-com bubble—these things were all chasing something that ended up being fundamentally very valuable. In most cases, it ended up being even more valuable than the people who were pushing the bubble thought it was going to be” - Meta Platforms (META 0.00%↑) CEO Mark Zuckerberg [Sep 23 – Lower Rates]
Meanwhile, demand for AI workloads continues to outstrip supply. Capital availability for inference buildouts is high. The training side, though, may soon require creative financing structures to sustain the pace. Nvidia still holds a near-monopolistic position in GPUs, but there are growing signs that OpenAI and others are encouraging competition among suppliers. Jensen Huang may be starting to feel pressure.
“Well, it’s -- a lot of people are looking for inferencing capacity. I mean people are running out of inferencing capacity….the inferencing market, again, is much larger than the training market.” – Oracle (ORCL 0.00%↑) Chair Lawrence Ellison [Sep 15 – The Anchor of Strength]
Healthcare
Capital markets have tightened for biotech ever since interest rates started to rise, but with rates expected to come down, there are signs that investors are re-engaging in the space. There’s optimism that AI may catalyze new breakthroughs in drug discovery.
“If you go back, like, the ’90s had a biotech bubble, and there were a bunch of pharma startup companies that were designing drugs and using new techniques, and the world got very excited. The investment world got very excited. As a group, they all lost money. …when the dust settles and you see who are the winners, society benefits from those inventions. They still get those life-saving drugs. And that’s what’s going to happen here, too. This is real. The benefits to society from AI are going to be gigantic.” - Amazon (AMZN 0.00%↑) Founder and Chairman Jeff Bezos [Oct 6 – Just a Blip]
Energy
The energy industry has suddenly found itself at the center of the AI story. Power is the biggest bottleneck for AI. Energy executives sound both excited and slightly daunted by the challenge. The scale of the required build-out is staggering, and no one yet knows which energy technologies will ultimately be able to meet AI’s needs.
“You see some of the constraints and they kind of exist in multiple places, the single biggest constraint is power” – Amazon (AMZN 0.00%↑) CEO Andrew Jassy [Aug 4 – All the Way Optimistic]
Nuclear has received lots of attention, but timelines remain long and projects are expensive. In the meantime, fossil fuels are quietly keeping the lights on—even coal has seen some resurgence.
“There’s a lot of things we have a hard time agreeing on as a country. And like you, I wish we could find more. But one thing is clear, the benefits of nuclear energy for families, for local communities, for states and the economy as a whole is something that we all can agree on.” – Constellation Energy (CEG 0.00%↑) CEO Joseph Dominguez [Aug 11 – Rate Cuts Expectations Rising]
Forward Outlook
It’s hard to believe we made it this far without mentioning Trump (apologies for changing that here). The government remains shut down as of this writing, but markets seem largely indifferent. Investors have become somewhat comfortable with the political theater. Everyone knows Trump is leaning hard on the Fed to cut rates—and markets suspect that, one way or another, he’ll get what he wants.
Still, this is Trump: when he’s not the center of attention, he tends to create some. So while AI currently dominates the capital markets narrative, it wouldn’t be surprising if the political stage were to command a spotlight of its own.
Your write up and summary are excellent just to run them with your last paragraph, true or not, not necessary.