RESPECTABLE GDP GROWTH
Even though the Trump administration boycotted the Group of 20 summit, blanketed the globe in tariffs and dismantled the Washington consensus on liberalisation and free markets that US governments had repeatedly advocated to others, the American economy managed to accelerate real GDP growth to 4.3 per cent in the third quarter and avoid major trade retaliation from most countries.
The global economy grew at a respectable 3 per cent; the Chinese economy demonstrated remarkable agility against America’s protectionist measures, making up its roughly 30 per cent drop in exports to the United States by shipping more to Europe and Southeast Asia. China’s trade surplus, for the first time, exceeded US$1 trillion – a staggering feat.
Then there were AI leaders and the capital markets that enabled them. Valuations soared, driving a 21 per cent gain in the Nasdaq and 17 per cent in the S&P 500 stock market indexes. Nvidia became the world’s first US$5 trillion company. OpenAI announced a US$1 billion deal with Disney.
It often seemed that financing had no limits for AI companies – even those with less-than-robust revenue and business models and, even worse, those that simply plastered an AI label on existing activities. We also saw the resurgence of self-financing, including when Nvidia essentially gave OpenAI money to buy Nvidia’s products.
The same capital markets continued to fund enormous debts and deficits in the advanced world. Yet the much-anticipated general increase in borrowing costs did not materialise. In fact, interest rates ended the year lower.
And while there were jitters over some fiscally weaker countries like France and Britain, these were limited and ultimately did little harm as both governments acted to calm markets, at least in the short term.