The economy is very resilient, growing at 2%+ despite historic shocks. Labor market stable with unemployment ~4.2%.

Shocks are regressive, hitting lower income more via fuel/food prices/tariffs, but aggregate spending and CapEx remain solid.

The economy is skewed toward higher-income spending; lower income is more fragile in high-rate/high-inflation environment.

Supply-chain resiliency concerns intensify; higher costs feed inflation. Defense spending rises in Europe, fiscal policy more proactive, raising interest rates and inflation.

Energy prices likely higher than pre-war due to infrastructure damage; oil at $150/barrel could wipe out tax-cut benefits and damage growth.

Even if Strait of Hormuz reopens, damage takes time to repair. Higher energy prices lift inflation, keep Fed hawkish, but economy can absorb unless nonlinear effects emerge.

AI not convinced near-term disinflationary; big investment boom can add upward pressure on energy prices. Over 5 years, equal probability AI is disinflationary or lifts inflation.

Highlights supply-chain issues and investment demand.