Issue A US equity reset could be triggered by AI disappointment or geopolitical disruption

Summary

MGI names corporate earnings as one of the swing factors that could knock the United States off its productivity-acceleration path. On this side, a reset in equity or wealth could be set off by a large structural change in the long-term outlook, for example disappointment with AI or major geopolitical disruption. The stakes are high because US equities stand at all-time highs of 3.7 times GDP and 2.4 times net assets and make up nearly 40 percent of household wealth. A price correction could therefore cause a sharp drop in demand and usher in a long period of low growth. The report concludes that it is essential for corporate earnings to meet the high expectations built into current valuations.