The Impact of Economic Strength on Markets

The economic outlook for 2025 indicates that high consumer confidence and governmental support from various policies are contributing to a robust GDP growth of around 3%, exceeding the long-term expectation of 2%. Factors such as consumers locking in low mortgage rates during the pandemic and an ongoing boom in AI and data centers are driving this strength. Despite this growth, there are concerns regarding inflated public market valuations, especially in equities like Tesla, which are experiencing extraordinarily high trailing P/E ratios. This setup raises questions about the sustainability of such valuations in a strong growth environment, suggesting that while the economy thrives, stock markets may be overleveraged and due for a correction, especially if interest rates rise further.