Full Signal Quant explains how AI radically shifts the economy for investors | Steve Hou, Bloomberg
Dec 18, 2025
Steve Hou, a quantitative researcher at Bloomberg with a PhD in financial economics, dives into the transformative effects of AI on the economy. He discusses the K-shaped divergence in labor markets, emphasizing how AI boosts returns for knowledge workers while posing challenges for young professionals. Steve also shares insights on developing a new stock index aimed at capturing companies in fundamental inflection points, highlighting a unique strategy to navigate the evolving financial landscape and the implications for investors.
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Regime Change In Bond-Stock Relationship
- Bond-stock correlation regime changed investor demand for government bonds over decades.
- Inflation dynamics shift asset pricing and government financing costs significantly.
Four Structural Drivers Of Higher Inflation
- Structural forces (decarbonization, supply-chain shifts, demographics, fiscal dominance) create a new, modestly higher inflation regime.
- Expect inflation around ~3% rather than the prior 2% target over the coming cycle.
Knowledge Drives The K-Shaped Economy
- The K-shaped divergence is driven by knowledge-based returns, not just wages vs. capital.
- Equity-based compensation amplified payouts to top knowledge workers and widened income splits.