BND Scope: Issue 26 - Resilient Growth, Expensive Capital: The U.S. Market Balancing Act

The U.S. economy grew by around 2.0% in the first quarter of 2026. On paper, this is a strong recovery compared to the slowdown at the end of last year. Consumer spending is holding up, exports are contributing, and government activity continues to support the system.

But when we look a bit deeper, things are less straightforward. Imports increased, inflation pressures are still present, and the Federal Reserve is clearly not ready to relax. The Fed’s latest messaging is cautious: they see resilience, but they’re not convinced the risks are gone. For investors, this means growth is real—but it’s not yet stable enough to remove uncertainty.

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If there’s one clear engine in the U.S. right now, it’s AI. Large technology companies are investing hundreds of billions into data centers, infrastructure, and AI-related services. This is not just a trend—it’s becoming the backbone of market expectations.

Recent earnings from companies like Alphabet and Amazon confirmed this direction. Strong demand for cloud and AI services is translating into real revenue growth. But there’s also a new question emerging: how long can this level of spending continue before investors start demanding stronger returns?

In simple terms, AI is still the main growth story—but it’s also becoming the biggest valuation debate.

After April 18, the flow of data and news from the U.S. started to paint a very familiar—but slightly more complex—picture. Growth is back on the table, but not without pressure. Investment continues to pour into key sectors like AI and infrastructure, yet inflation concerns and policy uncertainty are still shaping expectations.

In this issue, we’re not looking at a single trend—we’re looking at a balancing act. The U.S. remains one of the most attractive markets globally, but the question is no longer “Should you invest?” It’s “Where, and under what conditions?”

Growth Is Back—But...

AI Investment Is Driving the Market Story

Housing Market: Small Signals, Big Questions

The housing market is sending mixed signals. On one side, pending home sales showed a modest increase, and single-family housing starts reached their highest level in over a year. These are positive signs, suggesting that demand hasn’t disappeared.

But on the other side, year-over-year numbers are still weak, and future permits are declining. This tells us something important: confidence is still fragile. Buyers are cautious, and builders are not fully convinced about the months ahead.

For investors, real estate is no longer a broad opportunity—it’s a selective one. Location, pricing, and financing conditions matter more than ever.

Conclusion

Despite all these mixed signals, one thing hasn’t changed: the U.S. remains a magnet for global investment. Events like the SelectUSA Investment Summit highlight continued international interest in American industries, from manufacturing to technology.

This is not just about short-term returns. It’s about long-term positioning. Global investors still see the U.S. as a place where innovation, capital, and policy come together in a way that’s hard to replicate elsewhere.

Even in uncertain times, capital tends to move toward stability—and for now, the U.S. still offers that perception.

Manufacturing Is Growing—But Costs Are Rising Faster

U.S. manufacturing continues to expand, with PMI data showing steady growth for several months now. This is a good sign that the real economy is still active and not slowing down dramatically.

However, the cost side of the story is becoming harder to ignore. Input prices have surged to multi-year highs, driven by energy, supply chain pressures, and geopolitical tensions. This creates a difficult environment for companies: growth is there, but margins are under pressure.

For markets, this means earnings may not fully reflect economic activity. And for investors, it’s a reminder that not all growth translates into profitability.

The U.S. Still Attracts Global Capital

So where does all of this leave us?

The U.S. economy is not slowing down—but it’s also not running freely. Growth is supported by strong sectors like AI and infrastructure, while areas like housing and manufacturing are showing more cautious signals. The Fed is watching closely, and so should investors.

This is not a market to approach with extremes. It’s not about full risk-taking, and it’s not about staying out. It’s about balance.

As we move further into 2026, the key question remains:

Can strong investment momentum outweigh rising costs and policy uncertainty?

For now, the answer is yes—but carefully.