The Weekender is my bi-weekly take on macro shifts and emerging themes. It’s not investment advice — or even our firm’s official view. I aim simply to inform, challenge, and maybe entertain. If you’d like this in your inbox every other Saturday morning via Northern Trust, subscribe to The Weekender.

I’m writing this on Wednesday afternoon at 35,000ft somewhere above the French Alps. It will be posted by the time I land. The WiFi’s down (no Starlink, it seems – yet!) with only my memory, newspapers and magazines to entertain and inform. Old school. As I remain blissfully unaware of the drama unfolding below, my colleagues on Earth, no doubt, will fixate on headlines re the Federal Reserve cut and outlook, the Fed’s halt of its quantitative tightening program, trade deals or one of the five Magnificent Seven stocks who report, looking for signs that capex may flatten or future cashflows might fall — which they probably will. One day. But not yet.

I’m reminded of philosopher Robert Pirsig’s quote in Zen and the Art of Motorcycle Maintenance, “when you have mountains in the distance, you have space”. So, forgive me if I fail to comment on the deluge of headlines, but allow me this moment of reflection. For there are other events this week past which matter a great deal. Headlines I suspect have been lost in the noise.

Stand Out

This was the standout news headline: “The U.S. government and Westinghouse have struck an $80bn deal to build a fleet of nuclear reactors using funding from a trade agreement with Japan”.

First it was rare earths (MP Materials), then chips (Intel), next quantum and now nuclear.

The U.S. government’s role in this, other than that of a global syndicate banker providing (part of) the funding, could be in procuring the site, the permits, the off-take contracts and even help support an initial public offering. This form of state capitalism is aimed at meeting U.S. President Donald Trump’s ambition of quadrupling nuclear power by the middle of the century, taking it to 400 gigawatts of capacity. (Side note, if curious where the president’s interest in nuclear comes from, look up his uncle John Trump, former Professor at MIT and acclaimed nuclear energy scientist).

This, the same week NextEra announced plans to reopen a nuclear power plant in Iowa, purportedly to provide energy for Google’s data centre ambitions. Now, nuclear alone won’t solve the issue of electron scarcity. But it’s a start. And to help, the administration looks set to remove an even bigger constraint to winning the AI race. Permitting.

The Energy Unlock

We have previously written about the greatest scarcity in AI not necessarily being silicon, but electrons. As noted, Trump has said “if we want to win the AI race, we need to win the electricity race first”. The bottleneck here can be the time it takes to connect data centres to the grid. However, on Thursday last week, U.S. Secretary of Energy Chris Wright directed the Federal Energy Regulatory Commission to try accelerating the AI data-center buildout by reducing the timeline for a DC to connect to the grid from 3-5 years to a 60 day

If implemented, this could accelerate the timeline for AI capex and related infrastructure. It could provide an additional growth impulse for 2026, and further underwrite demand for industrial and commodity sectors, helping the market rally to broaden further. If little else, it's a reminder that success in the ethereal world (of ideas) demands extraordinary help — and supply — from the material one (of things). A world now attracting price-inelastic and strategic buyers (U.S. and Chinese governments) at a time of growing supply constraint, while trading at a fraction of the multiple of its largest end market — technology. In other words, a world still priced on its past. Not its present. And certainly not its future.

Productivity

As we’ve discussed before, U.S. Treasury Secretary Scott Bessent believes 2026 is the year capex will hand off to productivity growth, potentially allowing the Fed to run the economy hot a la Greenspan’s in the 1990’s (without risking inflation). Recent corporate announcements seem to support this view. According to a report by Boston Consulting Group (BCG), employees see a 10-20% productivity improvement by using ChatGPT, jumping to 30-50% if management reshapes functions around its use.

My own employer, Northern Trust, are seeing gains in programming and engineering efforts from artificial intelligence tools like GitHub. In a nod to future efficiencies, we expect to add growth without “adding more people in order to service that". Amazon said it will cut ~14,000 corporate roles, explicitly citing generative AI as a driver of the reorg and efficiency push. It’s also been reported they expect automation will allow them to forgo hiring 600,000 less people in coming years. With falling labor participation (think low birth rates/high retirement) and immigration restrictions, this should be welcomed. And before we fear mass layoffs, there is an awful lot of building, digging, drilling, mining, rewiring and welding to do — jobs I’m yet to see many robots excel at.

Replaced or amplified?

AI detractors will argue AI can’t imagine as well as humans, it can’t (yet) create. Where it leads in information, it lags in imagination. The best metaphor, I believe, is what photography did to/for artists. While it replaced many, some who adapted their styles flourished. Photography challenged artists to move beyond realistic representation, leading to new movements such as Impressionism, Expressionism, Cubism and Surrealism. Arguably, names like Monet, Picasso, Dalí, Matisse and Hockney became famous because of technology, not despite it. Artists focused on expressing emotions, impressions and abstract interpretations of reality. They stirred what it means to be human. Perhaps that’s a better image of the future. AI unlocks and amplifies human creativity. It’s certainly more pleasant than the alternative.

U.S. Earnings — So Far “Robust”

At the time of writing (Wednesday afternoon), 30% of the companies in the S&P 500 Index had reported earnings, with more than 85% beating earnings (recent average 77%) by 7.7% (7.3% average). Expect upgrades. Breadth is the highest it’s been in four years, suggesting it’s not just technology stocks enjoying the spoils of AI. Management teams sound optimistic, with twice as many firms’ raising guidance as lowering guidance, which well above the average (0.8x). Key themes so far: AI capex boom ongoing, computer chips remain scarce, AI productivity traction, no-hiring labor market, resilient but increasingly bifurcated consumer (more pressure on lower-income cohorts).

Credit conditions remain stable, and bankruptcy filings are falling. We think recent bankruptcies are more isolated events. I would note increased sightings of animal spirits with M&A starting to reappear. This may gain further traction should regulatory reforms combined with an end to quantitative tightening, free up more banking liquidity. Another 40% or so of the S&P 500 will have reported by the time you read this, including five of the Mag-Seven. Assuming these robust trends remain, it’s worth saying this: Bear markets require recessions. There is no recession signal in these numbers, certainly not as it relates to the key drivers. This is happening as the Fed is leaning into rate cuts and will likely stop quantitative tightening before year-end. And M2 money supply just hit a record high.

The Big “R”

What if the biggest risk wasn’t “Recession”, but “Re-acceleration”?

Cutting into a Crisis Re-Acceleration

The Fed cut makes 313 cuts globally in the past 24 months, about the same as post Lehman bankruptcy according to Merrill Lynch. Yet, unlike then the global economy hasn’t fallen 2-5% as it did during the Global Financial Crisis. Rather, it’s expanded double digit with M2 just hitting a record. This still feels more like the mid-90’s to me, the last time the Fed cut into a tech-led, non-inflationary boom.

China’s 15^th Five Year Plan

With a lot of focus on the trade truce between the U.S. and China this week, there was less talk about the Chinese Plenum. This was China's 15^th Five Year Plan (FYP). These events set the bearings for growth. The key takeaways were China is mobilization the nation to deliver “extraordinary measures” to achieve “decisive breakthroughs” in semiconductors and key technologies (this while their tech proxies trade at a fraction of U.S. ones). 

They want to “vigorously boost consumption”, and make household spending a powerful engine for growth (which plays well to trade talks). One way of doing this is through providing social safety nets — pensions, healthcare, insurance — to lower precautionary savings (at 120% of gross domestic product). Another, is via wealth effects, which is where stock markets come in (explaining the many incentives they’ve put in place to encourage greater equity participation).

I would also note a more dovish tone towards Taiwan, in contrast to those many commentators expecting imminent conflict. They seek to “promote the peaceful development of cross-Strait relations”.

Should they deliver (as command economies often do), then the strategy could be provide for a positive mix shift, and represent a pivot towards a more productive and stable economic growth path. This within a context where geopolitics seems to be moving closer to commerce, than conflict. That, I believe, should get rewarded by higher market multiples. 

Self-help

The European Council has committed Europe to a final deadline for implementing their single market integration strategy. That date - 2028. 

European savings rates are at pre-covid highs and with little equity participation, any initiatives like the proposed auto‑enrollment scheme or tax‑incentives for share investment, could start steady, programmatic inflows into EU equities. This would no doubt be supportive of valuations (see U.S. markets for clues). Now, in terms of what’s to play for, consider this chart below. It remains highly relevant for longer-term investors. It's showing what percentage of household assets are invested in equities in the major markets compared to the U.S.

Remember, it wasn’t that long ago, the 1960’s, when the Brits held more equities than even the Americans.

Clearly tremendous upside if these regions can provide appropriate frameworks and incentives to revive the cult of equity. Interestingly they are ALL trying to do so, making self-help an investment theme we need to understand.