The pain underlying U.S. GDP numbers goes beyond potential stock market effects

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This spending spree is not just powering GDP, it is inflating stock valuations and creating a rising liquidity tide that lifts risk assets, which is great for the small percentage of people who own the majority of the equity market.

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But for those living on Main Street, the AI boom is a double-edged sword. Traditional employers are cutting jobs. United Parcel Service Inc. has eliminated 48,000 positions in 2025, far above its earlier target of 20,000, as automation reshapes logistics. Amazon.com Inc. is slashing 14,000 corporate roles, with more cuts tied to AI-driven restructuring. Target Corp. plans to cut 1,800 jobs, and General Motors Co. has announced layoffs as well.

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These job losses hit middle-income earners, the very group that drives discretionary spending, and further widens the gap between economic winners and losers.

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Even consumer staples giants are feeling the pressure. The Kraft Heinz Co. is feeling the effects of the broader U.S. economic slowdown in 2025, particularly in its North American operations. Despite headline GDP growth, the company has lowered its annual sales and profit forecasts, citing weakened consumer demand and persistent inflation.

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In essence, Kraft Heinz’s performance is a microcosm of the broader U.S. recessionary undercurrents: headline growth driven by narrow sectors such as AI and elite consumption, while mainstream consumer brands face declining volumes and profitability. The company’s strategic pivot, including a major corporate split and aggressive promotional spending, underscores the challenges ahead in a polarized and inflation-weary economy.

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What it means for investors

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Don’t be fooled by headline GDP numbers. The U.S. economy is riding a narrow wave of AI-driven capital expenditure and elite consumption, while regional recessions and structural inequality deepen. This concentration creates both opportunity and risk.

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Tech infrastructure plays, including semiconductors, cloud providers and data centre REITs, remain attractive but they are vulnerable to any slowdown in AI spending. Consumer discretionary tied to affluent households may outperform, while mass-market retail faces headwinds from layoffs and weak wage growth. Housing remains bifurcated: Luxury markets and services catering to the wealthy may be resilient but affordability challenges will pressure mid-tier segments.

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Personally, I’m increasingly concerned about the political risk emerging from this economic divergence. The growing chasm between the economic elite and the broader population is fuelling populist movements on both the left and right, each pushing for radically different solutions, from wealth redistribution and aggressive taxation to protectionism and anti-establishment deregulation. This polarization is already reshaping fiscal policy debates, tax structures and regulatory frameworks, and it’s only accelerating.

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There is a real risk of a modern-day “let them eat cake” moment, where the economic and political elite underestimate the frustration brewing among those left behind. When the majority of Americans feel excluded from prosperity, the potential for social unrest, policy whiplash, and unpredictable election outcomes rises sharply. We’re already seeing signs of this in the form of extreme candidates gaining traction, cities electing far-left leadership and growing hostility toward institutions.

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Global investors should prepare for volatility not just in markets but in their everyday lives. Policy uncertainty, social tension and fiscal shifts could affect everything from interest rates and capital flows to housing affordability and business investment. In this environment, portfolio resilience requires more than just diversification; it demands a deep understanding of the political landscape and its potential to disrupt economic fundamentals.