Podcast Summary: Unhedged - "Can Anything Stop the US Economy?"

Episode Details:

• Title: Can Anything Stop the US Economy?
• Host/Author: Financial Times & Pushkin Industries
• Release Date: June 26, 2025

In this compelling episode of Unhedged, hosts Rob Armstrong and Aidan Rider delve into the surprising resilience of the US economy amidst a barrage of potential headwinds. Despite facing numerous challenges—from soaring interest rates to geopolitical tensions—the American economy continues to demonstrate remarkable strength. This summary encapsulates the key discussions, insights, and conclusions drawn by the hosts, enriched with notable quotes and precise timestamps for context.

1. Introduction: Setting the Stage

The episode opens with a brief advertisement snippet from Rob Armstrong of Pjum, emphasizing active risk management in investments. Shortly after, Aidan Rider introduces the central theme:

Aidan Rider [00:36]: "Inflation, high interest rates, an AI bubble, bad sentiment, tariffs, a lousy housing market, and most recently, war. This year the United States economy has faced all of those things and kept on ticking."

Rob Armstrong adds:

Rob Armstrong [00:36]: "Today on the show, what does it take to slow down the American economy?"

2. Interest Rates and Economic Stability

A significant portion of the discussion centers around the rapid increase in the federal funds rate from near zero to over four percent within two years—a move that many anticipated would precipitate a crisis.

Aidan Rider [01:20]: "Two years ago the federal funds rate went from basically zero to basically four. Four plus. And we're still at four plus."

Despite these hikes, the economy has not crashed as predicted. The hosts reflect on the period marked by inflation and microeconomic scares, such as the collapse of Silicon Valley Bank:

Rob Armstrong [01:55]: "Inflation's bad… we had some hissing noises and some creaking but the machine didn't break."

This resilience is further highlighted by the stable unemployment rate:

Aidan Rider [02:38]: "We never went into high unemployment… around four and a bit percent unemployment rate economy."

3. Sentiment Indicators and Political Impact

The discussion shifts to consumer and corporate sentiment, particularly following President Trump's election, which saw a downturn in public and international sentiment towards the US economy.

Rob Armstrong [04:30]: "Every signal from sentiment was flashing red."

Despite negative sentiment across demographics and sectors, the broader economy continued to grow, outperforming peers in the developed world. The hosts emphasize that low unemployment rates and sustained consumer spending have been pivotal.

4. The AI Boom and Market Reactions

Aiden and Rob explore the role of the AI sector in buoying the stock market, noting initial fears of an AI bubble were short-lived.

Aidan Rider [03:28]: "We thought, we're going to fall off a cliff here when people realize you don't need to spend all this money. But that rut lasted maybe a day and a half."

This section underscores the market's ability to absorb and adapt to technological advancements without succumbing to speculative excesses.

5. Geopolitical Tensions and Energy Independence

The conversation addresses ongoing Middle Eastern conflicts and their limited impact on the US economy, attributing this stability to the shale boom.

Aidan Rider [12:01]: "One thing that really made a big difference that has helped the American economy is the shale boom."

The US's position as the world's leading oil and natural gas producer has insulated it from global energy shocks, allowing markets to "look through" regional conflicts without significant disruptions.

6. Household and Fiscal Health

A key factor behind the economic resilience is the strong household balance sheets, a legacy of post-Great Financial Crisis financial behaviors.

Aidan Rider [10:39]: "The US household balance sheet in aggregate has been very good. So the consumer is not leveraged out of the years, and that really helps support the economy."

Additionally, government fiscal stimulus during the COVID-19 pandemic provided a safety net that prevented household debt from becoming unmanageable:

Aidan Rider [10:53]: "The government sent everybody a bunch of checks… none of these shocks… has really shaken loose the American households, good balance sheets and propensity to spend."

7. Immigration and Labor Market

Rob highlights the role of high immigration rates in maintaining economic stability by supplying labor to a burgeoning economy.

Rob Armstrong [11:37]: "You had really high immigration that made the break even… keep things a little bit cooler than they otherwise would have been."

Aidan concurs, noting that immigration helped prevent wage inflation from spiraling, thereby sustaining economic growth.

8. Future Risks: Deficit Spending and Financial Engineering

Shifting to potential threats, the hosts express concern over the US's reliance on deficit spending and the sustainability of its fiscal policies.

Aidan Rider [17:54]: "The US is addicted to deficit spending… at some point, the people who are lending the money demand to be paid more for doing so."

Rob echoes these fears, pointing out the longer-term implications of persistent budget deficits and the possible rise in treasury yields:

Rob Armstrong [17:20]: "There is a longer term trend. It might not be absolute chaos, but it is concerning."

They discuss emerging financial strategies, such as adjusting bank regulatory ratios to allow more treasury holdings and the involvement of stablecoins in treasury markets, which may mask underlying fiscal vulnerabilities.

9. The Role of the Corporate Sector

Despite fiscal concerns, the strong performance of the US corporate sector offers a buffer against economic downturns.

Aidan Rider [20:06]: "We still have the best corporate economy in the world. It's an incredible engine of prosperity… the corporate economy will get you out of trouble."

This optimism is tempered by uncertainties surrounding tariffs and their potential impact on the broader economy.

10. Concluding Insights and Market Outlook

The episode concludes with a balanced view: while the US economy has demonstrated impressive resilience, underlying fiscal challenges and external uncertainties pose significant risks. The hosts advocate for vigilance, suggesting that while the current strength is notable, it may not be indefinitely sustainable.

Rob summarizes:

Rob Armstrong [15:15]: "The market hasn't been able to recover in the last month because the US has just proved itself over and over again."

Aidan adds a cautious note:

Aidan Rider [16:33]: "This might not be sustainable."

11. Long and Short Segment

In the lighter "Long and Short" segment, Rob shares his newfound appreciation for guavas after an impulse buy, while Aidan humorously critiques persistent bullish research on Citigroup, expressing skepticism about repeated positive forecasts.

Rob Armstrong [22:11]: "I was in the grocery store… I saw guavas. I don't particularly like guavas, yet I still bought the guavas."

Aidan Rider [22:18]: "I have been reading literally that exact research note for 20 years… whatever happens with Citigroup, I wish them well, but it’s different this time."

Final Thoughts: Unhedged provides a nuanced exploration of the US economy's strengths and vulnerabilities. While celebrating factors like low household debt, robust corporate performance, and energy independence, the hosts remain wary of fiscal imbalances and geopolitical risks. This episode serves as a valuable resource for investors and enthusiasts seeking to understand the complex dynamics sustaining the American economy in turbulent times.

For more insights and detailed analysis, subscribe to the Unhedged newsletter or listen to future episodes.