AI, Rates and the Cost of Competition: Q4 economic outlook
On this episode of Can We Talk in Private?, co-hosts Alan Flanagan and Andrew Korz unpack their Q4 Economic Outlook, The Cost of Competition. Their conversation explores why a more competitive world, shaped by heavy spending on AI, defense, and manufacturing capacity, is driving greater demand for capital and putting upward pressure on interest rates.
The past two months have been an eventful and illuminating period for markets. From late August through early October, the 10-year treasury yield rose from 4.62% to 5.3%. Over that same period, AI infrastructure stocks outperformed the rest of the S&P 500 by 1300 basis points. Since then, both moves have reversed.
The 10-year yield has fallen by roughly 30 basis points, while AI stocks have given back all of that relative outperformance. Rates and AI have been the two dominant stories of the post-COVID economic and market cycle, and increasingly we can’t talk about one without talking about the other. That’s a key through line of our fourth quarter economic outlook, the Cost of Competition.
In it, we argue that a more competitive world is also a costlier one. Governments and companies are spending aggressively on AI, defense, and manufacturing capacity. That creates enormous demand for capital and puts upward pressure on its price, interest rates.
AI sits at the center of that story. It has been one of the largest sources of demand for capital while also being the biggest driver of wealth creation over the past four years. For most of that period, those were treated as two separate conversations, one about rates and one about AI. increasingly they’re the same conversation. And that’s the one we’re having today on Can We Talk In Private?.
