By Gary Aiken | November 6, 2025
By the time you read this, the government shutdown may be over. Or not. Politicians from both parties talking past each other have led to the delay of four weeks of official government data on employment, inflation, and other important economic statistics. For hundreds of thousands of furloughed government employees, recipients of programmed dollars, and many others who have been indirectly affected, the shutdown has been distressing. But in the 401(k)s, IRAs, and investment accounts of stock investors, distress has been hard to find.
While official data has not been forthcoming, unofficial and alternative data sources have continued to show a “K-shaped” economy. This description is meant as a shorthand. The letter “K” has a vertical line at its left representing some point in the past where two paths of the economy diverged. From this divergence, two diagonals sprout: one downwards and the other upwards. So, economists describing the economy as “K-shaped” mean that for some, the economy continues to provide, and for others, the road has become harder.
The capital economy is the one going up and to the right. The stock market continues to rise, short term interest rates decrease, and the rich get richer. Capital spending on Artificial Intelligence infrastructure has grown far beyond what was penciled in a year or two ago. Revenue projections have also grown substantially as spending in known categories has grown faster and new categories of spending have been discovered.
In my previous life, as a bond analyst, I used to be audacious enough to call company CFOs. I’d also run into CFOs and CEOs of companies in my local area from time to time. After all my company specific questions were answered, I would ask a semi-off topic question: “How are you using blockchain technology today, and how are you thinking about using it in the future?” I would get one of two responses: the blunt “we’re not, and we don’t know how” or the meandering non-answer indicating the same but wishing to be thoughtful about a topic no one really understood. Today, I ask the same question, but about artificial intelligence. Most business leaders have at least two real world examples about how AI is improving their business today, and a list of projects they want to use it for in the future.
Companies have compiled data over decades. Data that needed fast and dynamic computing power to be able to analyze. Some forward-looking companies with extra budget dollars were okay with sampling data to find crude answers that sometimes led to insights. Today, companies can use 100% of the data and metadata their businesses produced in the past and are producing in real time to deliver actionable insights.
What if instead of monitoring only a few phone calls to your agents, you could monitor all the phone calls? What if instead of relying on note taking from agents, you could have 99.999% accurate transcriptions? What if you could have AI agents analyze those call transcripts to determine where lost sales opportunities were left behind? Or a chance to identify a perceived wrong during a call in a client or prospect’s word choice in real time to help win a customer you might lose? These are not “what if’s.” This is happening today in hundreds of companies across the world. If you are not using it, your competitor probably is. Invest or get left behind.
The leading question, “Is this a bubble?” suggests an answer: “Yes, this is a bubble.” If AI and the capital economy is the upper line of the “K” and if a bubble is forming, what could cause it to pop? We are certainly not in the first inning of the buildout now. The hyperscalers (Microsoft, Google, Amazon, Meta, X, OpenAI, Oracle, etc.) have progressed beyond funding investments from free cash flow to borrowing money. Leverage increases risk – you must have revenues to pay interest, and you must be able pay the debt back or refinance at some point in the future.
The Fed is lowering interest rates for the bottom part of the “K.” Housing, auto, and labor data (official and unofficial) indicate a slower consumer economy. AI is disrupting labor, but it’s still too early to know how much. The Federal Reserve hopes to offset early signals of a deteriorating job market with or without government data. However, those actions might be futile or maybe even fan the flames of an AI-investment, debt-fueled bubble.
Capital investment bubbles often pop the same way. Inflation and an overheated economy force higher interest rates. A damaged and tapped out consumer creates drag on the capital economy. Revenue growth slows. Overleveraged balance sheets become problems. Companies cut costs (jobs) or default. Unemployment rises. Revenue growth slows further, job cuts accelerate, and that vicious cycle continues until excess is painfully washed out of the system.
It’s not our base case for this year or next, but we are on the lookout for the telltale signs. Can there be drawdowns or corrections in the meantime? Of course. That’s why we still opt for diversified portfolios. Your best course of action is to review your risk level with your Concord advisor.
Author
Gary Aiken, Chief Investment Officer
Gary Aiken is the Chief Investment Officer for Concord Asset Management and is responsible for macroeconomic analysis, asset allocation, and security selection, as well as trading and investment operations.
Gary has over 23 years of investment experience and holds an undergraduate degree in economics from the University of Maryland and an MBA from The George Washington University School of Business.
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