The US economy faces dual inflationary pressures: a short-term peak in headline CPI driven by geopolitical events and a longer-term, AI-driven supply shock in tech components peaking in 2027.
Rising 10-year Treasury yields, particularly above the 4.5% threshold, act as a primary restrictive force on the economy, equivalent to multiple Fed rate hikes and immediately impacting the housing sector.
US tariff policy creates complex outcomes, simultaneously spurring some domestic investment while also creating broader economic drags through investment uncertainty and slower hiring.
The Federal Reserve is currently operating in a 'belated fashion' due to a loss of confidence in its own economic forecasting capabilities.
The AI boom is a major economic force that has cushioned US GDP against trade shocks but is also creating a new, distinct inflationary wave in specific tech sectors.
2018-2019
Wong notes that the imposition of Section 301 tariffs on China during this period created a broad-based trade uncertainty shock, leading to a decline in investment in other sectors.
2024
According to Wong's analysis, the US trade deficit as a share of GDP hovered around 3%.
May 2024
Wong forecasts that the headline Consumer Price Index (CPI) will reach its peak for the year in the May report, at a level slightly above 4%.
Mid-Summer 2024
Wong expects the financial cushion provided to consumers by tax refunds to be fully depleted by this time.
First Half 2025
Wong states that the AI boom served as a key economic cushion, contributing almost one percentage point to GDP and offsetting shocks from tariffs that were front-run by firms in the first quarter.
2027
Wong predicts that the inflationary impact from the AI-driven supply shock in technology components like memory chips and software will reach its peak.
▶The New Inflationary LandscapeMay 2026
Wong's analysis separates current inflation into two distinct streams. One is a short-term, geopolitically driven surge in headline CPI, exemplified by the impact of a hypothetical Iran war. The other is a longer-term, structural inflation driven by an AI-related supply shock in specific technology components like memory chips, which is not expected to peak for several years.
Investors and analysts must differentiate between these two inflationary pressures, as policies designed to curb commodity-driven inflation may be ineffective against a technology-driven supply bottleneck, requiring a more nuanced portfolio strategy.
▶Financial Conditions Beyond the FedMay 2026
Wong emphasizes that the bond market, specifically the 10-year Treasury yield, is a primary driver of restrictive financial conditions, acting independently of the Federal Reserve's direct policy moves. She identifies the 4.5% yield level as a critical threshold that immediately impacts rate-sensitive sectors like housing and equates a 30 basis point rise to multiple Fed rate hikes.
This perspective suggests that the market can front-run or even supersede the Fed's intended policy path, making the 10-year yield a more critical leading indicator of economic slowdowns than the Fed funds rate itself.
▶The Double-Edged Sword of US Industrial PolicyApr 2026
Wong portrays US tariff policy as having complex and often contradictory effects. While acknowledging that 50% tariffs on steel and aluminum may spur domestic investment, she also calculates a direct drag on employment as firms absorb costs and notes that past tariffs created a broad-based 'uncertainty shock' that depressed investment in other sectors.
The net economic impact of protectionist policies is not uniform; sector-specific gains can be offset by macroeconomic costs, suggesting that the success of industrial policy hinges on managing broader business confidence and avoiding negative spillover effects.
▶AI as Economic Shock Absorber and InstigatorApr–May 2026
Wong frames the AI boom as a major, multifaceted economic force. On one hand, it provided a substantial cushion to the US economy, contributing almost a full percentage point to GDP during a period of trade shocks. On the other hand, this same boom is creating a new inflationary wave in the tech supply chain for components like memory chips and software.
The economic impact of AI is not simply about productivity gains; it also involves significant capital investment and supply chain reconfiguration that can create both growth and new inflationary bottlenecks simultaneously.