Only the U.S. Ultra-Rich are Thriving, Ernst & Young Economist says

The U.S. economy appears strong, at least on paper. GDP is growing, consumers are still spending at a relatively encouraging pace, and business investment hasn’t collapsed.

Massive AI investments and soaring stock market valuations are crowding out underlying vulnerabilities. (Photo: Oracle PR Flickr)

However, that apparent strength is masking something more troubling, according to Ernst & Young chief economist Gregory Daco, Moz Farooque reported for TheStreet.

In a recent Bloomberg Businessweek Daily interview, Daco described the U.S. economy as a paradox. He said the solid headline numbers are drawing attention away from a far more fragile and polarized reality behind the scenes.

The veteran economist argues that a handful of narrow pillars—including wealthier consumers, booming financial markets, and massive AI-driven investment by tech giants—are doing most of the heavy lifting.

At the same time, households and smaller businesses are feeling the squeeze.

The takeaway closely mirrors a warning aired last month by IMF Chief Economist Pierre-Olivier Gourinchas, who said massive AI investments and soaring stock market valuations are crowding out underlying vulnerabilities.

It’s also why some prominent investors, including Bridgewater Associates Co-Chief Investment Officer Ray Dalio, have been emphatic about gold, calling for 10% to 15% portfolio exposure.

With growth depending on a remarkably narrow group of winners, the downside risk is bound to rise. If AI investment slows, the weakness beneath the “strong averages” could surface quickly.