by Dr. Chris Kacher
The US trade deficit in goods and services shrank to $29.4 billion in October, down from $48.1 billion the prior month as the Trump administration’s tariffs reshaped global trade. The figure was the lowest monthly trade deficit recorded since June 2009. US imports have fallen while exports have remained strong, decreasing the trade deficit and seemingly accomplishing a major goal for President Trump.
We also have a surprise upside revision by Atlanta Fed GDPNow which predicts GDP to come in at a whopping 5.4% for Q4 from 2.7% previously. Real personal consumption expenditures growth increased from 2.4% to 3.0%. Net exports increased from -0.30% to 1.97%. Cooling inflation, higher production, and higher GDP growth all seem very promising for the US economy.
This suggests the cooling labor market which would normally foreshadow a slowing economy as many on Wall Street warned repeatedly last year points to an economy generating more output with fewer workers, a productivity-driven expansion that is unusual by historical standards but nonetheless bullish for asset prices. As noted in prior reports, unemployment has only inched higher compared to prior recessionary behavior where it soared. Further, the GDP beat in the latest quarter was the largest beat in the past decade.
So unit labor costs are falling, inflation pressure is easing, and profit margins are expanding enabling companies to grow earnings without relying on aggressive hiring or price hikes. That's another feather in the cap of the camp that says this time is different.
The upside boom is due to productivity from AI where companies can do more with less.
That said, Shadow Stats suggests far darker numbers in terms of negative GDP and much higher inflation, though that has been the case for years. ShadowStats (Jan 2026 latest) uses pre-1980/1990 methodologies to show CPI ~10-13% (vs. official ~2.7%) and real GDP contracting -7.5%+ (vs. official +2-3%). This is a massive difference from Atlanta Fed GDPNow and Truflation numbers.
So whether or not Shadow Stats is correct, markets place their bets based on official figures, not Shadow Stats. That said, one can see CPI numbers are biased far lower in the official figures which then suggests GDP numbers are artificially much higher. The Shadow Stat figures underscore AI and central bank money printing which are fueling populism to levels even beyond that of the 1930s Great Depression. Inflation is pronounced which creates a far greater divide between the haves and have-nots. Assets rise but have-nots tend to have few to no assets while the haves tend to be asset rich so benefit from inflation.
But as I've mentioned, tariffs and AI will be deflationary forces that hit the US economy and push prices down, rather than up. The question is when. The two opposing forces - money printing vs. productivity (creation of "stuff"/services/etc) - will affect prices. Elon Musk thinks that productivity, ie, the creation of "stuff"/services/etc via AI will outpace the printing of money within the next year or two, thus inflation should fall. Stay tuned.
Leading AI voices
Marc Andreessen calls AI the biggest tech revolution of his life—bigger than the internet, comparable to electricity or microprocessors—now 3 years past ChatGPT's breakthrough, with rapid revenue growth in consumer/enterprise apps despite high costs.
Marc Andreessen acknowledges AI companies' massive spending (e.g., capex on compute) but counters concerns by highlighting unprecedented revenue takeoff where new AI startups are growing "much faster than ever seen," with consumer apps monetizing at $200-300/month tiers and enterprise valuing intelligence for direct ROI like reduced churn/upsells.
Back in the 1990s, the internet had to be built which included fiber and towers. By contrast, AI deploys instantly via existing internet infrastructure to 5B+ users, fueling unprecedented demand while costs hyper-deflate, plummetting faster than Moore's Law via efficient models, commoditizing "tokens of intelligence." Small/open-source models (e.g., China's Qwen) quickly match big ones like GPT-5 on laptops, enabling edge deployment while giants chase frontiers.
Elon Musk expresses being "blown away" by AI's rapid evolution, citing daily jaw-dropping research papers and startup demos that unlock unexpected capabilities. As one of many examples, Grok's image analysis (recognizing Diamandis sans context) and circuit debugging are far beyond expectations. Musk said, "Every day I see a new AI research paper that completely floors me... or some new development I would've never anticipated... jaw on the floor."Many in development have reported they have shipped more code in the last 3 weeks than the decade before. The top AI models / agentic systems right now are an entirely different thing to what people used just a few months ago. Massive breakthroughs keep coming.
Musk anticipates AGI sometime this year, surpassing all humans by 2030. 3 years post-ChatGPT, AI has shifted from bust cycles to "ultra-democratized" magic where platforms such as Grok and Gemini are free, with compute scaling and pricing collapsing. It feels like the "80-year revolution is crystallizing now."
Compute shortages spur massive buildouts such as trillions in data centers. This bodes well for stocks such as IREN, APLD, and CIFR, all of which have been recommended to members at various times.
On Thursday, APLD reported blowout earnings pushing it toward new highs. All three tend to correlate in price highly suggesting it won't be long before IREN and CIFR catch up but both are volatile so swing traders who short can sometimes take advantage.
It also bodes well that the price of uranium, another leading sector, is at new highs again and uranium ETFs such as URAA are up on the day despite the major averages as of this writing.
