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What impact are you seeing from the national boom in data center development, including some big projects in Wisconsin?<\/p>\n
\u201cHyperscaler investments are transforming communities around the country. The initial buildout is rippling through the supply chain from power, cooling, switchgear, to construction. Longer term, they may not create many permanent jobs as they have very low employment requirements per square foot compared to other developments. They also are highlighting how there\u2019s a need for more electricity generation and better distribution.<\/p>\n
\u201cIn addition to the data center construction, there\u2019s the demand for the chips and memory that go into the computing power. Apple, Microsoft, and Sony have already raised prices because of the high cost of these inputs into many consumer electronics. The inflationary effects may not be as severe as from high gasoline prices, but they are not to be ignored.\u201d<\/p>\n
Several Wisconsin companies that contribute to the supply chain for the data center projects have reported a boost in their business. But now we are seeing a tremendous pushback, locally and nationally, to data center developments. Are you concerned that could slow data center development and ultimately take some wind out of the sails for the U.S. and Wisconsin manufacturing sector?<\/p>\n
\u201cLocal and national pushback regarding immense power and water consumption is very real. While this friction will undoubtedly slow down permitting and stretch project timelines, it will not kill the boom. Hyperscalers are in an arms race; they are already pivoting to solutions like behind-the-meter power generation to bypass grid constraints. Wisconsin manufacturers supplying these components will remain busy, even if individual project timelines get extended.\u201d<\/p>\n
Change in U.S. and Wisconsin Real GDP
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\n![\"\"](\"https:\/\/www.newsbeep.com\/us\/wp-content\/uploads\/2026\/07\/Change-in-US-and-Wisconsin-Real-GDP-.jpg\")
Credit: U.S. Bureau of Economic Analysis<\/p>\n
What impact is AI having on our economy right now? Is it positive or negative? Any chance we are in an AI economic bubble similar to the dot-com bubble?<\/p>\n
\u201cAI is currently having a net-positive impact by driving immense capital investment and boosting worker productivity. While there are parallels to the dot-com era in the sheer volume of capital being deployed, there is a key difference: today\u2019s investments are grounded in highly tangible, physical infrastructure (GPUs, cooling systems, power grids) that businesses are actively utilizing, rather than speculative web traffic. During the dot-com bubble, most of those businesses didn\u2019t have profits, but the firms that are funding the current AI buildout are immensely profitable. We will have to see how long that lasts as costs increase, though. Most of the productivity gains may be tentative as well. A key consideration is whether there is excessive build-out of capacity. During the dot-com bubble, firms laid fiber optic cable with a \u2018Field of Dreams\u2019 rationale: if they build it, they will come. They overinvested, overspent, with lots of leverage, and then had to cut prices. That was the doom loop. We\u2019re vigilantly watching for a similar dynamic, but it doesn\u2019t look systemic yet.\u201d<\/p>\n
If the data center and AI boom run out of steam, for whatever reason, does that put U.S. economic growth at risk? What else does the economy have to hang its hat on right now?<\/p>\n
\u201cIf the AI and data center buildout were to stall, the economy would have to lean on its traditional backstops. Right now, it can hang its hat on resilient consumer spending and a tight labor market that is keeping wages relatively stable. If we shift from AI plus consumers to only consumers, that\u2019s still not a bad foundation. Even if AI spending falls, we could see a hand-off to other business investment as there are a lot of tax incentives to invest in property, plant and equipment. Right now, AI spending is getting all the headlines, but there is a lot of spending taking place to upgrade equipment across industries.\u201d<\/p>\n
Higher gas prices during the war with Iran have been a big factor in recent inflation, which rose to 4.2% in May and dropped to 3.5% in June. What do you expect to happen with gas prices for the rest of the year?<\/p>\n
\u201cThe shipping blockade is the primary reason headline inflation spiked. As the Strait reopens, the risk premium on oil drops. Futures markets are pricing things to suggest crude and retail gas prices can retreat significantly in the second half of the year. Gasoline prices may not fall as much as oil prices because there is a lot of transportation, refining and distribution that separates oil prices from the price at the gas pump.\u201d<\/p>\n
Year-over-Year Change in Consumer Price Index<\/p>\n
Note: October 2025 data unavailable due to funding lapse
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\n![\"\"](\"https:\/\/www.newsbeep.com\/us\/wp-content\/uploads\/2026\/07\/Year-over-Year-Change-in-Consumer-Price-Index.jpg\")
Credit: U.S. Bureau of Labor Statistics<\/p>\n
Another issue has been President Trump\u2019s tariffs. What impact are tariffs still having on inflation?<\/p>\n
\u201cThe initial inflationary shock and feed-through effects from President Trump\u2019s tariffs were felt earlier in the year, but that impact is now fading. Moving into the second half of 2026, tariffs should exert far less upward pressure on consumer prices than the recent geopolitical energy shock. After the Supreme Court ruled many of the Trump tariffs illegal, the Trump administration replaced them within hours with capped, temporary tariffs under a different statute, which (at press time were) set to expire this month unless extended. Now the administration is pursuing more targeted tariffs on certain products and certain countries. Those will take longer to implement, so we could see some of the tariffs come back in waves. Those waves should have much lower peaks than the initial wave of tariffs in 2025.\u201d<\/p>\n
Overall, what level of inflation do you expect to see over the rest of the year?<\/p>\n
\u201cBecause energy prices are expected to ease, you can expect inflation to peak pretty soon. The outstanding question is whether the energy price inflation seeps into other categories of inflation. So, there could be some lingering effects, but generally, headline inflation should move from 4.2% to something closer to 3.5%. That\u2019s still too high, but at least it\u2019s moving in the right direction.\u201d
\nEditor\u2019s note: Inflation dropped to 3.5% in June.<\/p>\n
Speaking of dealing with inflation, what do you expect the Fed to do during the rest of the year with interest rates? So far in 2026, the Fed has held steady. Will that continue? Is new Fed chair Kevin Warsh going to take the Federal Open Market Committee in a different direction?<\/p>\n
\u201cI don\u2019t expect cuts, but I also don\u2019t expect hikes. There are too many conflicting factors pushing inflation around that doing nothing might be more prudent than doing something they later regret. Warsh is taking the FOMC in a distinctly different, lower-profile direction, but that might not mean changing policy. He is standing up task forces to deal with important issues, but that will be a process. While he might prefer to really shake things up quickly, he is taking a more measured approach. Changing the direction of the Fed is going to be more like changing the direction of one of those vessels in the Persian Gulf than changing the direction of a speedboat.\u201d<\/p>\n
Interest rates
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\n![\"\"](\"https:\/\/www.newsbeep.com\/us\/wp-content\/uploads\/2026\/07\/Interest-rates.jpg\")
Credit: FRED, St. Louis Federal Reserve<\/p>\n
All things considered, how do you think the American consumer is holding up?<\/p>\n
\u201cWe are seeing a bifurcated consumer base. Lower-income consumers are feeling a severe squeeze as slowing wage growth collides with 4%-plus inflation (3.5% as of June), especially since a greater portion of their spending is at the gas pump and grocery store than upper-income consumers. Conversely, middle- and upper-income consumers are holding up well even if they aren\u2019t feeling good about it. Three consecutive years of stock market gains and robust home equity are helping asset owners feel better about their finances than those without assets.\u201d<\/p>\n
What condition is the U.S. labor market in and how will that play out over the second half of the year?<\/p>\n
\u201cThe U.S. labor market is likely to start cooling, but it has been doing well since the big drop in net job creation in February. The June Employment Situation report showed a soft, but still decent, 57,000 job gain, with prior months revised lower, yet the unemployment rate actually ticked down to 4.2% because fewer people are participating in the labor force. Strict immigration policies are limiting labor force growth, so the economy doesn\u2019t need to create as many jobs as in the past to keep the unemployment rate stable. June was a case in point. More of the same is probably the best guess for what\u2019s ahead.\u201d<\/p>\n
What\u2019s your prediction for U.S. GDP for the rest of the year?<\/p>\n
\u201cGDP growth will probably cruise above trend for the year. Consumer spending growth is at cruising altitude, but it\u2019s business investment spending that has been pushing growth higher. That could experience an air pocket if rising chip and memory costs dampen data build-out demand, but it wouldn\u2019t be surprising to see GDP for the year come in at 2.2%.\u201d<\/p>\n
Performance of the S&P 500 since 2023
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\n![\"\"](\"https:\/\/www.newsbeep.com\/us\/wp-content\/uploads\/2026\/07\/Performance-of-the-SP-500-since-2023.jpg\")
Credit: FRED, St. Louis Federal Reserve<\/p>\n
How about the stock market? What\u2019s your outlook there for the remainder of 2026?<\/p>\n
\u201cThe easy answer is to say, \u2018cautiously optimistic.\u2019 On average, being optimistic has been a winning strategy, but in any given quarter or year, you can have negative numbers or drawdowns. Cautiously optimistic sounds better than being recklessly pessimistic, especially when equities have been supported by very strong earnings growth. If energy prices fall as expected and the Fed maintains stability without aggressive unexpected hikes, the market should hold its ground through the end of 2026. Valuations, like price-to-earnings, may be high, but there are no magic numbers where if they cross that line they need to abruptly change. Generally, better earnings lead to higher valuations. Conversely, worse earnings lead to lower valuations. That\u2019s why market swings are much more extreme than swings in the fundamentals.\u201d<\/p>\n
Any chance the economy takes a turn into a recession?<\/p>\n
\u201cA near-term recession is unlikely. Business as usual is a reasonable baseline expectation. I\u2019d be more worried if I saw a pervasive increase in pressure on corporate profit margins. There are things to watch out for, but nothing right now that makes me think a recession is right around the corner.\u201d<\/p>\n
Anything I\u2019m missing that you\u2019d like to add?<\/p>\n
\u201cThe economy and the market have been defined by one shock after another since the pandemic. The coast is never clear, and it is a testimony to the adaptability of businesses and resilience of consumers that growth has continued despite these shocks.\u201d<\/p>\n![\"Microsoft](\"https:\/\/www.newsbeep.com\/us\/wp-content\/uploads\/2026\/07\/DataCenter.MtPleasant-007.jpg\")