$30 trillion U.S. economic gorilla vs. policymakers

Don’t bet against the gorilla

Why do people keep asking me whether I think 100 unarmed humans could defeat a fully grown silverback gorilla in a fight to the death? I have so many follow-up questions. First: Do I get to choose the other 99 humans? Second: Are there any rules, or is this an old-school World Wrestling Federation no-holds-barred scenario? Third: Why would I want to provoke a typically calm and gentle animal?

I’m not sure where the social media consensus has landed, but personally, I’d rather not test an animal that can lift more than 1,800 pounds and bite with a force of 1,300 PSI. Yes, gorillas rarely use their strength aggressively, but I’d prefer to keep it that way.

It’s analogous to asking whether the $30 trillion U.S. gorilla of an economy¹ can withstand policymakers armed with tariffs, “too-late” monetary policy, regressive fiscal bills, and “rigged” job numbers, to name a few. Personally, I would have preferred we left the docile early-2025 U.S. economy alone. Growth was resilient.² Inflation was stable.³ Let sleeping giants lie, as they say.

Instead, the contest has begun. The debate is viral.

And once again, I’m going with the gorilla.

It may be confirmation bias, but…the usual “canaries in the coal mine” for the U.S. economy aren’t flapping, wheezing, or falling off their perch. (Apologies for the back-to-back animal metaphors.) A look at bank lending standards and credit spreads reveal little cause for alarm. Only 9.5% of senior loan officers report tightening standards, far below the 50%-60% levels typically seen during recessions.⁴ Meanwhile, high-yield credit spreads are trading roughly 200 basis points below their long-term average,⁵ which suggests investors are confident enough in the economy to continue to lend money to businesses with below-investment grade ratings.

In short, the canaries are still singing.

Every cycle, I find myself obsessively focused on a different indicator. In 2008 it was the interbank lending spread. In 2020, it was social mobility metrics, followed by back-to-work barometers, like the number of employees swiping security cards to enter office buildings. This time, it’s the 3-year U.S. Treasury inflation breakeven, which reflects the bond market’s expectation for inflation over the next three years. Since early May 2025, it has averaged 2.50%.⁶ That’s price stability, at least where I come from, and it suggests the Federal Reserve (Fed) has room to lower interest rates. If the breakeven were to meaningfully break above that average, I’d be more concerned about the cycle.

Charted territory

The U.S. dollar has declined by 9.5% this year against a basket of its largest trading partners.⁷ The currency had been relatively rangebound for much of the summer but is likely to continue to moderate given its lofty valuation⁸ and the likelihood that the growth and interest rate differential between the U.S. and the rest of the world will narrow.

Among the best-performing asset classes during periods of U.S. dollar decline are – not surprisingly – emerging market and developed market stocks as well as commodities and non-US bonds.⁹

Brian Levitt is a Global Market Strategist at Invesco.

Notes

1. Source: US Bureau of Economic Analysis, June 30, 2025. US nominal gross domestic product (GDP) was $30.3 trillion at the end of the second quarter.
2. Source: US Bureau of Economic Analysis, Dec. 31, 2024. US real gross domestic product grew 2.7% on average, quarter over quarter annualized.
3. Source: US Bureau of Labor Statistics, Dec. 31, 2024. US consumer price index averaged 2.7% over the last six months of the year. 
4. Source: US Federal Reserve, June 30, 2025, based on the net percent of domestic respondents tightening standards for commercial and industrial loans for large and medium US businesses.
5. Source: Bloomberg L.P., Aug. 18, 2025, based on the option-adjusted spread of the Bloomberg US Corporate High Yield Bond Index. The spread on Aug. 18, 2025, was 282 basis points, compared to an average of 487 basis points from 1993 to current.
6. Source: Bloomberg L.P., Aug. 18, 2025, based on the 3-year US Treasury Inflation Breakeven. A breakeven inflation rate is a market-derived estimate of future inflation, calculated by comparing the yield on a standard government bond (nominal) to the yield on an inflation-protected bond (TIPS) of the same maturity.
7. Source: Bloomberg L.P., Aug. 18, 2025, based on the US Dollar Index, which measures the value of the US dollar versus a trade-weighted basket of currencies.
8. Source: Bloomberg L.P., Aug. 18, 2025, based on the US Dollar Index. The US Dollar Index is currently more than one standard deviation above its long-term average.
9. Source: Bloomberg L.P., Aug. 18, 2025, based on quarterly returns from Q1 1974–Q2 2025 for the dollar, S&P 500 Index, MSCI EM Index, MSCI EAFE Index, gold, and the Bloomberg Commodities Index. Based on quarterly returns from Q2 1990–Q2 2025 for the Bloomberg Global Aggregate ex-USD Index (global bonds ex-US) and from Q2 1976–Q2 2025 for the Bloomberg US Aggregate Index (US bonds). US dollar performance is based on the Real Broad Trade Index Weighted US Dollar Index. All return figures are in US dollar terms. An investment cannot be made directly into an index. Past performance does not guarantee future results.

Disclaimer

Contents copyright © 2025 by Invesco Canada. Reprinted with permission.

This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions.

The opinions referenced above are those of the author as of August 22, 2025. These comments should not be construed as recommendations, but as an illustration of broader themes. This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions.

Forward-looking statements are not guarantees of future results. They involve risks, uncertainties, and assumptions; there can be no assurance that actual results will not differ materially from expectations. Diversification does not guarantee a profit or eliminate the risk of loss. All investing involves risk, including the risk of loss.

Diversification does not guarantee a profit or eliminate the risk of loss.

All figures are in U.S. dollars.

This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions.

All investing involves risk, including the risk of loss.

Past performance is not a guarantee of future results.

In general, stock values fluctuate, sometimes widely, in response to activities specific to the company as well as general market, economic and political conditions.

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