US equities reached all-time highs amidst unusual political commentary, including the president calling the chair of the Federal Reserve a ‘numbskull’ and suggesting rates be cut to 1% to relieve government interest costs. This situation represents ‘fiscal dominance,’ where a central bank keeps rates low to accommodate government spending, creating potential negative impacts on the economy. Despite this, the stock market and Treasury bonds remain stable, leading to questions about market sentiment regarding government policies and economic predictions. Fed Governor Christopher Waller indicated that rate cuts could be justified as inflation risks appear limited. Meanwhile, concerns about fiscal dominance linger, yet current inflation expectations remain stable. Notably, as tech companies such as Amazon and Microsoft reduce payrolls to leverage AI, the impact of tariffs on economic performance is yet to fully manifest. While some economists express alarm over recent data suggesting young male college graduates face high unemployment rates, broader economic indicators like the 'misery index' remain favorable. Overall, the article emphasizes a complex interplay between fiscal policy, market behavior, and emerging technologies like AI.

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