The U.S. economy will get better

The U.S. economy will get better in 2025_Sung Sang-hyun, Deputy Chief of Staff

0.
Looking at the connection between stock market growth and innovation, even if GDP grows, the stock market does not necessarily rise. Continuous stock market growth depends on companies maintaining their competitiveness through innovation, and a country where innovative companies can maintain the top market cap is a true growth country. For example, over the past 30 years, the US GDP has increased by about four times, but the Nasdaq has increased by six times. China's GDP, on the other hand, grew 48 times during the same period, but the Shanghai index only rose five times. This shows that an innovative business ecosystem is crucial to market growth.

1.
The US government's debt is at a historical high of 120% of GDP, and it is not in a sustainable situation. As a hegemonic power, the United States seeks to maintain its international status through its ability to maintain money supply and wage war. In the past case of the United States, if the debt cycle collapses to an unbearable level, there is a possibility that hegemony will be lost.

2.
Trump is seeking to restore U.S. manufacturing through reshoring and protectionism, in an attempt to strengthen the foundation of the U.S. economy and restore the economic structure that has been weakened by the absence of manufacturing. The recovery of the national manufacturing sector contributes to speeding up the circulation of money to GDP, which leads to economic growth. That's why it's important.

3.
Since the rise of the stock market does not simply depend on the growth rate of GDP, but on the continued growth of innovative companies, an ecosystem in which top-tier market capitalization companies continue to grow through innovation and hand over baton to the next generation of companies is important. New innovative companies must continue to emerge while large corporations maintain their market capitalization.

4.
The business cycle is an important factor in predicting a country's economic flow and can be confirmed by data published by the OECD or the conference board. The technological innovation cycle acts as a growth engine for the United States in particular, and high-tech industries such as AI and semiconductors are key. Here, U.S. technological innovation is positioned as a key strategy not only for GDP growth, but also for strengthening defense capabilities and maintaining hegemony.

5.
The debt cycle indicates whether the hegemonic state can manage its debt. Currently, the US debt is increasing, but to cover it, it is using strategies to induce GDP growth and lower the debt-to-GDP ratio. The loss of debt-bearing capacity is fatal, as seen in the past cases of the UK and the Netherlands losing hegemony.

6.
It is highly likely that the United States will actively utilize inflation to reduce the value of real debt. The United States, which has reduced debt in the same way as the Marshall Plan since World War II, is expected to use a strategy to increase nominal GDP through inflation, which could lead to a reduction in the government debt ratio and a reduction in the burden of real debt repayment.

7.
The Trump administration will promote capital investment and loan expansion by companies through tax cuts and deregulation. The increase in loans leads to an increase in the money supply, which acts as an important driving force for GDP growth. The expansion of loans by US banks is highly likely to lead to increased investment by SMEs and large corporations. In other words, according to the government policy, companies continue to expand investment through loans, which leads to an increase in the money supply and GDP growth.
- Corporate tax in the United States accounts for about 10% of total tax revenue, and the current tax rate is around 20%
- Biden Govt Tries To Raise Corporate Tax To 28%, Trump Tries To Cut To 15%
- Thus, Trump's corporate tax cuts are expected to increase companies' opportunities to create added value...

8.
AI technology, which has recently become a key factor in strengthening the U.S. economic growth and defense capabilities, is becoming a key factor. The U.S. government is supporting the development of AI technology and actively introducing AI technology centered on the Department of Defense. The reconstruction of AI and manufacturing is also closely linked to the Trump administration's reshoring policy. (The same is true of the recent consortium for defense.)
- A number of projects, including the Navy, are aiming to be equipped with AI by 2027.

9.
The U.S. is likely to try to balance growth and stability while maintaining interest rates of 4-4.5%. Excessive interest rate hikes can increase volatility, but the U.S. government is likely to adjust its liquidity supply to control it.
- To continue to expand growth through policies to increase bank loans while maintaining high interest rates
- Rather than paying off the debt, the United States is making the debt ratio at a level where it does not worry about the debt ratio through growth.

10.
The Trump administration's economic policies encourage investment and growth by American companies, which will have a positive impact on the stock market. The U.S. will seek to maintain its hegemony based on its cutting-edge technology, manufacturing, and defense capabilities, which will lead to long-term economic growth.
- Increase in loans -> Increase in money supply -> Increase in investment by companies -> Increase in EPS -> Increase in GDP
- If interest rates go down after that, consumption is likely to be promoted and have a positive impact on the economy.

11.
Rising interest rates and a liquidity crisis are likely to pose the biggest risk to the stock market in the first quarter, and a decrease in reserves and continued quantitative tightening could lead to volatility in the short term. The U.S. government is expected to come up with a variety of measures to minimize these risks, including plans to issue government bonds and ease bank regulations.

12.
When technological innovation leads to increased productivity, it can solve inflation problems and stabilize the economy. Advances in AI and high-tech industries will support long-term stability of the U.S. economy along with productivity improvements.

13.
Currently, the U.S. economy is leading growth centered on large corporations, but another growth cycle will begin when investment expansion to SMEs begins in earnest. This is likely to occur when the weak dollar and interest rate stability combine.

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