U.S. economy shows resilience despite high interest rates

The U.S. economy has continued to grow despite rising interest rates, with recent data showing that growth and high rates can coexist for now. The yield on the 10-year U.S. Treasury bond recently hit 5.35%, the highest since 2002, raising concerns about a potential recession. However, stock markets have remained strong, with major indexes like the S&P 500 and Nasdaq hitting record highs.

High bond yields not yet hurting stock markets

Typically, rising bond yields increase borrowing costs and can hurt stock prices, but this has not been observed in the U.S. so far. BCA Research noted that the economy and stock markets have become less sensitive to interest rate changes. Even with 10-year Treasury yields above 5%, the stock market remains bullish, and businesses and consumers are not showing signs of major financial stress.

Interest rate rise linked to AI and energy prices

Economist Paul Krugman suggested that the rise in U.S. interest rates is not due to a loss of confidence in U.S. debt, but rather to increased demand for credit tied to massive investments in artificial intelligence. This has led large tech companies to take on more debt, along with a rise in energy prices due to the war in Iran.

Strong corporate earnings support U.S. economic resilience

The resilience of the U.S. economy is supported by strong corporate performance and record investments, especially in AI. According to FactSet, S&P 500 companies saw earnings grow by 29.5% in the third quarter, the third consecutive quarter of growth over 25%. However, this could change if future data, such as weak earnings or delayed AI benefits, undermine investor confidence.

France faces different challenges with rising interest rates

In contrast to the U.S., France is struggling with rising interest rates due to a lack of confidence in its public finances. Public debt in France has reached a very high level as a percentage of GDP, and the government continues to run large budget deficits without a clear justification. An aging population is also increasing the cost of pensions, making the situation more precarious than in the U.S.