Investor Essentials Daily

Here Are The Four Possible Scenarios For The U.S. Economy

July 3, 2023

It is a great time to reflect on the future of the U.S.

As we get ready to celebrate American independence, it is a great time to discuss what lies ahead for Americans.

Their ideas are all kinds of opinions, with people saying the U.S. will remain the superpower it currently is, people thinking our decade is over, and China is going to take the title.

McKinsey just published a report on global wealth, stating that $48 trillion of U.S. wealth is on the line this decade. It is easy to say that the report wasn’t exactly bullish.

What the report essentially says is that the next decade is not going to be like the last two.

Since the Great Recession, investment returns or “paper gains” seriously outpaced the actual economic productivity of the United States. That is not sustainable in the long term and there is a good chance it will change.

McKinsey’s report outlined four scenarios for the U.S. We think two of them are more likely to happen than the others.

Today, we will look at all four scenarios and explain what each might mean for investors.

Investor Essentials Daily: 
The Monday Macro Report
Powered by Valens Research 

Each scenario portrays a different outlook for the nation’s wealth and productivity.

The first scenario is a continuation of the last 15 years. That means more paper gains and economic stagnation.

This is possible, although not ideal. It means we are kicking the risk of serious investment recession into the future, as asset prices surging without the economy backing it is unsustainable.

The second one is a high inflation scenario like the U.S. in the 1970s. It foresees a strengthening economy while asset prices suffer.

Again, this is possible. But inflation has already started to come down. This time, it is much like in the late 1940s and not the 1970s, which makes this outcome less likely.

The third one is the worst outcome possible: The Japanification of the U.S. economy. Investments and the economy would completely stagnate, and companies would shrink.

For reasons we talked about back in May, we believe the U.S. has the strength and position to avoid this.

The last one is the  “golden” scenario. It is the scenario where we have a real productivity boom, and actual economic productivity drives the market higher.

McKinsey compares this scenario to something long-time readers have read from us before: the post-WWII economic boom.

The supply-chain supercycle will be a huge factor in making this scenario a reality.

As we talked about last week, construction spending is booming, and we think it can keep driving higher for years.

With companies investing in infrastructure and supply chains, and the government supporting them, the path of GDP growth is visible.

McKinsey highlights that while this will lead to a lot more GDP growth, it will lead to less wealth creation. Inflation will be slightly higher, so multiples will not expand as much. But for setting the U.S. for long-term wealth creation, it is obvious this scenario is ideal.

These are long-term outlooks, and a lot can change.

The scenarios presented by McKinsey all depict long-term changes.

That said, in the near term, it shows how important it is for us to focus on and invest in our real manufacturing capacity.

As the government and companies ramp up investments in facilities, roads, bridges, and other kinds of infrastructure, the country will become more efficient in production and supply chains.

That is why we continue to be so bullish on the supply-chain supercycle. The country’s long-term wealth and economic health depend on it. 

Best regards,

Joel Litman & Rob Spivey

Chief Investment Strategist &
Director of Research
at Valens Research

View All

You don’t have access to the Valens Research Premium Application.

To get access to our best content including the highly regarded Conviction Long List and Market Phase Cycle macro newsletter, please contact our Client Relations Team at 630-841-0683 or email

Please fill out the fields below so that our client relations team can contact you

Or contact our Client Relationship Team at 630-841-0683