Reference News Network, November 5 report. According to the Spanish website "El Economista", on November 1, it is now clear that the global economy is much more optimistic than initially predicted after the Republican politician Trump's victory in the 2024 US presidential election, with just days left until the one-year anniversary of his win.

By the end of 2025, five factors have created a positive cycle, which is expected to continue into 2026, an outcome that was unimaginable this summer.

Two of these factors are directly related to the United States. First, the country successfully avoided an economic recession that was widely considered inevitable at the beginning of this year, largely due to large-scale investments related to artificial intelligence. Second, the United States (and to some extent the global economy) has benefited from the Federal Reserve's interest rate cuts, with the most recent cut implemented by the end of October.

Third, the trade war that Trump had promised to launch before taking office became a reality starting in April this year, but a one-year partial agreement between the US and China has eased tensions. Fourth, the resumption of major bilateral investment agreements is also significant, such as the $500 billion investment agreement between Washington and Tokyo. Finally, there are good news for the private sector: experts predict that profits of European listed companies will grow by 13.4% in 2026, and profits of Wall Street companies will increase by 12% in the next fiscal year.

IMF Managing Director Georgieva made a defining statement on the global economic situation in early October: "The economic trend is better than expected, but still not up to the level it should be." Her cautious optimism is reflected in the consensus among multilateral institutions and analysts who have generally raised their expectations for the global economy.

The following will elaborate on these five "white swan" factors. According to IMF estimates, these factors will drive global economic growth to exceed 3% this year and next year.

Artificial Intelligence Saves the US Economy

At the beginning of 2025, the outside world predicted that the US economy would shrink by 1%. In addition to the negative impact of the trade war being less than expected, another factor entered the scene with unexpectedly positive effects.

James Egelhof from BNP Paribas clearly stated, "Investment in artificial intelligence kept the US away from a recession." He explained with data: "In 2025, global investment in data centers that drive future artificial intelligence development will reach $650 billion, double the amount two years ago. Amazon alone invested $20 billion." Other major technology companies in the US are also absolute protagonists in this technological boom.

Apollo Global hedge fund pointed out in a recent report that "in the US, no other productive investment can match the importance of AI investment," which is sufficient to prevent any decline in its GDP.

The core issue is whether this AI boom will turn into a bubble.

Federal Reserve Implements Interest Rate Cuts

This American central bank seemed destined to experience a "disaster year" in 2025: constantly attacked by the White House, the threat of inflation rebounding out of control, and the dilemma of government shutdowns preventing access to key statistical data. Despite this, the Federal Reserve has followed the path hinted at by its chairman Powell at the Jackson Hole meeting in August: prioritizing the stimulation of the job market, and (for now) placing the target of reducing the inflation rate to around 2% in a secondary position.

Therefore, the Federal Reserve cut interest rates again at the end of October, bringing it to the lowest level in three years. The reduction in financing costs will continue to stimulate the US economy.

Meanwhile, experts from the research department of Spain's Banco Bilbao Vizcaya Argentaria said that the European Central Bank and the Federal Reserve on both sides of the Atlantic are beginning to coordinate their monetary policy schedules, which will have a positive impact.

However, it remains uncertain whether Powell can maintain this pace of interest rate cuts, and there are serious doubts about whether further rate cuts will occur in December.

Sino-US Trade Relations "Ease"

The Sino-US trade war, which was initiated shortly after Trump took office, has been partially suspended through an agreement, easing the pressure on global economic growth. This trade war was launched shortly after Trump entered the White House.

According to a report by the Organization for Economic Co-operation and Development, after the famous "Liberation Day" announcement, the effective tariff rate in the US was approximately 19.5%, the highest since 1933, and difficult to reduce significantly in the short term.

But the US later changed its position to some extent, pausing higher tariffs on most trading partners.

China and the US agreed to "immediately" lower tariffs, and they also eased tensions over rare earths, with China suspending export restrictions on these valuable elements used in the technology industry for a year. Both sides also agreed to suspend port fees on both sides of the Pacific, benefiting other trading partners as well.

Japan-US Cooperation Enters a "Golden Age"

Trump met with Japan's new Prime Minister Taro Kono during the Asia-Pacific Economic Cooperation Summit. The two leaders confirmed the "golden age" agreement between Japan and the US. Trump had previously threatened to impose a 25% tariff on Japan on "Liberation Day," but now the two sides have determined that the US will impose a fixed 15% tariff on Japan, and Japan will establish a $55 billion fund for investments in the US.

Subsequently, Trump signed a second agreement with Kono, establishing a framework for US-Japan cooperation to ensure the supply of critical minerals and rare earths.

European and US Corporate Earnings Reach Record Levels

Both European and US stock markets have reached record highs. Major indices are at their highest levels, and the market seems to continue rising, partly because of positive corporate earnings expectations, which will further boost investor confidence in the main global stock markets.

European expectations are particularly optimistic, with analysts predicting that earnings of companies in the Stoxx 600 index will grow by 13.4%. Experts predict that the combined net profit of companies in the S&P 500 index will increase by nearly 10% in the 2025 fiscal year.

Mario Montanani, senior investment strategist at Fonterra Asset Management, said: "The earnings season brought strong surprises, and the impact of tariffs was minimal, marking a turning point in the momentum of economic growth, indicating that previous expectations may have been overly pessimistic." This allowed the global economy to avoid what seemed like an inevitable heavy blow and regain its strength. (Translated/ Han Chao)

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