The US economy is entering a deflationary phase, and several structural forces are driving this shift. Tariff policies carry deflationary pressure through supply chain adjustments. Meanwhile, AI-driven productivity gains are pushing costs lower across sectors. Labor market shifts tied to demographic changes add another deflationary component to the mix.

Many of the economic narratives circulating over recent months have gotten it backwards. The consensus expectations about inflation persistence appear increasingly disconnected from ground reality.

What this means for markets is significant: GDP growth is likely to accelerate rather than stall, while asset valuations could expand as markets price in improved economic conditions. The combination of falling input costs, productivity gains, and policy tailwinds creates an environment where risk assets tend to perform well.