October 12, 2026

The US and Europe have fundamentally different roles in the AI economy. One is building it, and the other is using it. The US dominates on every supply-side measure: hyperscaler capex approaching $800 billion in 2026, data center capacity three times that of Europe and the dominant share of global AI models and semiconductor value, see the first three charts below. Yet on adoption, several European countries are actually ahead of the US, and many European firms are using AI in their businesses (see the fourth and fifth charts). This suggests Europe is an eager user of infrastructure it did not build and cannot easily replicate. The bottom line is that the US is the dominant AI builder, but both the US and Europe are AI adopters. For more, see our new chart book: The macro implications of the AI investment boom: US and Europe Written by Huw van Steenis

October 11, 2026

The gap between the 90th- and 10th-percentile public core bond managers has narrowed from 1.5% a year in the 2010s to 1.1% since 2020, see the first and second charts below. Dispersion now spikes mainly in crises and quickly falls back. This convergence comes on top of persistent underperformance by public fixed income managers. For example, data from S&P shows that over the past 10 years, the majority of active Treasury fund managers have underperformed their benchmarks, see the third chart below. The bottom line is that with little difference between top and bottom managers in public fixed income, and almost all of them trailing their index, public core fixed income has become essentially a beta allocation for both institutions and households.

October 10, 2026

Here are five new interesting papers that are relevant for the ongoing conversation in markets. Decoupling Direct Investment: American Firms' Retreat from China The author documents evidence that US-China linkages are declining across channels. New project announcements and US acquisitions of Chinese companies are down, and American multinationals are shrinking their existing operations. Official statistics understate the extent of the retreat because of how much US investment is routed through Hong Kong. The Early Impacts of AI on Employment among Recent College Graduates Using CPS microdata, the authors analyze the effects of AI on recent college graduate unemployment through August 2026 to argue that AI is still not having a material impact on the US labor market. They find that summer 2026 unemployment trends for recent college graduates follow typical seasonal patterns, and no evidence of any significant displacement of recent college graduates. The authors do find some limited evidence of higher unemployment in telework-focused roles. The Macroeconomic Effect of AI: Sizing the Software Engineering Channel The authors use stock market returns and Revelio Labs data to estimate a market-implied expectation for AI productivity. Between November 2022 and December 2025, market expectations implied the equivalent of a permanent 32.6% increase in software engineering productivity, worth 3.6% of GDP. By mid-2026, amid rapid improvement in AI coding agents, the estimated effect had more than doubled. I am slightly skeptical how well this is capturing productivity versus some other kind of AI market factor, but I thought this was quite an interesting approach regardless. Will AI Help or Hurt Work and the Economy? What People Around the World Expect This paper summarizes the findings of a survey of more than 64,000 adults in 32 countries taken in April and May 2026. The surveys finds that workers are considerably more likely to expect AI to help their jobs than to threaten them, in contrast to the narrative in the US about AI-driven job displacement. Survey respondents who expect AI to help anticipate stronger growth and employment, while those who see it as a threat expect weaker employment and higher inflation. Ratings, Debt, and Deficits: An Exploration The authors compare a simple model of debt sustainability with actual sovereign credit ratings. They find that ratings agencies give far more weight to debt levels than projected fiscal balances, and they rely heavily on country-specific factors. As a result, countries with the same debt and fiscal outlook can receive very different ratings. Written by Allison Boxer