US economic fundamentals are on a solid trajectory, diverging from the slower growth trends now expected in China, according to a note from Wells Fargo. Analysts have pushed back their estimate for when China will overtake the US as the world’s largest economy to 2049, up from an earlier projection in the early 2040s.
The delay reflects structural challenges in China, including an aging population, persistent deflationary pressures, and rising leverage in both the public and private sectors. These factors, Wells Fargo notes, reintroduce “hard landing” risks in China, while such risks are less pronounced in the US.
For US markets, the firm highlights that improving potential growth indicators provide a supportive foundation for long-term economic expansion. While downside risks remain concentrated in China, the US economy benefits from a combination of demographic stability, relatively manageable debt levels, and policy flexibility, which could underpin steady growth over the coming decades.
Wells Fargo also notes that their forecast assumes a gradual strengthening of the Chinese renminbi. While this could, in theory, accelerate China’s path to the top, US fundamentals appear set to maintain the country’s lead for the foreseeable future.
US stocks have recovered some of Monday’s losses, with the Nasdaq up 0.9%, the Dow Jones up 0.8% and the S&P 500 up 0.6% late morning.
“Most global stock indices recovered despite mixed economic data while cryptocurrencies stayed under pressure amid investor fatigue,” IG chief technical analyst Axel Rudolph said.
“While Bitcoin dipped below the $63,000 mark, BNB and Ether traded within a whisker of their early February lows, a fall through which may trigger another wave of selling.”
US stocks are moving higher in early trades, after an initial wobble.
The Dow Jones is up 0.4%, followed by the Nasdaq at 0.2% and the S&P 500 is just above flat, as expected.
Leading the Dow’s risers are rebounding IBM and Salesforce, up 4.4% and 4.3%.
Then comes Home Depot, up 3.9% after its earnings beat, followed by Apple, Nike and Disney.
Among the top S&P movers are Keysight Technologies, AMD, Albemarle Ford, IBM, Salesforce and DoorDash.
A moderately positive start for US stocks is expected on Tuesday, after Donald Trump’s new 10% global tariff kicked in overnight.
Nasdaq futures were up 0.2%, while those for the Dow Jones were pointing to a 0.1% gain, while S&P 500 futures were flat.
The previous day, the Dow fell roughly 820 points or 1.7% to 48,804, while the Nasdaq dropped 1.1% to 22,627 and the S&P closed down 1% at 6,837 points.
Prominent among fallers were American Express, Mastercard, Visa, DoorDash and Uber, dropping between 7% and 4% as the AI fear trade spilled over into delivery and payment stocks.
Analysts said investors were reacting to a research report from Citrini Research last week, entitled “The 2028 Global Intelligence Crisis”, which outlined a hypothetical scenario in which AI adoption drives the US unemployment rate into double digits by mid 2028.
AI disruption fears also hit the likes of Workday, Datadog and IBM, then spread to the US private capital groups who have been buyers of these software stocks, such as Ares, KKR and Blackstone, as concerns grew about exposure to the software sector and last week’s announcement from Blue Owl that it was halting redemptions and selling more than $1 billion in loans to manage liquidity pressures.
European and Asian stocks were mixed in earlier trading on Tuesday, with fallers including banks and financials as investors read across to the declines in the US.
Trump’s new tariffs came into effect from midnight Eastern Time, but his plans for a steeper 15% tariff were held back for now.
According to reports, the move follows a backlash from several US partners, including the EU and the UK, over the higher proposed rate, while other reports suggested the Trump administration was preparing new Section 232 national security investigations into industries such as batteries, telecom equipment and industrial chemicals.
The White House signalled that the 15% tariff has not been dropped altogether. “It is being worked on and will come later,” an official said, without giving a timetable.
AMD was a big mover in pre-market trading on Tuesday, up 12% after Meta struck a multi-year partnership to build vast new AI data centres, deploying up to 6GW of advanced graphics processors.
Home Depot shares climbed 2.3% after the retailer posted fourth-quarter results that just beat analyst forecasts, offering some reassurance that the business remains stable even as its core customers pull back on spending.
Other earnings include Workday, HPQ, Lucid, Cava and AMC, with data including US consumer confidence and Trump’s State of the Union address in the evening.