Consumer headwinds aren’t going anywhere.

At the end of the day, the economy drives the stock market.

If people aren’t spending money on clothing, driving to work, and building houses, the entire house of cards falls apart. We saw that in 2008/2009 and during COVID.

Over the past year, historic spending on the AI buildout has arguably kept the economy afloat. Yet, despite that historic spending, real GDP growth (growth on top of the rate of inflation) was just 0.5%, 2.1%, and 1.5%, respectively, in the past three quarters, well below what experts thought it would be coming into the year.

That’s not a great rate of growth given the level of capital investment and there are plenty of signs consumers are being squeezed by high oil prices and interest rates.

The problem is, I don’t think either can or will get any better anytime soon.

More on that in a moment.

The stock market continues its sideways move over the past few months. Even very bullish AI spending numbers seem to have been priced in by early summer.

The Asymmetric Portfolio has widened its lead over the market slightly, but without any big earnings movers, despite solid growth, it’s been a disappointing year. That’ll happen when I’m not partaking in the biggest investing “theme” of the year…the AI trade. But long-term, I think staying away from FOMO will pay off.

One of the big misses a lot of prognosticators and CEOs made coming into 2026 was expecting interest rates to be lowered, boosting economic growth. For example:

Rates definitely aren’t going to be cut at this point and real GDP growth probably isn’t going to hit 2.5% either.

But why?

I think prognosticators got too wrapped up in the combination of politics and rate cuts (hope that Trump would push the Fed to cut rates), but what no one saw was inflation getting worse. And there are good reasons that happened.

Oil prices have been a thorny issue over the past six months because of a self-inflicted wound. Yes, the war in Iran and the destruction all over the Middle East. And it doesn’t seem like the Straight of Hormuz is going back to any level of “normal” anytime soon.

Even if it did, there are structural reasons to believe oil prices will remain elevated for some time.

The good news is, U.S. oil production has helped fill the gap and the U.S. economy has been resiliant. The downside is, that’s led to inflation.

Making matters worse, interest rates aren’t helping calm the issue. Mortgage rates are at levels not seen since before the financial crisis that started in 2007 and don’t appear to be going down.

The 10-year, which is a proxy for mortgage rates, is climbing and that could continue as the U.S. and corportations take out more debt.

The Fed also doesn’t have a reason to cut rates because inflation is stubbornly high (see oil prices).

So, here we sit.

Oil prices are pushing up prices at the pump, which puts pressure on consumers who spend less on shoes and restaurants.

And homes aren’t built, aren’t remodeled, and are hard to sell because homeowners are “stuck” in homes with low interest rates and buyers can’t afford to buy/upgrade.

Until something changes, the core economy looks like it’ll be in a ho-hum place.

The problem is, changes needed to bring down oil prices and cut interest rates also correspond with a recession.

I guess the status quo is OK for now, but the position is more tenuous and reliant on the AI trade than I would like.