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Two opposing forces are currently shaping the global economy: on the one hand, the strength of the corporate sector; on the other, private households, whose purchasing power is being eroded by rising prices. The war in Iran is playing a central role. “As long as the situation in the Middle East remains unresolved, the question of which of these two forces will ultimately prevail remains unanswered,” says Thorsten Fischer, Managing Director and Head of Portfolio Management at Moventum AM.

The letter “K” currently plays a central role in assessing the US economy, as the “K-shaped recovery” is moving in two directions: upwards and downwards. Industry is firmly on the upward trajectory. The ISM Manufacturing Index remains clearly in expansionary territory: in July, it reached 55.6%, its highest level since May 2022, before easing slightly to 54.6% in August. This is being supported by solid incoming orders. “This is one of the key reasons behind the S&P 500’s continued strong performance,” Fischer says. Real-time forecasts also confirm this solid growth picture: in early September, the Atlanta Fed’s GDP nowcast put third-quarter growth at a robust 4.7%.

The picture in the US labour market, by contrast, is more mixed – a crucial factor given that private consumption accounts for almost 70% of US economic output. While the labour market had recently appeared to be weakening, the August employment report delivered a surprisingly strong reading: non-farm payrolls increased by 162,000, the strongest monthly gain since March. “It remains to be seen,” Fischer says, “whether this marks a sustainable change in trend or is merely a one-off positive outlier within what remains an overall more fragile labour-market environment.”

Conditions for private households, meanwhile, have deteriorated noticeably. Retail sales and consumer spending have both declined significantly, with the expected negative implications for cyclical consumer segments. The ongoing conflict in the Middle East is a particular burden, causing significant volatility in oil prices and periodically driving them higher. After energy costs, US consumers are therefore being left with less and less disposable income for other purchases. “This is another element of the K-shaped consumption pattern already evident in the United States,” Fischer explains.

US consumer prices rose by 3.4% in August, with energy remaining the main driver. Producer prices are also sending a warning signal: at 5.4%, they are running well above consumer price inflation, pointing to continued upward pressure throughout the value chain. “This shows that energy-price inflation is increasingly feeding through into both upstream and downstream sectors,” Fischer says.

At the same time, the burden on households from high energy prices and living costs remains a politically sensitive issue and is likely to become increasingly important in the run-up to the midterm elections in November. President Donald Trump’s economic policies have met with limited enthusiasm among the public.

The situation in Europe is similar. Business sentiment is improving, driven in particular by developments in Germany. “This may be an early indication that the announced reforms and fiscal packages are gradually beginning to have an effect,” Fischer says. However, people in Europe are also being affected by rising prices as a consequence of the war in Iran. Europe’s structural problems also remain unresolved, including bureaucracy, a low level of digitalisation, energy dependence and skills shortages.

“Overall, strengths and weaknesses are currently broadly balanced on both sides of the Atlantic,” Fischer says. Which way the balance ultimately tips will depend to a significant extent on developments in the Middle East. “The oil market continues to be characterised by exceptionally high levels of uncertainty,” Fischer explains. “There is simply not enough clarity about the future course of the conflict to produce a reliable price forecast at present. We are operating in a fog.”