EY-Parthenon Analysis: Three Pillars Supporting US Economy and Their Downside Risks

This report synthesizes insights from EY-Parthenon chief economist Gregory Daco’s discussion with Yahoo Finance [1], where he highlighted three interconnected pillars sustaining the 2025 US economy, each exhibiting resilience yet resting on a narrow foundation.

1. Affluent Consumers
   : Daco identifies affluent consumers as a primary driver, noting their sustained spending power despite broader economic uncertainties. However, this pillar’s narrowness lies in its reliance on a small segment of the population, which may not be representative of broader consumer health [1].

2. AI Investment
   : Corporate and institutional investment in artificial intelligence (AI) is a second pillar, fueling innovation and productivity. The downside here is the concentration of AI spending among tech giants, limiting broad-based economic benefit and exposing the economy to sector-specific volatility [1].

3. Asset Price Appreciation
   : Stock market gains and asset price growth have supported household wealth and confidence. Yet, this pillar is vulnerable to market corrections, as overvaluation or external shocks could erode wealth and dampen economic activity [1].

These pillars are interconnected; for example, asset price appreciation bolsters affluent consumer spending, while AI investment drives stock market performance for tech-heavy indices. Their narrow foundations mean the economy’s stability is dependent on the continued strength of these limited segments, rather than broad-based growth.

• The reliance on affluent consumers highlights a growing wealth gap in the US, where economic growth is not evenly distributed. This disparity could lead to social and political tensions, potentially impacting long-term economic policy and stability [1].
• AI investment concentration among tech giants raises concerns about market power and antitrust risks, which could result in regulatory interventions that disrupt the current investment landscape [1].
• Asset price appreciation’s linkage to consumer spending creates a feedback loop: a market correction could quickly reduce consumer confidence and spending, amplifying economic slowdowns [1].

• Consumer Spending Contraction
  : A downturn in affluent consumer confidence or income could weaken this primary pillar, leading to reduced overall economic growth [1].
• AI Investment Volatility
  : Regulatory crackdowns on tech giants or a slowdown in AI adoption could halt AI investment momentum, impacting productivity and stock market performance [1].
• Asset Market Correction
  : Overvaluation in stocks or real estate could trigger a correction, eroding household wealth and dampening economic activity [1].

• Policies aimed at broadening consumer prosperity (e.g., minimum wage increases, tax reform) could make the consumer pillar more resilient [1].
• Diversification of AI investment into small and medium-sized enterprises (SMEs) could spread economic benefits and reduce sector-specific risk [1].
• Prudent monetary policy could mitigate asset price overvaluation, supporting sustainable market growth [1].

The 2025 US economy is currently supported by three narrow but resilient pillars: affluent consumers, AI investment, and asset price appreciation, as identified by EY-Parthenon’s chief economist [1]. While these pillars have sustained economic growth, their narrow foundations—including wealth inequality, concentrated tech investment, and asset market vulnerability—pose significant downside risks. The interconnected nature of these pillars means a disruption in one could have cascading effects on the others. Stakeholders should monitor these vulnerabilities and consider structural changes to build a more balanced and resilient economy.