Yardeni Research Note Overview

Yardeni Research highlights that artificial‑intelligence (AI) investment and stronger industrial activity are supporting U.S. equities, whereas weak domestic demand continues to weigh on Chinese markets.

Market Performance Comparison

The MSCI China index has largely traded sideways since 2010, while the MSCI U.S. index has risen roughly sevenfold over the same period. In the technology segment, the Invesco China Technology ETF has remained broadly flat since the global financial crisis, whereas the Invesco QQQ ETF has appreciated about seventeenfold. Recent ticker movements show QQQ up 2.51%, CQQQ up 2.57%, MICNX0000PHK down 1.55% and MIUS00000PUS up 1.07%.

Challenges Facing China

China’s property downturn and weak consumer confidence are identified as key challenges. Consumer sentiment has not recovered to pre‑pandemic levels. Real retail sales growth fell 1.2% year‑over‑year in April, marking the first negative reading outside the pandemic period, while industrial production rose 4.1% in the same month. The combination of soft consumption and rising factory output has created excess industrial capacity, prompting manufacturers to rely increasingly on exports to absorb production. Bank loan growth slowed to 5.5% in May, the weakest pace since 2001, further signalling subdued domestic demand.

U.S. Industrial Activity and Drivers

In the United States, industrial production has been trending higher since mid‑2024. Output rose modestly by 0.1% in May, with technology‑related industries—particularly semiconductors and other high‑tech manufacturing sectors—among the strongest contributors. The research points to AI infrastructure as an important source of investment, noting that technology production accelerated after the launch of ChatGPT in late 2022. Growing electricity demand from AI data centres is identified as a long‑term driver for utilities and power producers.

Outlook Influences

The outlook for U.S. industrial activity could also benefit from higher defense spending, as the Trump administration is seeking to increase military expenditures in the next fiscal year.