Bloomberg Surveillance · Monday, August 10, 2026
Jim Caron of Morgan Stanley noted that nominal GDP growth, currently running at six percent for the first quarter and higher in the second quarter, directly correlates with higher corporate earnings and earnings per share growth. He explained that a higher nominal GDP environment, even with inflation around two and a half to three percent, is sustainable for the Federal Reserve as long as inflation expectations remain anchored, and it favors equities over fixed income due to potentially higher valuations and pricing power for companies.
“So when I talk about higher nominal GDP, think about that as higher equity earnings and earnings per growth in earnings per share growth.”
“So in some ways we're doing something similar to the right now with higher nominal growth.”
“So equities tend to be the asset class that is in favor in a higher nominal growth world. So it tilts me more towards the equity spectrum and a little bit of way from fixed income.”