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Days after Trump won his way to the White House, becoming the 47th President of the United States, the US Federal Reserve slashed the interest rates by 25 basis points, bringing them within the range of 4.5-4.75%. This is the second time this year that the Fed has lowered the interest rates, after cutting them down by 50 basis points in September 2024. u Fed chair Jerome Powell noted that monetary policy remains tight as inflation remains elevated at 2.4% as of September 2024, slightly above the 2% mark set by the commission. However, the Fed remained optimistic about the current state of the economy. "The Committee seeks to achieve maximum employment and inflation at 2% over the longer run. The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate," the FOMC (Federal Open Market Committee) noted in its press release. The rate cut was along widely anticipated lines, although experts were wary of the Fed's way ahead, given that Donald Trump has been elected as the US President. In the past, he has, on multiple occasions, expressed his desire to yield greater influence on the Fed, apart from publicly criticizing Powell. However, Powell continued to stand his ground, noting that Trump cannot legally sack him. He believed in keeping the Fed independent, at least until his tenure as governor ends in 2028. He highlighted that even if he is explicitly asked by Trump to quit, he won't do so. <h2>Trump's regime to inch up inflation?</h2> Trump's electoral promises, if translated into policies, could spell disaster for the Fed's effort to curtail inflation. Reportedly, Trump has promised to levy aggressive tariffs against US trading partners, particularly China, and even extend his 2017 tax cuts. This could mean higher levels of the federal deficit, which would push up prices, wages, and hence, inflation, even as the Fed tries to consistently bring it under control. Apurva Sheth, Head of Market Perspectives and Research, SAMCO Securities, notes that it wasn't a surprise when the US Fed cut interest rates by 25 basis points (bps) to 4.75%. The Fed had given enough clues, and the market too had anticipated these rate cuts. "However, what was surprising was how the <keyword id="23863852" type="General" weightage="20" keywordseo="US-10-year-bond-yields" source="keywords">US 10-year bond yields</keyword> moved over the last one and a half months, which have been rising relentlessly from 3.6% to almost 4.5% despite the 50 bps cut in the last Fed meeting. It seems that the market is anticipating slower rate cuts going ahead, and maybe there are even chances of inflation rising. The bond yields have cooled off and slipped below the 4.335% mark. This should be bullish for emerging markets like India," he added.

US Fed cuts interest rates by 25 bps, Powell notes Trump's victory to have no impact on policy decisions

India could see a shift in foreign direct investment (FDI) trends in the second term of Donald Trump (Trump 2.0) as President of the United States, says a research report by the State Bank of India. The report highlighted that under his first term, Trump 1.0, the Trump administration made sweeping regulatory changes aimed at attracting investments back to the U.S., which impacted FDI inflows globally, including India. It added that if similar policies are reintroduced in Trump 2.0 also, it could create challenges for emerging markets like India, which rely on FDI as a significant driver of economic growth. Notably, a recent Kotak report highlighted that a complete Republican control over all arms of the US government would mean increased US earnings via corporate tax cuts, higher tariffs on imports into the US and greater US fiscal deficits. The first two could spell doom for emerging markets like India and China, since foreign investors will make a beeline for investing more money in the US markets, which will come at the cost of intense selloff in emerging markets. However, higher fiscal deficits will eventually lead to the dollar weakening after the initial euphoria dies down. "India may see shifts in foreign direct investments (FDIs) during Trump 2.0. The Trump 1.0 administration saw significant regulatory changes aimed at attracting investments back to the US," the SBI report stated. However, given that India has been gradually diversifying its sources of FDI (foreign direct investments), this trend could serve as a buffer against any potential decline. Moreover, domestic institutional investors have been stepping up big time, maintaining some balance to the massive exodus of FIIs over the past month. So far in November 2024, FIIs have withdrawn Rs 19,849 crores from the cash segment in Indian markets, while DIIs have poured in Rs 14,014.18 crores as of November 10th, 2024. "India is no longer dependent on the traditional sources of FDI inflows... unlike the recent past, FDI is now coming in many new sectors," noted the SBI report. Unlike a decade ago, when most FDI inflows came from a limited number of traditional sectors, India is now attracting investment in a wide array of industries, including renewable energy, sea transport, medical devices, and surgical appliances. Data suggests over the last 24 years, i.e., between April 2000 and June 2024, FDIs have poured in $1,013.4 billion in the Indian economy. Out of this, 67%, i.e., $689.88 billion, has come in just the last 10 years. The report added there are up to 12 emerging sectors showing strong FDI interest, which could help offset any loss of inflows in conventional sectors if there is a shift in global investment patterns under another Trump administration. In the last financial year, the top 5 sectors that have received the highest quantum of FDI inflow include the services sector (finance, banking, insurance, and business) which makes up about 16% of the inflows. This is followed computer software &amp; hardware, which constitute around 15% of total FDI flows. Trading and telecommunications follows with a share of 6% each, and Automobile Industry comes next with a 5% share. In the short term, the potential for increased U.S. tariffs, more restrictive H-1B visa policies, and a stronger dollar could bring some volatility to India's trade and investment landscape. However, in the long term, these challenges might also encourage India to expand its manufacturing capabilities, diversify export markets, and focus on becoming economically more self-reliant. Notably, India has maintained a merchandise trade surplus with the U.S. despite tariffs imposed during Trump's first term. This indicates that Indian exports have remained resilient, and there is potential to strengthen this trade relationship further by capitalizing on emerging sectors and reducing dependency on traditional industries. Suman Chowdhury, Executive Director &amp; Chief Economist, Acuité Ratings &amp; Research Limited cautions that in the medium to long term, the trade relationship with the US may see a structural improvement. "Higher tariff and trade restrictions in the US with China should translate into better opportunities for exports of manufactured goods from India", he adds.

FDIs may shift to US under Trump 2.0 but it is unlikely to severely impact FDIs inflow to India, says SBI Report

India’s political landscape is increasingly being defined by the troubling nexus between crime and politics. A study has highlighted a startling correlation: the election of politicians with criminal records is directly linked to a rise in crime across the country, particularly in states with weaker institutional frameworks. As India's political system continues to grapple with this issue, the societal consequences are becoming clear. <h2>A history of <keyword id="23341122" type="General" weightage="100" keywordseo="criminal-politicians" source="keywords">criminal politicians</keyword></h2><keyword id="21026899" type="General" weightage="20" keywordseo="Pappu-Yadav" source="keywords">Pappu Yadav</keyword>, a veteran politician from Bihar, serves as a prime example of this disturbing trend. Having represented his constituency for nearly 25 years, Yadav has faced 41 criminal cases, including serious accusations of murder and kidnapping. Despite his conviction in 2008, Yadav was acquitted in 2013, and he continues to hold political influence. His case is not unique; the political scene in states like Bihar, Uttar Pradesh, and Madhya Pradesh is littered with politicians facing multiple criminal charges. Anant Singh, another prominent figure from Bihar, holds a political career shadowed by 38 criminal cases, including murder, kidnapping, and attempts to murder. These individuals represent a broader pattern where politicians accused of serious crimes continue to serve in public office despite their criminal backgrounds. "They are getting elected, and over time the number has only been going up," remarks lead author Nishith Prakash. "In some states, it could be as high as almost 40% of people who are representing the state have some kind of a criminal accusation." <h2>Crime begets crime</h2>The research delves into the ramifications of electing criminally accused politicians. The study found that states with a higher number of such politicians also experienced increased <keyword id="22044507" type="General" weightage="20" keywordseo="crime-rates" source="keywords">crime rates</keyword>. For example, states like Bihar, Madhya Pradesh, Rajasthan, Odisha, and Uttar Pradesh, known for their historically weak institutions, have seen crime rise by 4.3% annually with the election of criminal politicians. The number increases to 5.8% when the politicians are accused of serious crimes like murder and kidnapping. <div type="Article" hostid="261" msid="113692670" title="What will it take for Kangana Ranaut’s &amp;#39;Emergency&amp;#39; to finally hit theatres?" mstype="2" mssubtype="0"></div>Prakash notes that weak rule of law and institutional failure create fertile ground for such politicians to not only rise to power but also exacerbate the deteriorating law-and-order situation. When politicians themselves are involved in criminal activities, they often manipulate legal and administrative systems, further weakening law enforcement and emboldening criminal networks. The reign of <keyword id="20122630" type="General" weightage="20" keywordseo="lalu-prasad-yadav" source="keywords">Lalu Prasad Yadav</keyword>, president of the Rashtriya Janata Dal political party in Bihar, illustrates the adverse impact criminal politicians can have. Under his leadership, Bihar’s political environment devolved into what is now infamously known as "Jungle Raj," a period marked by rampant kidnappings for ransom, particularly targeting affluent individuals like doctors and schoolchildren. The researchers note that during this time, the kidnapping industry flourished as criminals enjoyed either direct or indirect support from the state. <h2><keyword id="22404298" type="General" weightage="20" keywordseo="impact-on-women" source="keywords">Impact on women</keyword> and <keyword id="19900794" type="General" weightage="20" keywordseo="economic-growth" source="keywords">economic growth</keyword></h2>Beyond the immediate rise in general crime rates, the study revealed alarming statistics regarding crimes against women. Electing criminally accused politicians was found to increase crimes against women by 12.6%. In states where such politicians held office, female labour force participation dropped by 10-11%, as women felt unsafe and chose not to engage in work outside their homes. The research also highlighted the economic toll criminal politicians take on their constituencies. Areas represented by politicians accused of serious crimes saw economic growth lag between 2.3% and 6.5% per year compared to other regions. These leaders often misappropriate public funds, divert resources for personal gain, and enable criminal enterprises, all of which stifle local development. <h2>Legal measures taken</h2>India has made strides in identifying and tracking criminally accused politicians. A landmark 2003 ruling by the <keyword id="19895345" type="General" weightage="20" keywordseo="Supreme-Court" source="keywords" meta.keywordsubtype="org" meta.entityname="Supreme Court" meta.hostid="261" meta.entityid="Supreme Court">Supreme Court</keyword> mandated that candidates for political office must disclose their criminal records, making it easier for voters and institutions to scrutinise their backgrounds. However, the law only disqualifies convicted individuals from running for office, allowing accused politicians to continue their political careers while facing serious charges. <div type="Article" hostid="261" msid="113446721" title="It&amp;#39;s not just the rhetoric — apathy and jokes could be fueling a spiral of retaliatory political violence, expert warns" mstype="2" mssubtype="0"></div>The research conducted by Prakash and his team has caught the attention of Indian courts and the Election Commission. While reform is slow, there is growing recognition that the quality of political leadership has a profound impact on societal outcomes, from crime rates to economic performance. "The quality of politicians matters," Prakash notes. "Who you elect has implications on outcomes that we care about. It could be economic growth, it could be crime against women, it could be labour force participation. These are very important outcomes for society and the economy." The findings of this research have been published in Journal of Law Economics and Organization and can be accessed <a href="https://docs.iza.org/dp15259.pdf">here</a>.

Not only does electing “criminal” politicians often lead to an increase in crime in India, it can also be terrible for the economy: study

India’s Chief Economic Advisor (CEA), <keyword id="20690607" type="General" weightage="20" keywordseo="V-Anantha-Nageswaran" source="keywords">V Anantha Nageswaran</keyword>, remains optimistic about the nation’s economic prospects despite a slower-than-expected <keyword id="19972825" type="General" weightage="20" keywordseo="GDP-growth" source="keywords">GDP growth</keyword> in the second quarter of FY2024-25. Speaking at the Bharat @100 Summit hosted by Assocham, he said that the fundamental health of the economy remains robust, according to a report by aNI. Nageswaran highlighted several indicators demonstrating the economy’s resilience. “If you run through the checklist for the <keyword id="19948184" type="General" weightage="100" keywordseo="Indian-economy" source="keywords">Indian economy</keyword>, the health is pretty robust,” he noted, pointing to controlled levels of external debt as a share of GDP, declining non-performing assets in the banking system, and stable inflation trends. Although certain food items have caused inflationary spikes, their impact is limited within the overall consumer price index basket, he explained. The CEA praised the shift in fiscal expenditure priorities over the past seven years, with greater focus on capital investments rather than revenue spending. This reallocation, he suggested, has bolstered long-term economic stability and growth potential. India’s GDP growth for the July-September quarter was 5.4%, significantly below the Reserve Bank of India’s forecast of 7%. While this has sparked concerns among economists, Nageswaran urged against overreacting. Erratic monsoons and excessive rainfall disrupted economic activity in Q2, he explained, while global uncertainties and supply chain pressures further weighed on growth. Despite these challenges, he maintained confidence in the broader growth narrative, citing improvements in key economic metrics. For instance, India’s gross capital formation has risen from 27.3% of GDP in the second decade of the 2000s to 30.8% today. Private consumption remains steady, and exports—spanning both services and manufacturing—continue to perform well even amid challenging global conditions. Nageswaran also underscored India’s growing competitiveness in international trade. He noted that the nation’s total <keyword id="24325087" type="General" weightage="20" keywordseo="exports-as-a-percentage-of-GDP" source="keywords">exports as a percentage of GDP</keyword> now surpass China’s, showcasing its resilience and adaptability in a shifting global trade environment. However, he cautioned against reading too much into quarterly fluctuations, highlighting the impact of geopolitical developments such as trade restrictions from the US on critical minerals and rare earths, as well as policy shifts in China. These external factors, he suggested, are likely to persist and may continue influencing short-term economic trends. (with ANI inputs)

Indian economy is resilient despite Q2 challenges, says CEA Nageswaran

Global markets are looking ahead to the US Fed's meeting scheduled for Thursday, November 7, 2024, expecting the Jerome Powell-chaired FOMC (Federal Open Market Committee) to slash interest rates further by 0.25%. In September this year, the Fed surprised the markets by cutting interest rates by a massive 0.5%, for the first time in 4 years. As per the <keyword id="23807624" type="General" weightage="20" keywordseo="CME-Fed-Watch-Tool" source="keywords">CME Fed Watch Tool</keyword>, there is now a 99.5% chance that the Fed will reduce the interest rates by around 25 basis points, bringing it within the range of 4.5% to 4.75%. Only 0.5% believe that the Fed might leave the rates unchanged, within their present range of 4.75% to 5%. As for the Fed's December meeting, scheduled for December 18, per the CME Fed Watch tool, 79.5% believe that interest rates would be in the range of 4.25% to 4.5%. Another 20.4% believe that yields will remain in the range of 4.5% and 4.75%. Only 0.1% see the interest rates staying within their current range of 4.75% to 5% <h2>No major changes anticipated</h2>However, it is unlikely that this quarter-point rate cut would bring about any significant financial changes in the US economy. The Fed is again expected to bring down the interest rates by another 25 basis points in their December meeting. This would imply a total rate cut of about 50 basis points by the end of this year. So, why is the Fed not bringing down interest rates by 50 basis points in one fell swoop this time around? Why wait till December to bring down the rates by another 25 basis points? Experts believe that it could stoke inflation, which has seen a sharp decline in the recent past. A steep slash of borrowing rates could accelerate borrowing activity and inject significant cash into the economy at once, pushing up inflation. Per the Fed's recent projections, a total of 4 rate cuts are anticipated in 2025. On a YoY basis, inflation in the US dipped to 2.4%, close to the Fed's target of 2%. With inflationary pressures reined in, the economy growing at the rate of 2.8% during the third quarter of FY24, and the unemployment rate down to 4.1%, the markets see much merit in bringing interest rates down. This is especially important to boost spending, particularly in sectors such as housing and automobiles, where even a slight tinkering in interest rates can drastically impact the amount and volume of loans taken to own them. Data suggests that during Trump's presidency tenure, i.e., between 2017 and 2021, inflation averaged at a rate of 1.9% a year. During the Biden administration, where Kamala Harris served as VP, the inflation is on track to average around 5% a year. Shrisha Acharya, Vice President, Anand Rathi Global Finance, also notes that the results of the impending US elections, which are likely to be declared tomorrow, will impact the yields and stock markets. "The Trump card, coupled with potential Republican control, could mean higher bond yields due to anticipated increases in deficit spending, inflation risks, and potential tax cuts. This could very well jiggle the confidence in U.S. Treasury bonds and thus start a chain effect that will possibly impact global market stability and lead to short-term volatility. On the other hand, Harris’ rise has been met with a stock market rally glued on expectations of economic stability and controlled inflation, with more predictable fiscal policy likely to help in a soft landing," he explains.

What can you expect from the US Fed meeting later this week? Here's all you need to know

A period of darkness followed after World War II for a number of reasons — one of them being the limited access to sweets and sugar. Between 1942 and 1953, the UK imposed sugar rationing to prevent hoarding, where sugar intake averaged at 40 grams per day. And this purported deprivation had some surprisingly positive effects! Recent research on individuals born in the 1950s has revealed a startling connection between early life sugar exposure and the development of chronic diseases like <keyword id="20902" type="General" weightage="20" keywordseo="type-2-diabetes" source="Orion">type 2 diabetes</keyword> and <keyword id="22984" type="General" weightage="20" keywordseo="hypertension" source="Orion">hypertension</keyword> later in life. The study found that limiting sugar intake during the critical first 1,000 days of life — from conception to nearly age three — can significantly reduce the risk of these conditions. Published in the journal Science, the study analysed data from the UK Biobank and compared the health outcomes of individuals born before and after the end of World War II sugar rationing in 1953 — after which sugar and sweet intake doubled to 80 grams per day. Notably, overall nutrient intake remained relatively stable during the rationing, with protein and fat consumption largely unaffected by the rationing policies, as per the study. The researchers discovered that those exposed to lower sugar levels during this period had a 35% reduced risk of developing type 2 diabetes and a 20% reduced risk of hypertension. Moreover, the onset of these diseases was delayed by four and two years, respectively. “Sugar early in life is the new tobacco, and we should treat it as such by holding food companies accountable to reformulate baby foods with healthier options and regulate the marketing and tax sugary foods targeted at kids,” says Paul Gertler, one of the study’s authors and a professor of economics at the University of California. The study suggests that even in-utero sugar exposure can have long-lasting health consequences. Limiting sugar intake during pregnancy and early childhood can provide significant protection against future health problems. <div type="Article" hostid="261" msid="112411685" title="Diet soda fans, look out for this ingredient — it may increase your risk of blood clots and heart problems, scientists say" mstype="2" mssubtype="0"></div>

“Sugar early in life is the new tobacco”: Scientists urge food companies to reformulate baby foods and tax sugary options

The <keyword id="20613906" type="General" weightage="20" keywordseo="Economic-Survey" source="keywords">Economic Survey</keyword> on Monday said the advent of <keyword id="19904566" type="General" weightage="20" keywordseo="Artificial-Intelligence" source="keywords">Artificial Intelligence</keyword> (AI) casts a "huge pall of uncertainty" with regard to impact on <keyword id="19938392" type="General" weightage="20" keywordseo="workers" source="keywords">workers</keyword> across all <keyword id="20525009" type="General" weightage="20" keywordseo="skill-levels" source="keywords">skill levels</keyword>. The Economic Survey 2023-24 tabled in Parliament predicted that the new-age technology, while turbocharging productivity, has the potential to disrupt employment in certain sectors. The Survey described AI as "phenomenal in its rapid pace of innovation and ease of diffusion" but also cautioned that the the <keyword id="20205392" type="General" weightage="20" keywordseo="future-of-work" source="keywords">future of work</keyword> will be reshaped by it. "... The advent of Artificial Intelligence casts a huge pall of uncertainty as to its impact on workers across all skill levels -- low, semi and high," it said. The biggest disruption for the future of work is the accelerated growth in AI, which is poised to revolutionise the global economy, the Survey noted. "India would not remain immune to this transformation. AI is being recognised as a general-purpose technology, like electricity and the internet, which is phenomenal in its rapid pace of innovation and ease of diffusion. As AI systems continue to get smarter and adoption increases, the future of work will be reshaped," it said. The Survey said AI has considerable potential for boosting productivity, but "also has the potential to disrupt employment in certain sectors". "Routine tasks, including customer service, will likely witness a high degree of automation; creative sectors will see extensive usage of AI tools for image and video creation; personalised AI tutors can reshape education and sectors like healthcare can witness accelerated drug discovery," it said. SEE ALSO:<a href="https://www.businessinsider.in/tech/mobile/news/google-pixel-9-pro-fold-to-launch-in-india-on-august-14-alongside-the-pixel-9-series/articleshow/111855704.cms" target="_blank"></a> <a href="https://www.businessinsider.in/tech/mobile/news/google-pixel-9-pro-fold-to-launch-in-india-on-august-14-alongside-the-pixel-9-series/articleshow/111855704.cms" target="_blank">Google Pixel 9 Pro Fold to launch in India on August 14 alongside the Pixel 9 series</a><a href="https://www.businessinsider.in/tech/mobile/webstories/oneplus-nord-4-vs-realme-gt-6t-which-mid-range-phone-should-you-buy-under-35000/slidelist/111803604.cms" target="_blank"></a> <a href="https://www.businessinsider.in/tech/mobile/webstories/oneplus-nord-4-vs-realme-gt-6t-which-mid-range-phone-should-you-buy-under-35000/slidelist/111803604.cms" target="_blank">OnePlus Nord 4 vs Realme GT 6T – which mid-range phone should you buy under ₹35,000?</a><a href="https://www.businessinsider.in/business/telecom/news/reliance-jio-and-airtel-added-3-45-million-subscribers-in-may-2024-while-vi-lost-nearly-a-million/articleshow/111800758.cms" target="_blank"></a> <a href="https://www.businessinsider.in/business/telecom/news/reliance-jio-and-airtel-added-3-45-million-subscribers-in-may-2024-while-vi-lost-nearly-a-million/articleshow/111800758.cms" target="_blank">Reliance Jio and Airtel added 3.45 million subscribers in May 2024, while Vi lost nearly a million</a>

AI casts huge pall of uncertainty over impact on workers across skill levels: Economic Survey

No one's going to sound an alarm, blast out a text message, or shoot you an email about it, but the US economy is undergoing a historic shift. We are leaving one long period of expansion — what economists refer to as a "supercycle" — and entering a very different one.Over the past 15 years, the economy has been characterized by weak demand and low interest rates — a decade-and-a-half hangover from the Great Recession. Now, experts tell me, that is coming to an end. The world has changed, and we are entering an era of higher growth, creeping inflation, and geopolitical instability that will reroute the flow of money around the world. A new era has arrived, but it's going to be bumpy.The good news is that this new era looks as if it will be unencumbered by some of the problems that put a ceiling on growth during the previous era. The most salient feature of the old period, economists say, was the risk of deflation — the possibility that a lack of demand would cause wages and prices to spiral downward, a trap that is <a target="_blank" href="https://www.businessinsider.com/inflation-economy-deflation-unemployment-job-market-recession-outlook-paul-krugman-2024-7">extremely difficult to escape</a>. In an effort to avoid that fate, policymakers in Washington pushed interest rates down to zero and encouraged <a target="_blank" href="https://www.businessinsider.com/softbank-crashing-investments-uber-wework-monopoly-failure-2019-11">all kinds</a> of <a target="_blank" href="https://www.businessinsider.com/charlatans-show-up-when-wall-street-stock-market-gets-weird-2021-3">risky</a> <a target="_blank" href="https://www.businessinsider.com/twilight-of-tech-gods-recession-stock-market-crash-silicon-valley-2022-5">behavior</a> <a target="_blank" href="https://www.businessinsider.com/bill-ackmans-big-pharma-trade-is-making-wall-street-a-super-awkward-place-2014-10">among</a> investors, businesses, and everyday consumers. Investors trying to reach their benchmarks "had to creep out on the risk spectrum," Josh Hirt, a senior economist at Vanguard, tells me. "Supercheap debt," he says, made it easy for businesses to "overexpand and overhire."The pro-risk environment had some earth-shifting consequences. Silicon Valley put the internet on our phones, China blew a massive bubble in its property market, and the world started investing in renewable energy. But low interest rates did little to boost demand, and the economy consistently grew slower than it did before the crash, never notching above 3% GDP growth. It was only after the massive government stimulus, spurred by the pandemic, that the economy reached escape velocity, pushing up wages and starting to grow at a healthy clip.Now, economists say, we're entering a supercycle that will be characterized by three sweeping forces. First, higher interest rates will reward savers, making it more expensive to take risks. Second, geopolitical and economic volatility will generate inflationary effects, reintroducing the specter of soaring prices. And third, industrial planning will be increasingly influenced by national-security concerns, altering supply chains across industries. How low interest rates wind up settling will establish a new gravitational pull in global markets, recalibrating the forces that determine where the economy is most likely to grow — and where investment is most likely to flow.The new supercycle "puts the economy in a completely new era," says Silas Myers, the CEO of Mar Vista Investments, which oversees $4 billion in assets. He warns that an entire generation of investors, lenders, and entrepreneurs have failed to embrace the "profound impact" that the new economic era will have on their businesses."We were in a time that was less demanding and more forgiving," Myers says. "But that time is ending."One of the clearest signs that a new economic supercycle has arrived is when the financial rules go topsy-turvy. The previous supercycle was ushered in when the Federal Reserve, in response to the destruction caused by the financial crisis, cut its benchmark interest rate to 0% — the first time the central bank went all the way to the bottom.The structural shift sent shockwaves throughout the world. Yields on Treasury bonds tanked, meaning investors had to start taking some serious risks if they wanted to make money. This new adventurism pushed stocks higher and higher. Capital went flying into China and other emerging markets in record amounts — some $1 trillion in 2010 alone. Venture capitalists sank billions into companies like Juicero and <a target="_blank" href="https://www.businessinsider.com/wework-adam-neumann-apartment-startup-investment-silicon-valley-vc-apocalypse-2022-8">WeWork</a> that had no viable plan to turn a profit. And with interest rates so low, companies could suddenly load up on debt: From 2007 to 2017, global nonfinancial corporate debt doubled, to $66 trillion. Until the pandemic hit, inflation and wage growth both remained below 3.9%. The world had changed. Now, with the arrival of a new supercycle, money managers are once again being forced to adapt to a changing set of economic realities. Normally, when the Fed hikes interest rates rapidly, the stock market tanks. But that's no longer true. From 2022 to 2024, as the benchmark federal funds rate shot up to 5.5% from 0.5%, the Nasdaq 100 and the S&amp;P 500 soared by 23% and 22%. Higher interest rates also failed to spur widespread layoffs or crater the economy. <a target="_blank" href="https://www.businessinsider.com/jobs-report-labor-market-hiring-layoffs-quits-recession-sahm-rule-2024-8">Unemployment has stayed below 4.3%</a>, and GDP growth has remained solid, <a target="_blank" href="https://www.businessinsider.com/gdp-gross-domestic-product-second-quarter-2024-us-economy-2024-7">defying fears of a recession</a>. In short, something has scrambled the natural interactions of the marketplace. It's as if you put your hand over a hot stove and your fingers turned ice cold.One explanation for the economy's topsy-turvy behavior is a change in what economists call the neutral interest rate — the optimal point for encouraging growth without triggering inflation. After the financial crisis in 2008, the economy was so weak that the neutral rate went to zero to encourage money to flow more freely. But now the market's weird nature may be signaling that the neutral rate has risen above the Fed's ideal target of 2%. That would explain why the Fed's higher rates are no longer putting the brakes on growth. Fueled by the post-pandemic government stimulus, the economy's baseline has shifted. Over at Vanguard, Hirt and his colleagues predict that the neutral rate will stay higher for the foreseeable future, eventually settling at about 3.5%."Even if we do dip below 3.5%, the Fed will be anchored at that higher rate," Hirt says. "If the economy were to experience weakness and we have to cut rates, we still don't think that means taking rates back to zero."Unless you're a boomer, you've probably never experienced a world with this high a neutral rate. It changes the nature of risk, which changes what people decide to do with money on micro and macro levels. If you can get a decent return parking your money in ultrasafe government debt, why risk investing it in a startup or stomach the stock market's volatility? This isn't to say no one will be out here taking risks with their cash — it will just flow in different directions. That's because consumers are in a better place now than they were in the era that emerged after the Great Recession.The economy is "an extraordinarily diverse and dynamic animal," Joe Quinlan, the chief market strategist at Bank of America, assured clients in a recent note. It's "a $28 trillion hydra-headed behemoth that beats to the tune of many different sectors." As the Fed's higher rates were putting a strain on rate-sensitive sectors like housing — which makes up 16% of the economy — Big Tech and travel-starved households were spending money fast and loose. The experience showed that overall consumption can continue to rise even when significant swaths of the economy are struggling.So what can we expect from the new economic supercycle? Like every cycle, it will have its upsides and downsides. Rising interest rates will make loans more expensive, forcing businesses to make more-thoughtful decisions about debt. But they'll also boost savings accounts and interest income. In addition, a faster-growing economy will tighten the labor market, empowering workers to continue to fight for a larger slice of the pie. Since 2019, the bottom 10% of earners have seen a wage increase of 13%.Shifting away from the "grow at all costs" mindset of the previous supercycle has also incentivized governments — especially in the developed world — to do more to police markets and protect consumers. Whether it's capping the price of drugs or enforcing antitrust rules more aggressively, polls suggest Americans want to see <a target="_blank" href="https://prospect.org/economy/2024-08-27-polling-voters-action-corporate-power/">more limits</a> on <a target="_blank" href="https://today.yougov.com/economy/articles/47798-most-americans-oppose-monopolies-and-support-antitrust-laws">corporate power</a> and <a target="_blank" href="https://www.pewresearch.org/short-reads/2021/07/20/56-of-americans-support-more-regulation-of-major-technology-companies/">more regulation</a> to safeguard citizens. For the first time in years, the Federal Trade Commission has begun going after pharmaceutical middlemen, opposing mergers between grocery giants, and taking big swings at Big Tech.The new supercycle will also have profound consequences worldwide, upending how and where money is most likely to flow. In China, the debt bubble that formed in the property sector during the previous cycle is sucking cash away from <a target="_blank" href="https://www.businessinsider.com/china-xi-jinping-stimulus-plan-wall-street-stock-market-economy-2024-9">businesses and households</a>, undermining China's bid to become the world's leading economic superpower. And with Europe growing more slowly than the US, foreign investors are steering more of their money to America. In the second quarter of this year, foreign investors owned $8.2 trillion worth of US Treasury bonds, up by 7.3% from a year earlier. Foreign investment is also soaring in US corporate bonds (up by 9.8%) and US equities (up by 23%). Quinlan says he expects the US economy to continue outperforming the rest of the world, given the fiscal and demographic challenges facing the European Union, Japan, and China. In an era of increasing instability, when former sources of growth are flailing, the United States is widely viewed as the safest place to find returns."Not lost on investors is the fact that the US economy remains among the most competitive, innovative, and resilient in the world," Quinlan wrote in a recent note to investors. "Aerospace or agriculture, energy or entertainment, transportation or technology, goods or services — pick any sector or activity, and there's a good chance the US leads the rest of the world. All of this has helped fuel demand among foreign investors for US securities of all stripes." America's economic diversification is also expected to give it a leg up in one of the most volatile features of the new era: trade conflict. The US and China are already battling for control over critical industries like <a target="_blank" href="https://www.businessinsider.com/china-xi-jiinping-future-tech-global-economy-semiconductors-military-failing-2022-9">semiconductors</a>, <a target="_blank" href="https://www.businessinsider.com/china-crushing-us-america-battle-energy-evs-batteries-tech-war-2023-5">batteries</a>, and <a target="_blank" href="https://www.businessinsider.com/china-xi-jinping-crush-tesla-elon-musk-american-ev-industry-2024-2">electric cars</a> — and the tit for tat will be especially costly for less diversified economies. Germany's dependence on manufacturing, for example, places its most essential industries on a collision course with China's ambitions. And while the United States is well positioned to weather the storm, that doesn't mean it won't be rough. The world has never faced a challenge like the skyrocketing flow of exports from China up and down the value chain. It's a dynamic that threatens to imbalance international trade by flooding the market with cheap goods of all kinds. <a target="_blank" href="https://www.businessinsider.com/china-shock-explainer-us-economy-trade-dumping-supply-glut-yellen-2024-4">China Shock 2.0</a> "will not go down easily," Quinlan tells me.For over a decade we have become accustomed to the economy working a certain way — if this, then that. As a new supercycle emerges, investors, businesses, and governments that structured themselves around the old model may experience acute shocks. To succeed in this unfamiliar new world, they'll have to adjust their expectations and find ways to harness the supercycle's opportunities. It's the economic equivalent of natural selection: As the economy evolves, those who adapt will be most likely to survive. The days of economic growth are back. The future belongs to those who can grow with it.<a target="_blank" rel="" href="https://www.businessinsider.com/author/linette-lopez">Linette Lopez</a> is a senior correspondent at Business Insider.

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