Author: Anthony J. Pompliano, founder and CEO of Professional Capital Management; Compiler: Shaw Golden Finance

The market is experiencing violent turbulence and volatility, and investors are trying to find ways to deal with it. The U.S. economic situation swings like a pendulum between a potential economic golden age and fears of the next Great Recession.

So what is causing all this confusion and uncertainty? There is no single factor that is responsible for this, and that is what makes the current situation unique. The dot-com bubble was driven by the tech industry and the global financial crisis was triggered by an overleveraged housing market, but right now we can point to a host of economic threats coming from all directions.

Bloomberg recently ran a great article titled “Markets simultaneously rocked by war, AI stress and credit rift” .

The three reporters who wrote this report wrote:

“No matter what Trump says now, his decision to attack Iran has injected a new and potentially long-lasting shock into the global economy. Not long ago, investor confidence seemed unbreakable.

This added to the most severe market volatility since April last year, when Trump announced global tariffs that caused sharp swings in asset prices.

Iran is only part of the problem. Artificial intelligence is emerging as a disruptive technology that can either create wealth for shareholders and creditors or destroy it in an instant. In the booming private credit industry, the number of non-performing loans has also begun to increase. The U.S. job market is softening. In addition, stubbornly high inflation has cast doubt on whether the Federal Reserve can resume cutting interest rates — and could even force the European Central Bank to start raising rates. ”

Now I agree with Bloomberg's assessment of what most investors should be paying attention to:artificial intelligence, war, private credit and weak labor markets.

Where I disagree is with inflation. There are actually two ways to look at this aspect of the U.S. economy. First, real-time inflation data shows that the current national inflation level is below 1%. This is largely due to falling prices for home prices and other daily necessities for Americans. Understand that goods and services feel expensive because past inflation has pushed up prices, but at the same time, current inflation levels may be low, meaning that price increases are not accelerating. However, this topic has been discussed repeatedly.

What I find more interesting is that every potential threat listed by Bloomberg is actually a deflationary factor that will lead to lower inflation. For example, private credit has been growing in recent years as financial institutions lend to small and medium-sized enterprises. This opportunity arises because the Dodd-Frank Act limits the ease with which most banks can lend to these businesses. (Note: The full name of the Dodd-Frank Act is the Dodd-Frank Wall Street Reform and Consumer Protection Act. It is a U.S. federal law passed on July 21, 2010. This bill is dedicated to protecting consumers, solving systemic risks in the financial industry and other issues, and aims to avoid a recurrence of the 2008 financial crisis.)

As cracks begin to appear in the private credit industry, we must recognize that any form of market downturn will lead to severe deflation. In the event of defaults, redemptions, financing restrictions or forced deleveraging, we will see lenders stop issuing new loans, existing loans will be restructured or written down, and companies will lose access to refinancing.

Since U.S. economic growth relies heavily on credit expansion, if these problems begin to emerge, reduced business investment, hiring freezes or layoffs, reduced M&A activity, and slower economic growth will be inevitable. This is also known as deflationary pressure!

But this is not a problem unique to private credit.

A weak labor market can lead to deflation because wages are the largest source of income and demand in the economy. When labor markets are weak, income growth slows, reducing consumption and pricing power throughout the system. Deflationary factors are further intensifying!

We know thatAI has a strong deflationary effect because it removes inefficiencies in the economy, allowing companies to create more profits with fewer workers. Elon Musk believes that the rise of artificial intelligence will impact the U.S. economy like a supersonic tsunami. Its power will be so powerful that the government will be overwhelmed and have to issue additional currency urgently. No one can predict whether this will happen as quickly as he envisions, but there is no doubt that AI has a deflationary effect.

This brings up the question of war. Typically, wars cause inflation because governments need to borrow heavily to pay for wars. But if the war is short and does not turn into a protracted war, inflation may not occur. Given that all the messaging from the current administration is about a quick fix, I'm not too worried that the current situation in Iran will trigger severe inflation that will impact the economy.

So that leads me to what I think is going to happen next.

First, in terms of monetary policy, I think interest rates will be lowered more than most people expect. If deflationary pressures develop in the U.S. economy, this will force the Federal Reserve to take action. But we also know that Fed chairman candidate Kevin Warsh has made it clear that he believes interest rates should be lowered, so I don’t think he will say one thing in public and do another thing after taking office.

Second, asset prices have shown amazing resilience this year. The United States extradited Nicolás Maduro from Venezuela, negotiated greater access to Greenland, launched a ferocious bombing campaign against Iran, bombed narco-terrorists in Ecuador, and now threatens to overthrow the Cuban regime, yet both the S&P 500 and Nasdaq are down less than 2% year-to-date. You might think that the stock market would be down significantly, but that's not the case.

Gold prices are up 20% over the same period, and given the current economic climate, I expect asset prices to continue to perform well. Software stocks and Bitcoin are having a tougher time with their prices, as they appear to be moving in close agreement.

Finally, I believe we will have a huge wave of innovation that will drive GDP growth. I still think people severely underestimate the potential of artificial intelligence and robotics. These technologies will permeate every aspect of our lives, and we barely understand how far-reaching their impact will be. As innovation emerges, we will enter a period of exponential growth. Robots will help make more robots, and AI software will start writing more software.

When we reach that escape velocity, my greatest wish is that we usher in an era of abundance driven by a golden age of economics. While this is not guaranteed to happen, I am confident that it will happen.