Market Commentary July 28, 2025 | Waterford Advisors

The Markets

How fast will an AI-powered economy grow?

Global economic growth has not always been robust. Until the 1700s, economic growth averaged about 0.1 percent per year and was closely tied to population growth. “Bigger harvests allowed more mouths to be fed; more farmers allowed for bigger harvests,” reported The Economist. Eventually, better-nourished people had ideas about how to improve their lives, and economic growth edged higher.

Innovation, investment, and productivity have helped to accelerate global economic growth. Economists measure economic growth (and contraction) using gross domestic product, or GDP, which is the value of all goods and services produced in a region over a period of time.

We live in prosperous times.

In the 20^th century, the total amount of goods and services produced exceeded the total amount of goods and services produced in recorded human history. “Between the years 1900 and 2000 world GDP at constant prices has increased about 19-fold, corresponding to an average annual rate of growth of 3 percent,” reported the International Monetary Fund’s research department.

Some countries’ economies grew faster than others. In 2024, the United States had the largest economy in the world (GDP of about $30 trillion). China had the second largest economy (GDP of about $19 trillion, in U.S. dollars), and Germany had the third largest (GDP of about $4.7 trillion, in U.S. dollars).

AI is expected to increase the pace of economic growth, although there is debate about the magnitude of the change. In MIT Management, Dylan Walsh reported:

“Artificial intelligence research is filled with dramatic forecasts. AI will affect almost 40 [percent] of jobs around the world, according to the International Monetary Fund. It will increase global GDP by $7 trillion — or 7 [percent] — over 10 years, predicts Goldman Sachs. Or it will grow between $17.1 and $25.6 trillion annually, if you prefer to go with McKinsey’s estimate. And these projections are relatively conservative compared with others…MIT Institute Professor Daron Acemoglu has a more conservative estimate of how AI will affect the U.S. economy over the next 10 years…the GDP boost would likely be closer to 1 [percent] over that period, Acemoglu suggests.”

“My assessment is that there are indeed much bigger gains to be had from generative AI, which is a promising technology, but these gains will remain elusive unless there is a fundamental reorientation of the industry…in order to focus on reliable information that can increase the marginal productivity of different kinds of workers, rather than prioritizing the development of general human-like conversational tools,” wrote Acemoglu, who is an economist.

Last week, the Standard & Poor’s 500 Index closed at a new high every day, reported Connor Smith of Barron’s. (On June 30, 33 percent of the index was invested in technology stocks.) The Dow Jones Industrial Average and Nasdaq Composite also finished higher. Yields on U.S. Treasuries were mixed over the week.

Data as of 7/25/25	1-Week	YTD	1-Year	3-Year	5-Year	10-Year
Standard & Poor’s 500 Index	1.5%	9.4%	19.9%	19.0%	16.4%	13.8%
Vanguard Total Intl Index (Foreign Stocks)	2.0	20.6	20.3	14.0	9.7	6.6
Total Bond Market (U.S. Dollar Bonds)	0.4	3.7	4.5	2.0	-1.1	1.7
Gold (per ounce)	-0.4	28.1	41.4	24.8	11.5	11.8
Bloomberg Commodity Index	-1.6	4.8	6.9	-4.3	8.6	1.2

S&P 500, Vanguard Total International Stock Index, Vanguard Total Bond Market Index, Gold, and Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized. Sources: Yahoo! Finance; MarketWatch; morningstar.com; djindexes.com; London Bullion Market Association. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.

PLANNING YOUR VACATION? AI CAN HELP. Some people enjoy travel planning. They read books about the destination, review online publications for restaurant, hotel, and event information, and ask friends (or locals) for tips and suggestions. But travel planning is not everyone’s jam. If you love vacations and dread the planning, AI travel-planning apps may prove useful, as long as you understand the limitations.

“Travel has become one of the most popular use cases for AI… While AI agents that can manage the entire process of planning and booking your vacation are still some way off, the current generation of AI tools are still pretty handy at helping you with various tasks,” reported Rhiannon Williams of MIT Technology Review.

Here are two things to keep in mind when using AI to plan a trip:

Develop detailed prompts. “Prompts” are the questions you ask AI. Detailed and descriptive prompts tend to produce better answers. Don’t worry, prompts don’t have to be perfect. You can start with the basics like, “What are easy day trips from Rome by train?” Once you have the answer, you can modify your wording and add context, helping AI deliver more detailed and specific information. The more you practice, the better you’ll get. AI can:

Build itineraries,
Provide packing lists,
Offer location history and interesting trivia,
Recommend top restaurants,
Offer family-friendly and budget-friendly insights, and
Tailor visits to your preferences.

Fact-check the answers. Unfortunately, it’s not a good idea to accept the information AI provides as fact. “AI models are prone to making stuff up, which means you should always double-check their suggestions yourself,” reported Williams.

For example, Bloomberg reporter Catherine Thorbecke asked AI to recommend “the best beef noodles in my area [Thailand] — with the very specific request that the shop had to accept credit cards.” The restaurant had fantastic beef noodles, but it only accepted cash.

Regardless, Thorbecke found AI to be a valuable travel companion. She wrote, “I found the tool to be incredibly helpful while navigating a foreign city, using it not just to find spots to eat but also to translate menus and signs, as well as communicate with locals via voice mode. It felt like the ultimate Asia travel hack.”

It’s important to remember that AI may be susceptible to scam travel websites, just like humans are. If an AI travel app directs you to a site for booking, make sure to verify that the site is real. One way to check is by reviewing the web address. Fake websites have URLs that are very similar to those of real websites. The tipoff is usually that the fake address is misspelled, includes strange characters, or has an incorrect domain extension (e.g., .net instead of .com).

WEEKLY FOCUS – THINK ABOUT IT

“The wish to travel seems to me characteristically human: the desire to move, to satisfy your curiosity or ease your fears, to change the circumstances of your life, to be a stranger, to make a friend, to experience an exotic landscape, to risk the unknown.”

― Paul Theroux, Author

Best regards,

Waterford Advisors

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* These views are those of Carson Coaching, not the presenting Representative, the Representative’s Broker/Dealer, or Registered Investment Advisor, and should not be construed as investment advice.

* This newsletter was prepared by Carson Coaching. Carson Coaching is not affiliated with the named firm or broker/dealer.

* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.

* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.

* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.

* Gold represents the 3:00 p.m. (London time) gold price as reported by the London Bullion Market Association and is expressed in U.S. Dollars per fine troy ounce. The source for gold data is Federal Reserve Bank of St. Louis (FRED), https://fred.stlouisfed.org/series/GOLDPMGBD228NLBM.

* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.

* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.

* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.

* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

* The risk of loss in trading commodities and futures can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. The high degree of leverage is often obtainable in commodity trading and can work against you as well as for you. The use of leverage can lead to large losses as well as gains.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

* Past performance does not guarantee future results. Investing involves risk, including loss of principal.

* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.

* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

* Asset allocation does not ensure a profit or protect against a loss.

* Consult your financial professional before making any investment decision.

Sources:

https://www.economist.com/briefing/2025/07/24/what-if-ai-made-the-worlds-economic-growth-explode or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/07-28-25-The-Economist-What-If-AI%20-%201.pdf

https://www.elibrary.imf.org/display/book/9781557759368/ch005.xml

https://fred.stlouisfed.org/series/GDP

https://fred.stlouisfed.org/series/MKTGDPCNA646NWDB

https://fred.stlouisfed.org/series/MKTGDPDEA646NWDB

https://mitsloan.mit.edu/ideas-made-to-matter/a-new-look-economics-ai

https://shapingwork.mit.edu/wp-content/uploads/2024/05/Acemoglu_Macroeconomics-of-AI_May-2024.pdf

https://www.barrons.com/livecoverage/stock-market-news-today-072525?mod=hp_LEDE_C_1 or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/07-28-25-Barrons-S&P-500-Caps-Off-Perfect-Week%20-%208.pdf

https://www.spglobal.com/spdji/en/indices/equity/sp-500/#overview [Go to documents/factsheet/ S&P 500 USD]