The vibes are starting to feel off regarding the state of the U.S. economy right now. Back in 2022, young economist Kyla Scanlon coined the term “vibecession” to describe the awkward feeling that Americans had in regard to the disconnect between how they felt and what the economic reality was. I would argue we are in the throes of a Vibecession Part 2 as we head into the final quarter of 2025.

In June of 2022, inflation peaked at a year-over-year reading of ~9.1% and the University of Michigan Consumer Sentiment Index reached an all-time low of 50. At that time, however, the GDP was trending negative at -0.9% growth. While the job market was extremely robust and Americans had a lot of leverage in negotiating their pay, inflation was making people feel like they couldn’t afford anything, and both the stock and bond markets were in double digit drawdowns. Those “vibes” that people were feeling early in 2022 started to show up by the summer.

Right now, however, the Atlanta Fed’s GDPNow is forecasting GDP growth in the 3Q of 2025 to be +3.8%, yet the UofM consumer sentiment index is extremely pessimistic at 55.1 (anything in the 50s is considered a pessimistic reading). The stock market is at all-time highs, and people who own houses have never had more home equity. Unlike the summer of 2022, the economy is doing extremely well by almost any metric and yet…people feel absolutely awful. Why?

I have a few opinions (see below), but I highly suggest listening to Scott Galloway and Ed Elson’s Prof G Markets podcast from earlier this week where they discuss the current feelings of the American consumer and compare and contrast today’s environment to the feelings of 1999 and the start of the internet boom and bust.

Reason #1

The majority of consumer spending is coming from the very wealthy. The top 10% of wage earners (households making above $250k per year) account for half of all consumer spending, the highest reading of all-time according to Moody’s. Galloway has said that the fastest growing segment of the American population is decamillionaires, which are households with over $10 million. If you’re a business owner, you want to cater to these folks because they will spend a lot of money on things that they feel like are worth the price tag. Everyone else, however, is struggling.

Reason #2

Young people are extremely upset. Only 15% of young Americans believe the country is “on the right track”, which has been the case going back to the Covid shut down. Recent college graduates, as of August of this year, have an unemployment rate of close to 10%, which is almost unheard of in modern America. Frustration mounts and pundits are blaming everything from the White House to Artificial Intelligence. Federal Reserve Chair Jerome Powell recently discussed this data point, however, and the general consensus at the Fed is that the economy is in a job “holding pattern”. Companies are just starting to lay people off, but none of them are hiring. Which leads to…

Reason #3

CEOs are extremely cautious right now, and the main reasons are concerns regarding global growth, recession, and ongoing trade wars. It is very hard to plan strategically for the next quarter, let alone the next few years, due to the constantly changing landscape surrounding tariffs and trade wars. A “wait and see” approach leads to corporate budgets remaining flat, and their desire to hire people out of college gets put on the backburner. You can also add a concern that the majority of job seekers lack the talent for the current openings. While there is a general hysteria surrounding AI taking our jobs, I think it’s a relatively small part of this overall puzzle.

Reason #4

The housing market continues to be completely broken. Young people feel like they’ll never be able to own a house, and the increase in mortgage rates make current homeowners feel stuck. This is the most unaffordable housing market of all-time, and while that gives a small segment of the population a small kick in the wallet from a “wealth effect”, it has a deleterious effect on everyone else.

The final item I’ll add to the above reasons is the massive amounts of capital expenditures (capex) going on in the tech sector, specifically surrounding AI, that are clouding the business climate. AI related capital expenditures added $152 billion to U.S. GDP in the first half of 2025, compared to $77 billion from consumer spending. This is very notable considering consumer spending typically contributes about 70% of the overall GDP number in America.

The ongoing joke right now is that the S&P 500 can really be split into two pieces, the S&P 10 (the very large tech companies loaded with cash) and the other S&P 490. The top 10 companies make up almost 40% of the index market capitalization, which creates huge distortions in the stock market. Yes, companies like Google, Meta, and Microsoft are spending epic amounts of cash to chase the Artificial Intelligence pot of gold, but the majority of companies are just staying afloat. While roughly 79% of the companies continue to meet or beat their earnings expectations, there is less and less capex coming from the bottom 490 every month, and the top 10 stocks are getting very pricey.

Much like what Galloway and Elson discuss in their podcast that I mentioned earlier, this feels very similar to what things felt like in 1999.

Recently, Nvidia agreed to invest $100 billion into OpenAI. This investment was made so that OpenAI could buy Nvidia chips. Come again? Yes, that’s right. That is financial engineering, my friends. Nvidia desperately wants OpenAI to buy their chips, OpenAI doesn’t have the capital to do so, so Nvidia takes an equity stake in the private AI firm and provides them the capital to turn around buy expensive things back from them.

A lot of this kind of madness was taking place with internet and e-commerce companies right before bottom dropped out from under the dotcom bubble in 2000. There certainly are differences and I’m not suggesting that this is the logical next step for the AI economy of 2025, but it is starting to get a lot of people’s attention. As they say, history doesn’t always repeat itself, but it often rhymes.

“…this episode feels different from 1999 and 2000. At that point, before de-industrialization had begun in earnest, before Vladimir Putin had arrived in Moscow, and while the Twin Towers of the World Trade Center were still standing, the US and its economy seemed invulnerable. Optimism and excitement were everywhere and frothed over. This time around, the excitement over AI feels more like a collective grasp for a lifeline. Psychologically, it’s different.” ~John Authers, Points of Return (10-1-2025)

Sadly, this time around, we don’t even get the optimism that came with the internet boom. Back then, literally everyone was thinking about the possibilities of what the internet could bring, and the “boom” portion was really exciting and, dare I say, fun. Sure, it ended with the Nasdaq cratering by more than 80% with the “bust”, but it ushered in a new era for America.

Not this time. The “boom” in artificial intelligence spending doesn’t seem to be leading anyone to believe that the next 20 years are going to be great. At least not right now. The second vibecession is just beginning.

Noble Wealth Pro Tip of the Month

October is National Financial Planning Month. Seriously, it is. With that as a backdrop, I am going to loudly recommend that any of you out there that have been on the fence about having someone look at your financial situation, or if you know someone that has been hinting at needing some help, please…give us a shout.

Are you positive you have enough money to retire? What can you do about it if you don’t? What are you going to do when it’s time to send your kids to college? Could you afford that new house?

True and honest financial planning is not about selling you a product. It’s about understanding your cash flows, your personal balance sheet, your tax situation, and mitigating obvious risks that lurk around every corner. It’s about understanding what’s important to you and your family and making sure you’re on the right path to get there. It is very difficult to review your own situation without some bias. Both Grant and I are Certified Financial Planners, and Grant also carries the Chartered Financial Analyst designation. If we can’t help you, we’ll find someone who can.

Things We’re Reading and Enjoying

How the AI Economy Could Collapse - Prof G Markets Podcast

Scott and Ed break down a wave of AI spending news. They also discuss the circular deal theory emerging in AI and why it concerns them from an antitrust perspective. Then they unpack data that demonstrates how lower income Americans are doing and examine why some of the traditional economic data has been distorted by inequality

Dotcom on Steroids - GQG Research, September 11th, 2025

Today’s market, particularly in the tech sector, exhibits dotcom-era overvaluation, with lofty multiples, slower earnings growth, and a weaker macroeconomic backdrop, in our view
We believe today’s technology sector no longer represents forward-looking quality due to decelerating revenue growth, collapsing free cash flow, and increasing competition
We see better investment opportunities outside the tech sector, offering similar potential returns at lower risk and aligning with the goals of compounding capital with strategic downside risk management

“There is nothing noble about being superior to your fellow man. True nobility is being superior to your former self.” - Ernest Hemingway

NWP Monthly Digest | October 2025