The ‘Three A’s’ are keeping the economy afloat during Iran war. Is it enough to avoid recession?

EY Parthenon chief economist Gregory Daco warns the U.S. expansion is narrow and increasingly fragile, driven mainly by affluent consumers, heavy AI investment and asset appreciation. He notes inflation (PCE) rose to 3.8% in April while wages are increasing only about 3% and the personal savings rate fell to 2.6%. Daco raised the U.S. recession probability to roughly 40%, saying sustained high oil prices and persistent inflation could force households to cut spending and eventually dent broader market gains. The piece implies the S&P 500’s rally is masking uneven real-economy strength and that markets could be vulnerable if inflation and energy costs don’t ease or corporate investment fails to broaden beyond AI.