June 1, 2026​​​​​​

An Amazing Time to Be Alive

At this point, Iran is mostly noise. Ebb and flow, back and forth, yadda yadda yadda. Markets seem to view it the same way. Outside of energy prices, the direct impact on most Americans is limited, and even gasoline prices remain well below prior highs.

What continues to matter is the aftermath of the nearly $7 trillion of stimulus, monetary policy liquidity, and helicopter money that flooded the economy. I remain convinced we are still working through those consequences today.

It helps explain the "K-shaped" economy. Those on the upper arm of the K accumulated enormous wealth and are still trying to find places to invest it. Whenever that much capital is chasing opportunity, the risk of misallocation rises. History tells us that excess liquidity eventually finds its way into places it shouldn't.

That brings us to the Federal Reserve.

Kevin Warsh has his work cut out for him. The challenge is shrinking the Fed's balance sheet without causing economic convulsions. It is entirely possible that short-term rates move lower while the Fed simultaneously continues to reduce its balance sheet. One action pushes rates down, while the other pushes rates up, creating something of a wash (Warsh?).

If there is a risk to that strategy, it is higher long-term rates. The economy has become accustomed to abundant liquidity. Removing it will not be painless.

For community bankers, the message is straightforward: liquidity will likely be more scarce over the next decade than it was during the last one. Build more liquidity than you've grown accustomed to, and be careful assuming funding costs will remain benign. Spread compression can arrive quickly when borrowing costs rise.

Meanwhile, AI is the whole enchilada.

Some argue the enthusiasm has gotten ahead of itself. Others believe it will prove to be the most important technological advancement of our lifetimes. I fall into the second camp, especially when you include quantum computing, nuclear energy, space-based economy and other emerging technologies that are developing alongside it.

Are some stock prices ahead of themselves? Undoubtedly. A correction of 10% to 15% would not surprise me at all. In fact, it would probably create opportunity. What makes this cycle different is that many of these companies are producing revenue and earnings growth that is extraordinary by any historical standard.

John Mauldin recently quoted Tyler Cowen, who estimated that, if AI contributes only a modest amount to productivity growth, one-half of one percent, America's debt trajectory improves dramatically. Personally, I believe productivity gains will be much larger than that.

If productivity growth accelerates, the economy grows faster than the debt. If the economy grows faster than the debt, the debt burden becomes far more manageable.

Energy remains the lynchpin.

Traditional fossil fuels will continue supplying the lion's share of our energy for years to come. But I increasingly believe nuclear power arrives just in time to support the demands of the AI economy. Data centers are being built at a breathtaking pace, and they will require enormous amounts of reliable electricity. My bet is that nuclear power ultimately supplies much of that incremental demand. Small modular reactors, site built, will supply the needed energy for the compute coming online without the need for transmission lines.

Something that continues to baffle me is how negative financial commentary has become. I understand it from the political press. Fear sells. Outrage sells. But financial journalism is supposed to be more grounded in reality.

Yet pessimism dominates many headlines.

Case in point is the coming wave of mega-IPOs. SpaceX, Anthropic, and OpenAI may command valuations that would have seemed unimaginable only a few years ago. Perhaps that is evidence of excess. Or perhaps it is evidence that we are witnessing the birth of a new economic era.

I lean toward the latter.

After thirty-seven years of watching markets, recessions, crises, bubbles, and recoveries, I have learned that betting against human ingenuity is usually a mistake.

We are living through one of the most consequential periods in human history. That is not hyperbole. Technology is advancing at a pace few thought possible. Medicine, communications, manufacturing, transportation, energy production, and space exploration are all being transformed before our eyes.

Life has never been safer. Products have never been more abundant. Medical advances are occurring that were science fiction just a generation ago.

It is an amazing time to be alive.

Mikell Tomlinson | Senior Vice President TIB Capital Markets EMAIL