MEMORANDUM
TO: Investment Committee
FROM: Senior Economist
DATE: May 23, 2026
RE: Federal Reserve District Research Briefing
Based on the recent monitoring window, here are the most analytically significant publications and their implications for our portfolio positioning:
1. [NY] AI’s Macroeconomic Challenges and Promises
The revelation that Big Tech capital expenditures exceeded operating earnings in Q3 2025 signals a pivot from the "hype" phase to a massive infrastructure build-out. This suggests a significant lag between investment and productivity gains, implying that the ROI on AI may be back-loaded, which could pressure tech margins in the near term.
2. [RIC] Modelling Unemployment Insurance in the Real World
The finding that current U.S. unemployment insurance is near-optimal suggests that the Fed and Treasury are unlikely to pursue structural overhauls of the safety net to stimulate labor mobility. For our outlook, this means labor market frictions will likely remain constant, and we should not expect policy-driven shifts in the natural rate of unemployment (u*).
3. [STL] Taxation and the Global Allocation of Intangibles
This research highlights how tax regimes dictate the geographic placement of intellectual property and high-value assets. As global tax harmonization efforts continue, we expect a reallocation of intangible assets that could trigger volatility in corporate earnings and shift FDI flows away from traditional tax havens.
Synthesis: The data suggests a transition toward a capital-intensive AI era where productivity gains are not yet offsetting massive spend. Simultaneously, stability in labor policy and shifting global tax dynamics indicate that macro volatility will likely be driven by corporate balance sheets rather than structural policy pivots.
The paper examines the tension between the long-term productivity potential of AI and its current high capital costs. It finds that AI investment is currently absorbing resources faster than it is generating operational returns.
In the third quarter of 2025, America's largest tech firms for the first time spent more on capital investment than they earned from operations. The implication is that AI, a technology with the potential to make the economy more productive, is, for now, absorbing resources faster than it is generating returns. This post discusses how the tension between AI's long-run promise and its short-run costs affects the outlooks for inflation, real activity, and financial stability.
The study evaluates the efficiency of unemployment insurance programs through economic modeling. It concludes that the current U.S. framework aligns closely with the theoretical optimal design for such programs.
One model suggests that the optimal unemployment insurance program would be set up pretty close to what the U.S. currently has.
The paper examines how corporate tax regimes influence the strategic placement and ownership of intangible assets across borders. It argues that tax differentials drive the global allocation of intellectual property to optimize after-tax returns.
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