'Things are going to be okay, in Canada and the U.S.': Thorne

Key Concepts

• Historic Regime Change: A structural shift in the economy driven by new policy frameworks and technological advancements, rendering historical data less predictive.
• AI Super Cycle: A long-term, multi-year investment cycle driven by artificial intelligence, compared to, but argued to be more significant than, the iPhone product cycle.
• Supply-Side Economics: Economic policies focused on deregulation and tax incentives to stimulate production and growth.
• Nominal GDP (NGDP) Targeting: The strategy of running an economy "hot" to grow out of debt.
• Secular Bull Market: A long-term period of sustained market growth that persists over many years.
• Balance Sheet Recession/Liquidity Trap: Economic conditions characterized by high debt and low interest rates where monetary policy becomes less effective, requiring structural intervention.

---

1. The "Historic Regime Change"

Jim Thorne, Chief Market Strategist at Wellington Altus Private Wealth, argues that investors are currently navigating a "historic regime change." He posits that historical data is no longer a reliable anchor for expectations because the current economic environment is defined by:

• AI Integration: A fundamental shift in productivity and revenue generation.
• Deregulation: Specifically citing Canadian banking deregulation and policy shifts aimed at stabilizing sectors like real estate.
• Policy Evolution: A move toward supply-side economic policies in the U.S. and Canada that prioritize growth over traditional austerity.

2. Market Outlook and Earnings Projections

Thorne maintains a highly bullish outlook, projecting the S&P 500 to reach 8,000, with a potential stretch to 8,400.

• Earnings Growth: He notes that earnings momentum is accelerating, with 16% growth currently being observed. He projects S&P 500 earnings could reach $650–$750 per share by 2028–2031.
• The "Prophetic" Ramp: Thorne argues that the market is in the early stages of a 5-to-6-year secular bull market. He suggests that current sell-side analysts are too conservative, failing to account for the massive revenue generation potential of AI and supply-side policies.
• Valuation: He suggests applying a multiple of 22x to 25x to these future earnings, emphasizing that the "alpha" is found by looking 12 to 18 months into the future rather than reacting to daily volatility.

3. Economic Frameworks and Methodology

Thorne explains his methodology for predicting long-term growth through two primary lenses:

• Nominal GDP Correlation: He views earnings growth as a direct multiple of Nominal GDP. By running the economy "hot," the U.S. aims to grow its way out of debt, which provides a structural tailwind for corporate earnings.
• Productivity Bubble: He identifies the current era as a "productivity bubble" fueled by the AI build-out. He explicitly disagrees with those who compare the AI cycle to the iPhone cycle, suggesting the AI impact on the "totality of the economy" is far more profound.

4. Regional Analysis: U.S. vs. Canada

• United States: Viewed as the leader in the current economic acceleration, driven by aggressive supply-side policies.
• Canada: Currently experiencing a "balance sheet recession" and "liquidity trap." Thorne praises recent interventions by regulators and policymakers (specifically mentioning Mark Carney) to bail out sectors and deregulate banking.
• Policy Recommendation: Thorne argues that for the Canadian economy to fully recover, the Bank of Canada must cut interest rates by another 1% to stimulate private sector loan demand.

5. Addressing Short-Term Risks

Regarding the Middle East conflict and recent market swings, Thorne characterizes these as "supply shocks." He believes the market will "see through" these events as one-time effects, provided that central banks and financial institutions maintain clear communication. He warns, however, of the risk of "Icarus" behavior—where the market might rise too high, too fast, if earnings growth materializes earlier than expected.

Synthesis and Conclusion

Jim Thorne’s perspective is that we are in the early stages of a "secular bull market for the ages." He urges investors to move away from relying on historical data and instead focus on the structural changes brought about by AI and supply-side economic policies. By looking 12–18 months ahead and recognizing that the current cycle is a multi-year phenomenon rather than a short-term trend, investors can capture significant alpha. The primary takeaway is that the combination of AI-driven productivity and aggressive nominal GDP growth creates a unique environment that will likely not be repeated in the current generation of investors' careers.