Economy picked up in early 2026, but inflation jumped, too

 Within the first three months of 2026, the U.S. economy grew at a 2% pace, an improvement after a slower end to 2025. Alongside this growth, consumers have shown fatigue amid rising prices, and the economy is running below the Congressional Budget Office's estimate of the economy's potential to grow without aggravating inflation.

While businesses continue to drive growth by investing more, especially in AI, consumers are feeling the pressure. Regular gasoline is averaging $4.30 per gallon, which is a four-year high. These high prices are making people more cautious with spending and has the potential to slow the economy again.

The big idea of this article is to stress that growth does not always equal stability. The economy is technically improving, but rising costs make it more difficult for people to feel that progress in their daily lives.

Spirit Airlines shuts down as company says it can’t keep up with higher oil prices

    Spirit Airlines, which is known for being very low-cost, has shut down after years of financial problems. They had been dealing with debt for a long time and had already been through the bankruptcy process twice. It might've helped them in the short run, but it never really fixed the overarching problems. On top of this, higher fuel prices, higher operating costs, and tougher competition in the airline industry made it even harder for them to remain profitable. Even with demand for travel rebounding after the pandemic, Spirit was never able to get its finances worked out.

    In some of their final days, there was a last effort to keep the airline alive. This was through a bailout or takeover idea that had connections to the Trump administration. This idea depended on getting approval from creditors and other stakeholders, which ultimately never happened. After this, Spirit had no realistic path forward and started shutting things down. Flights were cancelled, leaving passengers trying to find new last-minute flights. If tickets were bought straight from Spirit, they had a reserve to refund these customers. Other airlines offered $200 one-way tickets for confirmed Spirit ticket holders. Overall, Spirit shows how risky the ultra-low-cost airline structure can be when costs suddenly rise, and there's no cushion to absorb it.

https://apnews.com/article/spirit-airlines-trump-bailout-bankruptcy-37a4818e1b71c0905d022f669d85948c

The Cost of AI in the Eyes of Investors

     In a recent article from the The Epoch Times, big tech companies like Google, Meta, and Microsoft just released their latest earnings reports, and while they’re making a large sum of profit, they’re also spending a massive amount of money on AI. Essentially, building the infrastructure needed for AI, like huge data centers and expensive computer chips is costing investors billions of dollars. Google seems to be handling it the best so far because they’re only using about half of their extra cash to pay for these upgrades. However, investors are getting a bit nervous about companies like Microsoft and Meta because they’re spending a much larger chunk of their money just to keep up in the AI race.
    This shows that the AI boom phase is finally starting to wear off. Before, everyone was just excited about the idea of AI, but now investors are starting to ask the questions of when do we actually make money from this? It’s not enough to just spend billions on new tech anymore, these companies have to prove that AI is actually going to pay off soon. If they don’t start showing real results or new ways to make profit in the next few months, we might see their stock prices take a hit as people realize how expensive this whole AI investment really is. 

https://www.theepochtimes.com/business/big-tech-posts-strong-earnings-as-ai-spending-pressures-cash-flow-6020476

Supply Shocks? We’ve Had a Few. Here’s How Investors Can Deal

The article explains that the economy is currently facing a series of supply shocks, which are sudden disruptions that limit the availability of goods, labor, or energy. These shocks are difficult for the government to manage because their tools, like changing interest rates, cannot fix broken supply chains or provide more oil. For investors, these events are particularly challenging because they can cause prices to rise while economic growth slows down.

To deal with this uncertainty, the author suggests that investors move beyond simply planning for the most likely outcome. Instead, they should use scenario analysis to test how their portfolios would handle various situations such as a prolonged energy crisis. The article recommends focusing on resilience by investing in high-quality companies with economic moats that can pass higher costs on to customers. They say that diversification remains essential but investors are warned that traditional bonds may not provide protection during high inflation periods. The goal for investors is to prepare for a wider range of risks rather than betting on a single economic path.

As seen in the IS-LM models discussed in class this supply shock might have different impacts in the economy. There might be an decrease in GDP, an increase in interest rates, and an increase in price levels. 

https://www.morningstar.com/economy/supply-shocks-weve-had-few-heres-how-investors-can-deal