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The benchmark for U.S. borrowing costs has climbed at a rate alarming to investors

A deepening selloff in the U.S. bond market drove the yield on the 10-year U.S. Treasury note to 5% for the first time in 16 years, extending a rout that has rattled stocks, lifted mortgage rates and fueled persistent fears of an economic slowdown.

A critical driver of U.S. borrowing costs, the 10-year yield rose to within a few thousandths of a percentage point of 5% last week following an unexpectedly strong retail-sales report and comments from Federal Reserve Chair Jerome Powell that reinforced investor bets on stubbornly high short-term interest rates.

The 5% barrier barely held then, but broke in an early Monday climb. The 10-year yield reached as high as 5.021%, according to Tradeweb, up from roughly 3.8% at the start of the year.

Yields, which rise when bond prices fall, have climbed since the start of 2022, when investors began worrying in earnest that the Fed might raise interest rates to fight inflation.

In recent weeks, though, the selloff has only grown more intense and potentially destabilizing, with the 10-year yield jumping at times more than 0.1 percentage point a day and investors scrambling for explanations. The lack of clarity has only added to investors’ anxieties, reflected by declines in stocks that have pulled major indexes off their summer highs.

Many investors and analysts argue that high yields make sense given signs that a resilient U.S. economy can withstand much higher interest rates than previously believed. Investor expectations for higher rates drive down prices of Treasurys and push up yields because investors anticipate that new bonds will offer larger interest payments.

Others, though, worry that yields have become unmoored from the outlook for Fed policy and are responding to more unpredictable factors, such as souring sentiment about the size of the federal budget deficit and government’s willingness to address it.

The two theories imply different outcomes. If falling bond prices are justified by the strong economy, concerns about a 5% yield on the 10-year may prove just as fleeting as when the yield reached other milestones, dating back to early 2022 when it jumped to 2.5% from 1.5%.

If not, higher yields may finally lift borrowing costs to a point that businesses and consumers substantially pull back on spending.

“The question is: Is a 5% 10-year the type of number that breaks the U.S. economy?” said Scott Kimball, chief investment officer at Loop Capital Management. “Probably not, but you’re going to be in that yellow” caution zone, he added.

Investors and economists pay close attention to Treasury yields, and the 10-year yield in particular, because they set a floor on the interest rates across the economy, including those on mortgages and corporate debt.

For investors, yields also represent a risk-free return that they can get by holding government bonds to maturity—an important benchmark for determining the prices of riskier assets such as stocks.

A 5% 10-year yield is hardly unprecedented in U.S. history. But it was unthinkable to most investors just a few years ago, after a decade of sluggish inflation and ultraloose Fed policies, including near zero short-term interest rates and direct purchases of Treasurys.

The Covid-19 pandemic marked a turning point, leading to historic government stimulus programs, a surge in inflation and a different economy, marked by healthier private-sector balance sheets, changed work habits and much higher rates.

Investors’ views of the economy have evolved gradually. At the start of this year, many expected yields to fall based on the assumption that they were already high enough to precipitate a recession.

Instead, growth has remained steady. And yields have generally kept rising, outside of a scare in March when the collapse of Silicon Valley Bank spurred fears of an imminent downturn. Yields also fell in the wake of Hamas’s Oct. 7 attack against Israel but have since picked up again.

For all the debate about what has fueled the latest, more acute selloff, most investors agree that the 10-year yield rose in the summer due largely to bets that interest rates would stay high for longer.

Investors had previously piled into wagers that the Fed would keep raising interest rates until it triggered a recession, and then start cutting rates significantly. That led investors to prefer longer-term Treasurys—holding their yields well below those of shorter-term ones in what is known on Wall Street as an inverted yield curve.

“The classic, very crowded trade was to own longer-duration fixed income, because typically in a recession bond yields go down and, if you own longer duration bonds, you make more money,” said Jim Caron, chief investment officer of the portfolio solutions group at Morgan Stanley Investment Management.

By the late summer, though, conditions were changing: inflation was cooling and the Fed was signaling that it was nearly done raising rates. Still, the economy, instead of sputtering, was showing signs of accelerating.

The result was a massive reversal in investor positioning, with longer-term Treasurys falling out of favor along with recession bets. Yields on those bonds shot higher, closing the gap with short-term yields.

Meanwhile, other potential challenges have emerged.

At the end of July, the Treasury Department announced that it would need to borrow more in the coming months than investors had been anticipating, leading to a larger-than-expected increase in the size of short and long-term Treasury debt auctions. The following day, Fitch Ratings downgraded the U.S. credit rating to just below triple-A, citing a worsening budget outlook and governance concerns, highlighted by standoffs over lifting the federal debt ceiling.

Since then, the rise in Treasury yields has only further fed anxieties about the budget, given that higher yields mean the government needs to spend more on interest payments. And Washington has continued to show signs of dysfunction, narrowly averting a government shutdown in a short-term budget deal that resulted in the ouster of Kevin McCarthy as House speaker.

Those type of developments are all helping to push yields higher, as investors balk at the prospect of ever larger Treasurys issuance, said Kimball, of Loop.

“Whether the government wants to admit it or not, the U.S. Treasury is now more double-A than it is triple-A,” he said.

Supporting the argument that a growing volume of Treasurys is feeding the bond selloff, some widely-tracked financial models have suggested that Treasury yields have climbed in recent weeks not because interest-rate forecasts have changed but because of an increase in the so-called term premium. That category covers all possible factors other than baseline rate expectations, including uncertainty about the rate outlook and supply-demand dynamics.

The question of what is moving Treasury yields is important because an uncontrolled bond selloff, removed from economic fundamentals, has the potential to be much more disruptive than an orderly rise in yields. A recent example is last year’s sharp declines in U.K government bonds that started when then Prime Minister Liz Truss proposed large tax cuts and only ended when Truss stepped down and the plans were scrapped.

Still, some investors say that alarm about the U.S. fiscal situation is overblown and not having a major impact on bonds.

Leah Traub, a portfolio manager at Lord Abbett, noted that government auctions of Treasurys have generally proceeded smoothly in recent weeks, with signs of less demand from overseas—where bond yields are also rising quickly—but increased demand from domestic buyers.

Traub is among those who have been wagering that the 10-year yield would rise. But her rationale has been that it will be difficult for inflation to fall all the way down to the Fed’s 2% target, causing the market to adjust to a higher path for rates.

“The labor market is still very, very tight,” she said. “And it would take a lot of economic weakness, a lot of growth weakness, to really have labor market weakness which would then feed into inflation coming lower.”

The asset manager raised $1.5 billion more than for a predecessor vehicle as investors sought to cash in on decarbonization and digital transformation trends

Goldman Sachs Group’s asset management business has collected $4 billion to invest in midsize infrastructure assets, as investors look to take advantage of a favorable political and economic climate for the sector.

Goldman Sachs Asset Management closed West Street Infrastructure Partners IV at the fund’s target and has already committed $2.3 billion across eight investments, the New York-based manager said. Goldman Sachs oversaw a total of more than $2.7 trillion in assets as of June 30.

So far investments in the new fund include Synthica Energy, a Cincinnati-based developer of renewable gas plants, Verdalia Bioenergy, a developer and operator of European biomethane plants, and Gridstor, a developer and operator of utility-grade battery storage projects in the U.S., Goldman said.

The new fund attracted capital mainly from institutional investors, with the balance made up by high-net-worth investors, Goldman and its employees, the bank said. The fund’s predecessor, West Street Infrastructure Partners III, closed in 2017 with $2.5 billion, a spokesman confirmed.

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Goldman said it is investing the fund across infrastructure subsectors that include energy transition, digital infrastructure, transport, logistics and social infrastructure.

The infrastructure asset class stands to benefit from broad economic trends, including the transition to a lower-carbon economy, digital transformation and shifting demographics, “each of which requires very significant mobilization of private capital,” said Goldman’s Co-Head of Infrastructure Scott Lebovitz in a statement announcing the close of the fund.

Private infrastructure investors in the U.S. also stand to benefit from a roughly $1 trillion infrastructure law passed in 2021 to repair the nation’s aging roads and bridges, upgrade the electrical grid and expand broadband internet access.

Around $7.8 billion had been invested across 1,462 projects since the law was enacted in November 2021, according to data published by the Department of the Interior.

Goldman is looking to use the new fund to back what are called value-add infrastructure investments, namely businesses with long-term cash flows and strong market positions, and that deliver assets and services viewed as critical to society.

Value-added investing involves acquiring assets and growing their revenues through investment and operational improvements. It is a higher-risk and higher-returning strategy than core infrastructure, which targets assets such as utilities in developed countries with long-term supply contracts already in place.

Goldman’s infrastructure investment team has deployed approximately $16 billion since inception in 2006, the bank said. The team is led by Lebovitz, Global Co-Head Tavis Cannell and Chief Investment Officer, Infrastructure Philippe Camu.

Reliance is nearing a deal to acquire Disney’s India business, according to a report, as Mukesh Ambani’s oil-to-telecom empire eyes broadening digital and television assets.

Disney values its India business at about $10 billion, whereas Reliance views the assets at between $7 billion to $8 billion, the Monday Bloomberg News report said. A deal could be finalized and announced as early as next month, the report said.

Reliance in an earlier statement said the firm is always evaluating properties for acquisitions.

In 2019, Disney acquired 21st Century Fox’s entertainment assets for $71.3 billion, a move significantly bolstered by the inclusion of Star India.

The deal was integral to Disney’s global streaming expansion, handing it broadcast and streaming rights to the Indian Premier League cricket matches, a multitude of multilingual TV channels, and an interest in a Bollywood film production company. At the time of acquisition, Star’s Hotstar had amassed about 150 million monthly active users.

While Hotstar dominated the Indian video streaming landscape for several more quarters, things have tapered off since as Reliance-backed Viacom18 has grown in popularity after securing the five-year rights to stream IPL cricket matches for about $3 billion. Disney paid $3 billion for the same five-year right, but for broadcasting the content on TV.

Reliance has poached many top leaders and engineering talent to ramp up JioCinema in the last one year, and has populated the on-demand streaming service with premium content from HBO and NBC.

Disney’s Hotstar, which has lost about 20 million subscribers this year as consumers flocked to JioCinema to watch IPL matches, is currently streaming the ongoing cricket World Cup to mobile viewers at no cost, hoping to win back customers. It reclaimed the global on-demand video streaming record earlier this month from JioCinema, when the Disney streamer app drew 35 million concurrent viewers to a cricket match. It broke its own record Sunday during a game between India and New Zealand, when the concurrent viewers jumped to 43 million.

CEO John Berger’s comments come as shares of renewable energy companies fall because of high interest rates

US solar power has become critical to avert a looming energy crisis, the head of a large rooftop solar installer has said, even as shares in renewable energy companies continue to plummet this month.

“I do feel like we are headed to an energy crisis of some sort,” either in the oil business or power business, John Berger, chief executive of Sunnova, told the Financial Times.

“Privately, very privately, some utilities are realising that, to meet the demands of electric vehicles and electrification, power companies like us are necessary. That they cannot do it all,” Berger said.

Sunnova’s share price closed down 5.9 per cent on Friday to $8.67, its lowest level since March 2020. Other big solar companies Sunrun and SunPower closed at lows not seen since the initial days of the Covid-19 pandemic. 

“The share price is bad,” Berger acknowledged. 

The tumble comes as higher interest rates have driven up the cost of renewables financing and threaten to undermine the price cuts from the subsidies in President Joe Biden’s climate law, the Inflation Reduction Act.

Houston-based Sunnova partners with solar panel companies and then leases equipment to homeowners, or sells to homeowners in power purchase agreements. It also securitises solar loans and sells them to investors.

In September, the US energy department finalised a $3bn partial guarantee for Sunnova’s solar loans. On Thursday, Sunnova priced $244mn of solar notes, its first with the DoE’s partial guarantees.

Berger said shareholders have not appreciated Sunnova’s ability to increase prices as the costs of solar equipment fall. In the third quarter of 2023, North American solar prices rose 4 per cent from the prior three months and were up 21 per cent year-over-year, according to a report from pricing provider LevelTen.

Prices for solar components have fallen from their record highs last year. Polysilicon spot prices dropped about 70 per cent from mid-April to mid-July, the energy department said in an August report. And solar module prices have fallen as well amid oversupply and slumping prices for certain commodities, it said.

Lower solar equipment costs have helped offset higher financing costs, Berger said. Simultaneously, the company is able to raise its prices for solar power.

Rooftop solar is expected to grow just 9 per cent this year, down from record annual growth of 40 per cent last year, as the higher cost of financing squeezes homeowners out of the market and incentives in California, the largest market for rooftop solar, are slashed, according to a report from Wood Mackenzie and the Solar Energy Industries Association. The report said the segment would not recover to the same levels of growth as previous years. 

“People are reassessing project economics,” said Michelle Davis, global head of solar at Wood Mackenzie, an energy consultancy.

“Interest rates increase just the general cost of capital . . . If your costs go up, then that production tax credit doesn’t go as far.” 

The troubles facing the residential solar industry highlight the conflicting goals of the Biden administration, as the Federal Reserve’s effort to tame inflation by raising interest rates risks undermining the US plan to rapidly deploy renewable energy as it increases financing costs.

Rooftop solar, compared to utility-scale solar, is more likely to be financed by loans and is vulnerable to interest rate increases. The technology gives homeowners more control over their power sources, relieves stress from the grid, and can help speed up the pace of renewable deployment due to faster permitting timelines.

“The macroeconomic challenges in the economy have made the residential solar business grow slower this year than last year,” said Peter Faricy, chief executive of residential solar giant SunPower, which reported a net loss of $30mn last quarter and lowered its 2023 forecast by 20 per cent.

“We would all like to see it grow faster, not just because we’re in the business of it, but because of the impact it has on the environment.”

Thousands of contemporary art, French royal furniture and rare books amassed by Hubert Guerrand-Hermès will be dispersed through four auctions in December.

Where would you find at once a chair from Marie-Antoinette’s boudoir, one of Pierre Soulages’ paintings, furniture by Le Corbusier and a pair of topiary boars by François-Xavier Lalanne?

At the Hôtel de Lannion, a 17th-century Paris mansion once home to Hubert Guerrand-Hermès, a fifth-generation descendant of Thierry Hermès, founder of the French luxury house.

Some 1,000 lots from his collection will be going under the hammer at Sotheby’s in a series of four physical and online auctions mid-December.

Mario Tavella, president of Sotheby’s France and chairman of Sotheby’s Europe, said it was rare to find a collector like Guerrand-Hermès who had been equally interested by the classical arts as he was by design and contemporary artists.

Sotheby’s said according to family lore, Guerrand-Hermès sharpened his eye for collecting at a young age when his mother would send him and twin brother Xavier to the Puces de Saint-Ouen flea market, challenging the boys by offering to pay what she thought their finds were worth.

Estimated between 10 million euros and 15 million euros, the lots of the late Hermès descendant collected over the years spoke of “a discerning eye that expertly knew how to marry different periods and disciplines,” continued the auction house executive.

In addition to French royal furniture that includes a carved and gilded Louis XVI chair commissioned for Marie-Antoinette’s personal apartments at the Chateau de Versailles and a dresser commissioned by royal mistress Marquise de Pompadour, the late collector also snatched up works by Pablo Picasso, Juan Miró and contemporary artists such as Antony Gormley and Anish Kapoor.

Austrian art dealer Thaddaeus Ropac, who shared a love of music with him, told Sotheby’s the collector had been eager to learn about the contemporary scene, attending dinners with artists such as Anselm Kiefer.

A central interest of Guerrand-Hermès was the Duchesse de Berry, whose discovery he once described as “the beginning of a passion, which has never left me.

Some 500 lots are connected to the 19th-century aristocrat, born Marie-Caroline of Bourbon-Two Sicilies and who married the third son of French king Charles X.

Not only was she a patron of the arts herself and an enthusiastic collector, but she was also the ancestor of Guerrand-Hermès’ wife Rosalinda Álvares Pereira de Melo, herself a member of the Portuguese nobility.

He recreated the duchess’ library on the ground floor of his Paris home, amassing rare manuscripts once owned by the duchess but also items such as a gilded Sèvres clock from 1826 in Restoration style, an elephant timekeeper in patinated bronze and an Aubusson carpet in a chequerboard of floral squares. Her portrait as well as those of some of her relatives will also be part of her sale, as will her handkerchiefs.

Among the items going under the hammer in December are works by Bernard Dubuffet and Joan Miró; Lalanne’s topiary boars, estimated between 100,000 euros and 150,000 euros; the artist’s Singe SI et Singe SII, between 1 million euros and 2 million euros; a portrait of Duchesse de Berry by Baron Gérard, expected to go between 50,000 euros and 70,000 euros; and Soulages’ “Peinture, 28 février 1977,” with a top estimate of 1 million euros.

Guerrand-Hermès, who died in 2016 at the age of 75, had been vice chairman of Emile Hermès SARL, which represents the family shareholders, and general manager of the group’s real estate companies. He also served as a foreign trade adviser to the French government and was made an officer of France’s Legion of Honor in 1999.

A patron of the arts, the collector was treasurer of the Société des Amis du musée national d’art moderne — Centre Pompidou, and a supporter of the World Monuments Fund, a not-for-profit association dedicated to preserving cultural heritage.

Ahead of the auctions, the collection will be on public display at Guerrand-Hermès’ erstwhile Paris home near the Musée d’Orsay between Dec. 9 and 13.

Europe's competition authority had widely been expected to wave through the deal after it was approved in the U.K., and other regions, earlier this year.

LONDON – The European Commission has “unconditionally” cleared the acquisition by Farfetch of a 47.5 percent stake in Yoox Net-a-porter in a decision that had widely been expected.

The approval comes seven months after the U.K. Competition and Markets Authority approved the transaction, which was first announced in August 2022.

On Monday, Compagnie Financière Richemont said the EU was the last regulatory authority required to provide clearance. Richemont had planned to complete the deal later in the fourth quarter of this year.

In a brief statement, Richemont said the deal’s completion remains subject to “certain other conditions” that Richemont and Farfetch are working towards fulfilling. A further announcement will be made in due course.

The European Commission later issued its own statement, confirming its approval of “joint control of YNAP” by Richemont and Farfetch.

It said the transaction “would not raise competition concerns, given its limited impact on competition in the markets where the companies are active.”

Richemont’s shares were down slightly in early afternoon trading at 104.15 Swiss francs.

As reported, YNAP’s parent company plans to sell a majority stake in Yoox Net-a-porter Group to Farfetch and Alabbar, YNAP’s partner in the Middle East.

On completion of the deal later this year, Richemont will hold a 49.3 percent stake in YNAP. Over the next five years, Farfetch is expected to acquire the entirety of YNAP, subject to certain conditions.

In exchange, Richemont will receive Farfetch Class A ordinary shares, expected to represent 12 to 13 percent of Farfetch’s issued share capital.

The deal also foresees the acquisition by Symphony Global, one of the investment vehicles of Mohamed Alabbar, of a 3.2 percent stake in YNAP, with the aim of transforming YNAP a “neutral online platform” for the luxury industry.

Richemont and Farfetch have said they plan to work together to accelerate the quality and global penetration of the Richemont brands online.

Going forward, Richemont will also leverage Farfetch technology, with YNAP and the Richemont maisons adopting Farfetch Platform Solutions. The maisons will also sell via e-concessions on the Farfetch Marketplace.

The wheels of the deal are already in motion: In the first six months of fiscal 2023, Richemont reported a loss of 766 million euros following the noncash write-down of assets linked to the proposed sale of a majority stake in YNAP.

Richemont chairman Johann Rupert has said the new alliance will realize his “long-standing goal of making YNAP a neutral, industry-wide platform, with no controlling shareholder.”

He added that “it was never Richemont’s dream, or intention, to own an online business.” Rupert said Richemont originally took full control of YNAP because its former shareholders had wanted to sell their stakes.

Rupert said the planned sale of YNAP to Farfetch will allow Richemont “to deliver on its global digital strategy” and, at the same time, “to focus on what it does best.”

He said the plan is to continue building brand equity at the company’s luxury maisons without having to worry about running a digital business.

The deal with Farfetch, he declared, will be “transformative for all of luxury, and not for a select few. It will transform big and small companies throughout Europe” by allowing them to set up shop online with help from tech-savvy Farfetch.

Founder and chief executive officer José Neves said Farfetch’s tech will be “a game-changer for Richemont’s brands, and allow them to operate in a hybrid marketplace that is open to the entire industry.” The deal, he added, will double the gross merchandise value of Farfetch.

Analysts are raising their year-end forecasts as the Fed ponders whether to increase interest rates again

Earlier this year, economists and Federal Reserve officials predicted that the U.S. economy would be sputtering by now as higher interest rates cut into spending and investment.

The opposite is happening.

Recent economic data suggest the economy is accelerating despite higher borrowing costs, the resumption of student-loan payments, and wars in Ukraine and the Middle East.

Analysts, many of whom had expected a recession this year, are pushing up their forecasts. Goldman Sachs economists last week raised their growth estimate for the third quarter ended on Sept. 30 to an annual rate of 4% from 3.7%. High Frequency Economics, an economic consulting firm, raised its third-quarter forecast to 4.6% from 4.4% and its fourth-quarter forecast to 1.2% from 1%.

A figure in that forecast range for the third quarter would represent acceleration from 2.2% growth in the first quarter and 2.1% in the second. The Commerce Department reports the official figure on Thursday.

A banner September

By some measures, the labor market actually got stronger over the course of the third quarter. Employers added 336,000 jobs in September, up sharply from 227,000 in August and 236,000 in July.

That hiring is fueling new spending. Monthly retail and food-service sales were up 0.7% in September after 0.8% in August, 0.6% in July and 0.2% in June.

Manufacturing, which had sagged in the spring, is showing signs of rebounding as well. Factory output ticked up 0.4% in September, Fed data showed Tuesday, after declining 0.1% in August.

Big banks such as Citigroup and JPMorgan Chase reported strong earnings this month, and executives say their outlook on the economy has improved. American Airlines also said Thursday that it expects travel demand this holiday season to be stronger than last year’s.

Despite this momentum, inflation has continued to ease, to 3.7% in September from a recent peak of 9.1% in June of last year.

That has allowed Fed officials to indicate they would hold off on further rate increases unless they see signs of renewed price pressures. The Fed has raised interest rates to a 22-year high of between 5.25% and 5.5% over the past 19 months to cool the economy and bring inflation under control.

Fed officials are “proceeding carefully,” Fed Chairman Jerome Powell said in a speech Thursday.

Falling inflation boosts purchasing power

There are several possible drivers for the recent acceleration. First, the combination of cooler inflation and still-strong wage increases means that paychecks go further.

Between December and June, inflation-adjusted incomes after taxes rose at an annualized rate of 7%, estimates Ian Shepherdson, chief economist at Pantheon Macroeconomics. That pushed up the household saving rate to 5.3% in May from 3.4% in December of last year, adding to the roughly $1.2 trillion in accumulated savings left over from pandemic-era stimulus programs.

During the third quarter, households began to run down those savings, fueling new spending. The saving rate fell to 3.9% in August.

Receding fears of a recession could also be making households more comfortable spending money, especially now that it appears the economy has shrugged off the effect of the failures of Silicon Valley Bank and Signature Bank in the spring, said Marc Giannoni, chief U.S. economist at Barclays.

After predicting a recession for the past year, economists surveyed by The Wall Street Journal this month said they now believe that the economy will avoid a downturn in the next 12 months.

Muted impact of higher rates

Meanwhile, the Fed’s interest-rate increases haven’t had the expected cooling effect. That could be because businesses and households locked in lower interest rates during the pandemic when the Fed’s short-term rate target was near zero, Powell said Thursday.

Indeed, economists at Jefferies found corporate interest expenses as a share of revenue has been declining over the past year, despite the Fed’s rate increases. And while higher mortgage rates make it harder to finance new home purchases, roughly 14 million homeowners refinanced during the pandemic, according to research by the New York Fed.

That lowered many families’ mortgage payments and, in some cases, allowed them to cash out some home equity, boosting household savings by about $400 billion through the second quarter, the bank found.

Where does the economy go from here? Economists point to three possible outcomes.

First, the momentum might be short-lived.

Even though hourly wages are going up, workers are working fewer hours. Year-over-year weekly wages adjusted for inflation fell 0.2% in September, the first decline since May. If this continues, households could pull back.

Second, the economy could continue to run hot and send inflation up again. That could prompt the Fed to raise interest rates further, slowing the economy and raising the risk of recession.

A Goldilocks scenario

Third, growth could stay strong but inflation remain under control. This would be the best of all worlds because it would imply higher productivity, meaning that the economy could produce more goods and services without bottlenecks that lead to inflation. If that is the case, stronger growth could continue without the Fed having to raise interest rates.

There are some signs of promise. The proportion of working-age people in the labor force—that is, who are working or looking for work—is the highest in more than two decades. That suggests job growth can stay high without employers having to boost wages so much that they must also raise prices.

And the transition to cleaner energy sources is sparking new business investment, thanks to federal subsidies. Private-sector nonresidential spending amounted to 14.7% of inflation-adjusted gross domestic product in the second quarter of this year, the highest share in records going back to 2007.

For now, however, many economists are reluctant to embrace this upbeat scenario.

“Has the economy shifted in such a way that we don’t have to worry about inflation pressures from a tight labor market? I don’t think that’s the case,” said Ben Herzon, an economist at S&P Global.

Her shapewear brand valued at $4 billion is expanding its collection this week to include boxers, briefs and undershirts

Kim Kardashian’s shapewear empire is stretching toward a new kind of customer.

This week Skims is adding men’s boxers, briefs, undershirts, T-shirts, tank tops and leggings to its online store, building on its popular collection of nude-toned bras, bodysuits and underwear for women.

Kardashian said she sees an opportunity to bring higher-end products to a men’s category dominated by mass brands. “There really is a niche in the marketplace for our designs, our color tones and our materials,” she said in an interview.

Numerous upstart companies, including Skims, have sought to grab market share from giants like Victoria’s Secret in recent years with products that promised a better fit and more comfort. Skims co-founder and CEO Jens Grede believes men’s underwear is ripe for that sort of disruption.

“The men’s category as a whole, has really been a race to the bottom, of multi-packs and discounts,” said Jens Grede. “We’re trying to excel and show men that there’s just a different level of comfort and performance you can have in your first layer.” Pieces will range in price from $16 to $54, and packs from $42 to $98. The items will feature cotton, stretch and compression fabrics. Sizes will run from XS to 5X.

Kristen Classi-Zummo, an apparel-industry analyst at market-research firm Circana, said men’s underwear has become a competitive category, with $5.7 billion in sales over the last 12 months.

“Traditional giants like Hanes and Fruit of the Loom continue to hold their ground, but the landscape is evolving,” said Classi-Zummo. “Active brands, private labels, and direct-to-consumer players are fiercely competing for a spot in every man’s underwear drawer.” The Skims men’s line features shape-hugging underwear and minimalist athleisure that hews to a neutral palette of brown, khaki, gray and black.

To attract male customers, Skims is relying on star athletes. The brand has tapped Brazilian soccer star Neymar, NBA player Shai Gilgeous-Alexander of the Oklahoma City Thunders and NFL defensive end Nick Bosa of the San Francisco 49ers for its first ad campaign.

“If you really want to communicate with hundreds of thousands of men, sports is the platform to do it,” Grede said.

Kardashian said she hoped the athletes will help Skims show that its pieces can fit a range of body types. “They’re all just individually so great in their fields, but also all three are so different,” she said.

Skims launched in 2019 with lingerie and compression shapewear available in a range of nude tones. Today the brand has a $4 billion valuation, with $670 million in total funding.

Grede said the brand is projected to reach $750 million in net sales this year. Grede didn’t share a timeline for an IPO but said “I believe Skims deserves to be a public company when the time is right.”

Kardashian said Skims shoppers often requested men’s products for their boyfriends and husbands. Skims spent three years developing its men’s line, which Kardashian said could later include pajamas, loungewear and shapewear.

Skims is opening its first stores next year in New York and Los Angeles, which Grede said will sell both men’s and women’s. While Skims’ women’s products sell at Nordstrom, Saks Fifth Avenue and Net-a-Porter, among other select retailers, Grede said its menswear will initially only sell online and in its stores. Eventually, he said, the company plans to sell to retail partners.

In addition to Hanes or Fruit of the Loom, Skims will now also compete with some of America’s biggest sportswear brands like Under Armour and Nike. Grede is also the co-founder of Brady, the sports apparel brand from Tom Brady. A spokesperson said there is no overlap between Brady and Skims.

Kardashian said the brand has been sending its men’s products to influencers and athletes ahead of the launch. The campaign featuring Neymar, Gilgeous-Alexander and Bosa will run across digital, social media and TV.

“The challenge is always to get guys to try on a new product because we are very set in our ways,” Grede said. “To get them to try a new brand can take time, but I think once they try Skims, they won’t go back. Men are obsessed with comfort.”