Growth Surprises, Skyrocketing Valuations, and Tax Challenges

This week’s headlines span faster-than-expected growth, eye-watering valuations and a shift in tax policy. Below, I break down what the latest U.S. data really tells us, what SpaceX’s IPO could signal, and why a tax U-turn points to a much bigger challenge.

The U.S. economy grew at an annualised rate of 4.3 percent in the third quarter, according to the Bureau of Economic Analysis, comfortably beating expectations of around 3.2 percent. It was one of the strongest growth prints in recent years and yet another reminder that the U.S. economy continues to defy repeated predictions of an imminent slowdown.

Consumer spending once again did much of the heavy lifting, supported by a resilient labour market and solid income growth. Government spending also picked up, while trade added an unexpected boost. Exports held up better than anticipated, while imports fell, mechanically lifting the headline GDP figure. That trade dynamic mattered more than many forecasters had assumed, and tariffs played a quiet role in shaping it. Firms appear to have adjusted purchasing patterns in response to trade policy, front-loading imports earlier in the year and pulling back later, which flattered growth in the quarter without necessarily signalling stronger underlying demand.

This helps explain why so many forecasts missed the mark. Economic models tend to struggle when policy changes alter behaviour quickly and unevenly. Tariffs, fiscal policy shifts and lingering post-pandemic distortions have made recent growth harder to predict than headline indicators suggest. The miss was less about a single faulty assumption and more about how sensitive the economy has become to policy-driven shocks.

Crucially, few economists expect this pace of growth to persist. Many of the supports behind the Q3 surge look temporary, and most projections point to a gradual return toward trend growth in 2026. The result tells a story of resilience, but also one of volatility, where strong quarters reflect adaptation rather than a permanently higher growth path.

SpaceX, the aerospace firm founded by Elon Musk, is reportedly preparing for a major initial public offering in 2026 that could raise more than $30 billion and value the company around $1.5 trillion. If realised, that valuation would surpass any IPO in history and place SpaceX among the largest publicly listed corporations.

For many investors, the prospect of a SpaceX listing serves as a proxy for sentiment toward high-growth, loss-making companies. One common metric used to assess early-stage firms is the price-to-sales ratio, which compares a company’s valuation to its revenue. A valuation near $1.5 trillion against annual revenues of perhaps tens of billions would imply a price-to-sales multiple north of 60, a level that dwarfs traditional benchmarks in established industries. Such high multiples suggest that the market is pricing in an assumption of future dominance in sectors like satellite internet, launch services, and potentially government contracts.

That optimism speaks to the broader mood among some investors that extraordinary growth opportunities justify elevated valuations, even when current earnings are modest. Still, high multiples carry risk if future growth slows or fails to meet expectations. The SpaceX story, therefore, highlights how much confidence is priced into the valuations of advanced technology firms and what investors must weigh when a private giant prepares to list.

The government’s recent adjustment to farm inheritance tax relief, which raises the effective tax-free threshold from £1 million to £2.5 million, highlights a long-standing difficulty in tax policy: how to tax wealth that exists largely on paper rather than in cash. Agricultural land values have risen sharply over recent decades, driven by scarcity, planning restrictions and investment demand, even as farm incomes have remained volatile and, in many cases, modest.

Under inheritance tax rules, liability is triggered by the transfer of ownership rather than by income generation. A farm may be highly valuable in asset terms but generate limited annual revenue, leaving heirs with a significant tax bill and little liquidity to pay it. The policy change reduces that pressure, making it easier for farms to pass between generations without being broken up or sold to meet tax obligations.

From an economic perspective, the relief is designed to preserve continuity in agricultural production and avoid forced asset sales that could disrupt rural businesses. At the same time, it raises broader questions about efficiency and distribution. Generous reliefs can inflate land prices by embedding tax advantages into asset values, potentially making entry harder for new farmers and reinforcing concentration of ownership.

The wider lesson extends beyond agriculture. As asset prices outpace incomes across the economy, governments face increasing difficulty designing taxes that raise revenue without distorting behaviour or penalising households that are wealthy on paper but cash-constrained in practice.

Price-to-sales

A valuation metric that compares a company’s market value to its annual revenue. A high price-to-sales ratio suggests investors expect strong future growth, while a lower ratio implies more modest expectations.

Assets vs Income

Assets are what you own and what they are worth, such as property, land, or shares. Income is the cash you receive over time, like wages or business revenue. Someone can appear wealthy based on assets while having limited income available to spend or tax.

Liability

A liability is a financial obligation that must be paid, either now or in the future. This can include debt, taxes owed, or other legally binding payments.

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Featured Image: Falcon Heavy Demo Mission, SpaceX, Flickr