Well, what do you know — once again nailed it back in February about the Federal Reserve lowering rates in September. For the smart money that has been following me. The data points are stacking up exactly where I said they would: rates easing, productivity gains showing up, tax and deregulation tailwinds in place.
That doesn’t mean it’ll be a straight line up — there will be drawdowns, the kind that shake out the weak hands and fuel the talking heads on TV. But step back, and the outlook for 2026 looks solid. Growth is real, earnings are broadening, and the U.S. economy is setting up for a “Goldilocks” run.
So no, it’s not blind optimism — it’s math. Don’t worry,(about draw downs) be happy.
Scenario Setup (Assumptions)
- 10-year Treasury yield: 3.50% by June 2026
- 2-year Treasury yield: 3.00% by June 2026
- Unemployment: ~4.5%
- Wage growth: ~3.5%
- Gasoline: ~$3.00/gal
- Tariffs: 15% average
- Deregulation in key industries
- Productivity gains from AI adoption
- Consumer & corporate tax cuts (TCJA extended)
Growth Adds & Subtracts (Real GDP, 2026)
| Factor | Impact on 2026 GDP Growth |
|---|---|
| Baseline Trend Growth | ~1.8% |
| AI Productivity Gains | +0.4 to +0.6 pp |
| Deregulation | +0.2 to +0.3 pp |
| Consumer Tax Relief | +0.2 to +0.3 pp |
| Corporate Tax Effects | +0.1 pp |
| Cheap Energy (~$3 gas) | +0.1 to +0.2 pp |
| Tariffs (15%) | −0.5 to −0.6 pp |
Net Real GDP Growth Thesis
Summing the adds and subtracts, the U.S. economy is positioned for real GDP growth of ~2.6% to 2.7% in 2026. This is above the CBO baseline of ~2.2% and reflects a balance of productivity-led supply-side gains and modest fiscal stimulus, offset by trade headwinds.
S&P 500 Earnings Outlook
- Broader earnings growth beyond the Magnificent 7 expected in 2026.
- Continued strong corporate buybacks supporting EPS.
- Consensus 2026 EPS: $295–$305 (midpoint ~$300).
- Implies ~10% y/y earnings growth, supported by margin expansion from AI, easing wage pressures, and lower rates.
TL:DR
2026 is shaping up as a year of balanced growth: solid ~2.6–2.7% GDP expansion, falling interest rates, and record S&P 500 earnings (~$300 EPS). Tailwinds from AI productivity, deregulation, tax relief, and cheap energy outweigh the tariff drag.
The U.S. economy enters 2026 in a “Goldilocks” zone of sustainable growth without runaway inflation — with a few drawdowns along the way, just to keep the skeptics loud (and wrong)
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