Introduction to the New Year
The year 2026 has just begun, and it already feels like a lot has happened. With news about Venezuela, Iran, Greenland, and more, it’s easy to feel overwhelmed. But when it comes to the economy, has anything really changed?
The Economic Outlook
Despite all the news, the economic outlook doesn’t seem to have shifted much. There are claims that the US economy is growing at 5%, but this number might not be entirely accurate. The Atlanta Fed’s estimate of fourth-quarter growth will likely be adjusted as more data comes in. The truth probably lies somewhere between the estimated 1.8% and 5%.
Understanding the Growth Backdrop
The current growth is largely driven by high-income consumers and investments in artificial intelligence (AI). As long as the equity market, especially tech, remains strong, there’s no reason to think this growth will suddenly stop. The S&P 500 is still up since the start of the year, which is a positive sign.
Factors Influencing Consumer Spending
American consumers, particularly those with lower to middle incomes, can look forward to tax refunds from their tips and overtime work in 2025. These refunds, which tend to peak in late February, are expected to be about a third higher than usual. This influx of money could boost consumer spending and support the economy.
Conclusion
In conclusion, despite the chaotic start to 2026, the economic fundamentals don’t seem to have changed significantly. While growth estimates may vary, the underlying factors such as consumer spending and investment in AI are still positive. As the year progresses, it will be interesting to see how these factors play out and impact the economy. For now, it seems that the economic outlook remains relatively stable, despite the initial flurry of news and events.
