The US Economy in 2026: Momentum Trumps Uncertainty

The United States economy has come through the turbulence of 2025 in robust shape, and we expect this momentum to continue well into the new year, before probably fading a little in the second half. Overall, however, Societe Generale expects GDP growth of 1.5% to 2% for 2026, after around 2% this year – ensuring the US will remain the fastest growing major developed economy.

Reasons to be cheerful

Behind that momentum is, above all, private sector investment -- led by the massive capital expenditure triggered by the AI arms race but also including spending on electrification, space cooling and the energy transition more generally. While it may be an exaggeration to say that US growth would have stalled this year without the data center boom, its impact is certainly significant. To pick just one of many eyewatering statistics: the hyperscalers are on track to issue $200 billion of corporate bonds in 2025, and we expect that figure to increase by 25-50% next year.

Another reason to be optimistic about 2026 is that the fiscal stimulus from the One Big Beautiful Bill is frontloaded, with measures such as a 100% tax allowance for depreciation, the abolition of taxes on tips and overtime, and higher childcare allowances being phased in ahead of spending cuts. 

On top of that, the first quarter will benefit as government and consumer spending bounce back from the recent government shutdown, as federal programs resume and furloughed employees return to work and receive their backpay. It is also worth noting the wealth effect from a still strong stock market and the fact that financial conditions are loose – and getting looser as the Federal Reserve cuts interest rates and starts to once more expand its balance sheet.

Some notes of caution

As 2026 progresses, however, there are some risks to consider, with a principal one being the direction of monetary policy. The Fed has been on a downward rate path, with the December 10 cut marking the third reduction in 2025, which, of course, stimulates economic activity. 

Having said that, at Societe Generale we expect only one or two more cuts next year – fewer than most other analysts – since we are concerned about a possible reacceleration of inflation, or at least inflation expectations. And we believe the central bank will increasingly have to take that into account and that this will override its concerns about a slowing labor market. 

Of course, if a markedly dovish new Fed chair is named to replace Jay Powell next May, then significantly lower rates will be back on the table – though the impact on markets and financial conditions may be offset by growing worries about declining central bank independence.

Whoever becomes its new head, though, a key point to note is that the Fed does not have the policy tools to deal with what is aptly described as an increasingly K-shaped economy. Over 50% of US consumer spending comes from the top 10% of the population, who are doing just fine as financial assets continue to inflate. Meanwhile, the other nine tenths are starting to struggle in the face of rising prices for goods and services and growing layoffs. 

Feeding into that dilemma is uncertainty over tariffs. While both households and corporates have proven to be tremendously resilient in the face of the back-and-forth of the administration’s trade policy, the outlook is even messier at present given upcoming judicial rulings on the legality of the current tariff regime. 

Whatever happens, higher tariffs are likely to stay with us and the White House has a range of national security and fair-trade mechanisms to justify reimposing them if the current levies are struck down. Not least because their income is making a significant contribution to keeping a growing federal deficit in check. This is, however, another source of inflation as well as of uncertainty.

Finally, the end of next year sees the mid-term elections, adding political uncertainty into the mix and raising the prospect of a gridlocked government and putting an end to what has been a clearly pro-business and pro-market economic policy. 

The glass remains half full

Despite all of this, the outlook for the US economy during 2026 remains broadly positive. American consumers have shown remarkable resilience over many economic cycles and corporate investment may continue to surprise on the upside. Looking across the rest of the world, meanwhile, there are no other markets that offer investors as many opportunities across securities markets that are underpinned by openness, clear rules, trustworthy data and – by and large – sensible economic policy.