Wall Street Split on 2026 U.S. Economic Growth Outlook
With 2025 nearing its end, major financial institutions are beginning to outline what they expect for the U.S. economy next year.
- Major Wall Street banks expect the U.S. economy to grow in 2026, but disagree on the strength of the expansion.
- Inflation remains a key point of uncertainty, with UBS projecting price pressures to stay above the Fed’s 2% target.
- JPMorgan warns that tariffs, geopolitical risk and political uncertainty could introduce volatility despite continued growth forecasts.
While most forecasts point to continued expansion in 2026, agreement stops there — banks differ sharply on how strong that growth will be, and whether inflation and policy risks could interrupt the recovery.
Economic activity in 2025 has been mixed. The first half of the year delivered a solid performance, highlighted by a strong second quarter, but momentum has slowed as households face higher living costs and weaker sentiment. The changing backdrop is shaping the way analysts evaluate 2026.
Bank of America sees resilience heading into the new year
Among the more optimistic projections is Bank of America, which expects U.S. GDP to rise around 2.4% in 2026. The firm believes that government stimulus through the OBBBA program will continue boosting spending and business investment, while the delayed effect of earlier rate cuts should support economic activity.
The bank also cites AI-related investment and firmer trade dynamics as important growth contributors. Inflation, in its view, will cool only gradually, with headline PCE still above 2.5%, and unemployment easing toward 4.3%.
JPMorgan flags more fragile undercurrents
JPMorgan’s outlook is less upbeat. The firm expects stronger volatility across financial markets next year as economic imbalances become harder to ignore. Its analysts point to early signs of weakness in the labor market, stubborn cost-of-living pressures and the risk of tariffs reshaping fiscal and trade conditions.
Geopolitical exposures — especially U.S.–China tensions tied to critical mineral supply chains — and the possibility of legislative deadlock after the 2026 midterms are also key factors behind the bank’s cautious tone. JPMorgan acknowledges the potential for corporate investment and AI spending to remain strong, but warns that the downside risks should not be discounted.
UBS focuses on inflation as the primary challenge
UBS forecasts solid output but argues that price pressures will remain the central issue of 2026. The bank expects inflation to continue rising into the first half of the year, driven heavily by the pass-through effects of tariffs. It sees core PCE peaking around 3.2% before easing slowly, remaining above the Federal Reserve’s target through late 2026 and potentially into 2027. UBS notes that short-term inflation data may be noisy and difficult to interpret as the economy transitions through this phase.
Despite their differences, major banks share a common expectation: the U.S. economy is unlikely to contract in 2026. Growth is widely anticipated — the disagreement lies in whether inflation, policy risk and global tensions will limit the scale of that expansion. The year ahead is expected to be one in which momentum continues, but stability is not guaranteed.
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