Five Reasons to Be Optimistic About the 2026 Economy

One year ago, businesses — especially CEOs — were optimistic about the US economy in 2025, expecting lower taxes and more market-friendly policies from incoming President Donald Trump. Then came April 2, Liberation Day. The market fell, uncertainty rose, and affordability became a more acute concern. Meanwhile, the labor market continued to weaken, as immigration restrictions led to a slower-growing workforce and labor shortages in some sectors.

Nonetheless, the US economy persisted. As the end of the year approaches, the market is up more than 15%, and GDP growth in the third quarter was an unexpectedly robust 4.3%. What will 2026 be like? There are reasons to be optimistic, as many were a year ago. Here are five of them.

Consumers will have more money. Treasury Secretary Scott Bessent said he expects Americans to receive up to $150 billion in tax refunds early next year as a result of the budget law the president signed last summer. Higher earners who spend a smaller share of their income will feel a bigger impact, with the notable exception of people who earn tipped income. Nonetheless, the Congressional Budget Office expects the tax cuts to boost demand and labor supply in the next year. Trump also says he will send $2,000 checks to most households next year to assuage affordability concerns. That should probably be taken with a grain of salt, but the overall direction of tax policy is more spending and confidence for consumers.

Businesses will have more money. Another provision of that budget law is that corporations can deduct 100% of equipment purchases in the year they spend the money. There is evidence that a similar rule, as well as corporate tax cuts, boosted investment by 11% and GDP by almost 1% after the passage of the 2017 tax law. But the share of spending that corporations were allowed to deduct has been declining since the original law passed, and there was uncertainty about what it would be in the future. The new provision is expected to increase capital spending and growth next year and beyond.

Interest rates will be lower. Whether Federal Reserve Chair Jerome Powell will make further cuts is uncertain, but the new Fed chair who takes over in May almost certainly will. It’s also likely that the bank will increase its purchases of Treasury debt, further easing credit concerns.

Energy could be cheaper. The CBO predicts the tax provisions that encourage more production of oil and gas will also have a positive impact on GDP next year. It estimates the impact will be larger in the next few years because some of the regulations are temporary, but it’s not inconceivable that a greater supply of energy will reduce the cost of energy.

There will be more certainty on tariffs. Maybe this is the triumph of hope over experience. Then again, it will be hard to have less policy stability than there was this year. The high level of tariffs announced on Liberation Day not only shocked markets, but the constant uncertainty over what they’d be and what they apply to caused economic damage and probably contributed to higher inflation. Now deals are going into effect and the question of legality will be resolved one way or the other.

Add it all up, and there are reasons to be bullish about 2026. The impact of the budget law alone is expected to boost GDP next year by 0.9%.

Beyond 2026, there are reasons to be worried: All this stimulus may result in a sugar high, and America relearned during the pandemic how dangerous those can be. Rebate checks, a tax cut and lower interest rates risk bringing back high inflation, which would hit US households hard and could further entrench inflation by destabilizing expectations. It could take years for the Fed to rebuild its credibility and ability to influence the inflation rate. There is also the matter of the growing national debt, which this law will contribute to. This will increase longer-term interest rates, which could weigh down consumer spending eventually.

But those are problems for another year — and another column.