We are halfway through January 2026. Economists are making forecasts.
https://www.wsj.com/economy/economist-survey-2026-growth-outlook-7e5d8feb?mod=hp_lead_pos5
Economists Shrug Off Trumponomics, Boost 2026 Growth Outlook Back Above 2%
Last year, economists slashed expectations amid tariffs and other Trump policies. The latest survey shows those concerns have largely receded.
By [Harriet Torry](https://www.wsj.com/news/author/harriet-torry and
Anthony DeBarros, The Wall Street Journal, Jan. 18, 2026
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Economists now forecast 2.3% GDP growth for 2025 and 2.2% for 2026, revising initial tariff-induced cuts upwards.
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The unemployment rate rose to 4.4% in 2025, but economists expect it to stabilize around 4.5% in 2026 with increased job growth.
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Inflation ended 2025 at 2.7% and is projected to ease to 2.6% by late 2026.
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The forecasts are based on 74 surveys from academic and business economists received by the Journal between Jan. 9 and Jan. 15, before Trump’s latest threat to impose tariffs on countries that resist his demands to acquire Greenland…
Spending by upper-income households was buoyed by high stock-market valuations. That is expected to continue in 2026 given last year’s rate cuts by the Federal Reserve, and continued low unemployment.
Another reason for economists’ sunnier forecasts are the tax cuts from the One Big Beautiful Bill Act that should result in higher refunds this spring, giving a boost to consumer spending. Nineteen states also raised their minimum wage starting this month, another boon to low-income households…
“The growth in the economy is being fueled by consumers in the top 20% of the income spectrum, who benefited from a rising stock market that’s fueled by massive investments on AI and data centers. Fine for now. But it makes the economy quite vulnerable to any sudden pullback in equity values,” said Bernard Baumohl, chief global economist at the Economic Outlook Group. [end quote]
Here is Morningstar’s roundup of predictions. The predicted stock growth isn’t much more than the predicted bond growth. But of course stocks are riskier and more volatile than bonds, especially during a historic stock market bubble.
The Atlanta Fed’s GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2025 is 5.3 percent on January 14. That’s positively sizzling. It’s way above the blue chip consensus. But the Atlanta Fed’s model has been right before so I wouldn’t discount it. The Atlanta Fed’s model was boosted by fourth-quarter real gross private domestic investment growth – a fancy way of saying “billions spent on AI data centers.” Everyone is betting on one horse.
I checked out Wells Fargo Economics because they are usually good. They are optimistic for 2026 and betting on the same AI horse.
When everyone bets on the same horse bubbles form. Price to earnings ratio based on average inflation-adjusted earnings from the previous 10 years, known as the Cyclically Adjusted P/E Ratio (CAPE Ratio) is over 40, compared with a historic median of 16.
All trends are continuing with the usual noise. The stock indexes are rising. VIX is low. The trade is risk-on as SPX and junk bonds are rising faster than the 10 year Treasury price. The Fear & Greed Index is in Greed.
The Treasury yield curve is gradually steepening. The Federal Reserve cut the fed funds rate (short end) but the market supports higher long-term yields due to huge government deficits and economic growth.
The St. Louis Fed Financial Stress Index has been climbing in the past few weeks. The Fed stepped in with some liquidity which can be seen as a slight uptick in Fed assets at the same time that Financial Stress subsided. This may be short-term WD-40 for the gears of the banking system and not large-scale QE which would suppress the long-term bond yields.
The Chicago Fed’s National Financial Conditions Index (NFCI), which provides a comprehensive weekly update on U.S. financial conditions in money markets, debt and equity markets, and the traditional and “shadow” banking systems, is very loose and getting looser.
USD is bouncing up in its channel. Gold, silver and copper are in rising trends. Oil and gas are fluctuating in their channels. Bitcoin’s chin is off the floor so it may have bottomed.
The latest direct government meddling in the economy includes Trump telling credit card companies to cap interest at 10% (which would cancel credit for low-score customers). Also, Fannie Mae and Freddie Mac were instructed to buy roughly $200 billion in agency MBS which would bypass the Federal Reserve in monetary stimulus.
https://www.nytimes.com/2026/01/15/business/fannie-and-freddie-ipo.html
Big Plan for Fannie and Freddie I.P.O. in Flux as Trump Pushes Affordability
Six months after President Trump told Wall Street banks to prepare a swift stock offering, there is no firm plan for how to take the giant mortgage firms public.
By Matthew Goldstein and Lauren Hirsch, The New York Times, Jan. 15, 2026
It was supposed to be one of most consequential I.P.O.s in years, and President Trump wanted the nation’s biggest investment banks to hash out a plan to sell shares of the government-controlled mortgage giants Fannie Mae and Freddie Mac on a major stock exchange…
But six months later, the deal is still a work in progress. … Another critical decision remains outstanding: After any stock offering, will the mortgage firms be freed from government control? Fannie and Freddie were taken over by the federal government during the 2008 financial crisis to prevent their collapse and further disruption to the housing market… [end quote]
What Trump’s $200B MBS proposal means for mortgage spreads, rates
GSE buying plan sparks rally in mortgage bonds, but analysts question durability
January 9, 2026, 12:47pm by Flávia Furlan Nunes, HousingWire
Article Summary
Trump’s $200 billion GSE bond purchase plan sparked a rally in MBS, narrowing spreads and improving yields, although analysts expect only a modes and temporary impact on mortgage rates.
“$200 billion is small, but not insignificant,” Nash Paradise, director of sales at UMortgage, explained in an interview with HousingWire. “The total MBS market is about $9 trillion, so $200 billion was enough to get some instant overreaction in MBS purchasing late yesterday and has the potential to impact the spreads in a range of 0.15% to 0.3%.”… [end quote]
The METAR for next week is sunny.
Wendy