📍The US economy in 2026 will fall into a "lite stagflation" — a milder version of the stagflation era, with sluggish growth and sticky inflation.

📌US economic growth is likely to hover around 1.5-2%. The cycle where fiscal stimulus and asset price increases are the main drivers of the market, while the rest of the economy follows at a slow pace.

📌Inflation remains subdued due to OER reflecting housing market lags. Non-housing services will decline very slowly as they follow wage trends; tariffs have not yet fully reflected the impact, leaving room for price increases throughout 2026. The Fed’s journey to bring core inflation back to 2% remains bumpy, with the 3% mark becoming a persistent anchor zone. Even the Fed is uncertain about hitting its target before 2027.

📌Labor cools down: Unemployment reaches its highest since 2021; the Employment Cost Index (ECI) drops to its slowest growth rate in four years. Wage pressure weakening is not strong enough to bring down service inflation at the pace the Fed desires (but also cannot be too weak).

📌The outlook for 2026 still revolves around a K-shaped consumption structure. When the top 20% hold an average of $1.6M in financial assets per household:
- Purchasing power is concentrated among the wealthy, lifting overall spending even though most households are not earning income.
- Hard data and soft data diverge: Spending remains stable thanks to the motivation from the wealthy, but consumer confidence will decline as surveys evenly split opinions.
- Sticky service inflation: Demand from the wealthy maintains high price levels even as overall wage income weakens.

=> The result is a relatively stable growth floor in the US driven by fiscal policy and the wealth of the upper class, but with an extremely low growth ceiling. Not to mention the wave of layoffs (which could be even more intense in 2026) due to AI-driven automation, leading to massive unemployment, persistent inflation, and erosion of general purchasing power. Meanwhile, profits of large corporations are increasing thanks to replacing human workers with AI, creating a highly polarized economy.