Welcome to the economic outlook for the US economy.

Now, today we're gonna focus on where we see 2026 going, um,

when it comes to economic growth, labor inflation.

Now to really get us started, we have seen that globally,

the pace of activity has really slowed in 2025,

but one really enduring feature has been uncertainty.

As we made our way through the year,

the economy remains really resilient.

It's been supported by consumer strength

and targeted investment.

But what we're gonna talk about at length today is

that the underlying signals are increasingly distorted.

So we have elevated tariffs,

we have shifting immigration policies

and a fiscal backdrop that are all sort

of complicating visibility when we look at the next

12 to 18 months.

Now for businesses, this means that data volatility

and conflicting indicators, so

resilience spending on one hand,

but clear signs of softening labor momentum on the other,

for example, are prevalent

and going to be, continue to be relevant in 2026.

So I would say that really the takeaway is

that we're not necessarily an economy in active decline,

but we are an economy that's in a transition period.

And so we're gonna see some really interesting movement

as we make our way into point places.

Now to really get us started,

let's talk about overall economic growth.

What we see for 2026 is that much of the volatility

that really marked the first half of 2025 tied to inventory

and trade adjustments is going to be behind us.

And what's emerging is a more uneven domestic picture.

So consumption strength, for example,

really heavily concentrated among higher income households

that are benefiting from elevated equity and housing values.

So on the other hand, middle

and lower income families, they face more pressure from,

from inflation interest costs and selling wage growth.

So in short, growth is persisting absolutely,

but the breadth of gross growth is a little bit more narrow

and it's absolutely more bifurcated as we get into 2026.

So that's where this conversation about a khap economy

really comes, um, comes to fruition.

Now, when we talk in terms of inflation,

this becomes really paramount, right?

So core inflation is expected to hover around two

and a half to three point a half percent through 2026.

It's above target, but really anticipated

to gradually cool in the second half of 2026.

As those tariff related cost pressures sort

of show up in a persistent way in the first half

of the year, then really fall out

of the year over year numbers.

So a far cry from the inflation experience in 2021 and 2022,

but persistent and a sworn in the Federal Reserve side.

Nonetheless, with all of this in mind,

the Federal Reserve is shifting into

a cautious easing cycle.

So they started cutting rates in September, anticipated

to continue in December

with 50 more basis point cuts in 2026.

And what that means is

that monetary policy is really moving towards a more neutral

stance, not necessary, not necessarily active stimulus.

And a big reason for this, right,

because we have sort of this persistent inflation picture,

we also have the fed cutting rates.

Those things maybe seem to be out of sync with each other,

but when we look at the labor picture, we start

to get a lot more insight into why this is.

And we've seen quite a few signs of labor market softening.

Now, part of this is cyclical.

The other part is going to be, um, a little bit

of normalization, which some with some

of the immigration demographic trends that we've seen.

So the labor market absolutely continues to recalibrate

and normalization is sort of tipping towards softening,

which is what the Federal Reserve is

sort of struggling against.

So job gains have slow to around 29,000, um,

monthly gains.

That's a fraction of the free 2020 case.

Now, immigration demographic trends have lowered the break

even employment rate, meaning that fewer jobs are now needed

to hold the unemployment rate steady.

Um, but we're also seeing this augmented

by companies being really cautious in hiring trends.

And that means that they're just really more hesitant

to hire, given the economic outlook.

And so the Federal Reserves pivot.

It really exemplifies this factor, right?

It's sort of this tension where yes,

inflation is persistent.

Ideally it's a one-time shock from these

tariff induced price pressures.

On the other hand, we sort of need to take more active role

as we try to

diminish the overall negative impacts on the labor market.

Now, all of this is coming to a head, right?

Because we have elevated inflation,

we have a weakening labor market,

we still have pretty resilient growth.

And a lot of this is coming from consumer spending.

And this is being driven by the wealth effect,

which we don't love to see

because it means

that the overall economic growth we're

experiencing isn't broad based.

So what do I mean by this?

What I mean is that affluent households continue

to anchor consumption growth to really powered

by record high equity markets.

Also solid real estate valuation.

So the tech heavy SMP concentration really amplifying

that wealth effect and also magnifying the potential

for downside risk if asset prices correct.

So for now, discretionary demand from the top income tiers

is offsetting softness elsewhere, really working

to keep aggregate consumption steady.

But that balance remains quite precarious.

And so when we talk about what are the overall paths

that 2026 can take, of course we have a baseline

that we've largely discussed today.

We have optimistic pessimistic, we have upward pressure

or the potential

for upside coming from faster productivity gains,

renewed business investment

or a smoother policy path

that can really help restore both business

and consumer confidence.

On the downside, we have risks stemming from deeper labor

market weakness, tighter credit,

or an asset correction that undermines some of

that robust spending that we've seen.

So the outlook remains fair.

Finally, balanced steady growth is absolutely achievable,

but unfortunately not guaranteed so short,

we're really not looking at a crisis economy.

We're looking at an economy that has had quite a lot

of short term resilience, but there are absolutely pressures

as we make our way through 2026.

So businesses are going to need to continue to,

to be clear-eyed in their planning, nimble, flexible,

all things that have been really necessary

for success over the last several years will continue

to be key in 2026.

With that, that's what we see for the US economy.

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With that, I just wanna say thank you for your time.