US Key Themes 2026: Exceptionalism amid fragmentation

US exceptionalism is alive and well, and that won’t change in 2026 as we expect the economy to outperform consensus expectations, supported by wealth effects, AI- and non-AI-related business equipment spending, and solid productivity growth. In this research, we’ve identified four key themes for the US economy in 2026:

1. A fragmented economy. A rising tide won’t lift all boats as exceptionalism will occur amid an increasingly bifurcated economy. The health of the economy will depend on who you ask – employed versus unemployed, large versus small business, and high- versus low-income households. The reduction in dynamism in the labor market will contribute to a jobless expansion. This leaves the economy vulnerable to shocks because the labor market is the main firewall against a recession.
2. Core inflation becomes unstuck. In the second half of 2026, the tariff impact will fade, housing disinflation will intensify, and the labor market will remain neutral for inflation. Consumers’ inflation psychology is worth monitoring. Businesses and consumers believe higher inflation is a feature, not a bug, of the post-pandemic economy.
3. AI boost will continue while broader equipment spending increases. The economy will still reap the benefits of increases in AI spending, but fading policy uncertainty, narrow corporate bond spreads, wide corporate profit margins, and investment incentives under the One Big Beautiful Bill Act, point to increased equipment investment outside of AI.
4. Round two of new trade order. Ebbs and flows in tariffs are to be expected, but the USMCA renegotiation will be one of the most important trade events in 2026. We’ll also monitor the US-China trade relations, as the world’s two largest economies strike a delicate balance in their efforts to decouple from one another in the least economically disruptive manner possible.

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