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To help you make plans for the year ahead, here are 10 of our top forecasts for 2026 for the economy, politics, new technologies and more.
The economy
1) The economy will hold up relatively well. But it won’t feel especially good for everyone. The pattern of K-shaped spending — high-income folks splurging due in part to their investments doing well, while lower-income households curb their spending — figures to continue and may grow more pronounced. Once again, inflation won’t return to the 2% level the Federal Reserve aims for, while anemic hiring appears set to continue. That’s a tough combination for less affluent consumers. But barring a big drop in financial markets, the wealthy will spend freely.
2) The Fed will find itself in a tough spot, trying to encourage faster hiring by cutting rates a couple of times while inflation is still above the 2% the Fed wants to reach. Whichever candidate President Trump chooses as the next Fed chair will favor trimming rates to goose the economy, but he is likely to face dissent from Fed officials who think the central bank should be more focused on wrestling inflation down.
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3) Look for the frozen housing market to finally thaw a bit. Mortgage rates should settle into the low to mid-6% range — not exactly cheap, but low enough to get more potential buyers off the sidelines and into the game. In fact, buyers should regain a bit of leverage in some parts of the country where the inventories of homes for sale are running above demand, namely the Sun Belt, Florida and Texas figure to see prices dip for that reason, in the order of 2-5%. But the Northeast will see prices rise by similar levels, due to lower inventory and stronger demand.
4) After spiking in 2025, U.S. tariff rates will pull back a bit in 2026, on average, as trade deals or negotiated exemptions take effect, and some duties are likely nixed by the Supreme Court. The uneasy stalemate in the trade war between the U.S. and China will probably hold next year. Both nations will want to maintain some stability in trade relations ahead of the midterm elections here. Vietnam, India and Thailand will make inroads in the U.S. market at China’s expense.
5) Financial regulators will be busy policing AI “autonomous agents,” artificial intelligence-powered algorithms that can already approve loans and execute trades on their own. The Securities and Exchange Commission (SEC) and the Fed will introduce new regulations requiring banks to treat their AI agents as digital employees subject to dedicated monitoring. Look for the emergence of a new role at banks, the chief AI risk officer (CAIRO), to ensure compliance.
Politics
6) Look for Democrats to take back the House from Republicans, who now hold a precariously thin margin of seven seats. The swing in power won’t be substantial, with Dems likely to hold a similarly small advantage of 10 seats at best. Despite this, the House will pour cold water on the remaining two years of President Trump’s legislative agenda, forcing him to cut deals with Democrats, a scenario he’s been able to avoid so far with the GOP in total control of Congress. But Republicans will retain control of the Senate, and may even gain a seat or two, as the political landscape favors the GOP in the upper chamber. Susan Collins of Maine is the only vulnerable GOP senator up for reelection, although Democrats are bullish that they can flip North Carolina’s open seat by running former Governor Roy Cooper. Democrats face tough fights to retain seats in Georgia and Michigan, states Trump won in 2024.
Business and investing
7) Overseas AI data centers will see a surge in development and interest. Increasingly, foreign nations and businesses want local AI computing and data. That has spurred foreign cloud computing companies to build data centers to compete with U.S. giants, such as Amazon, Microsoft and Alphabet. For example, Europe’s Stackit caters to EU privacy and data rules for domestic customers. American cloud giants will ramp up data center projects overseas, where they can find cheap power or faster permitting for power, a big constraint in the U.S. and many other places. With the demand for sovereignty over data, look for U.S. tech giants to increase partnerships with local cloud providers, especially in countries like India, the United Arab Emirates and South Africa.
8) Expect lots of stock market and business jitters around AI investment. But major tech companies won’t let up on the astronomical spending that is required to maintain leadership with leading-edge AI. Frontier AI models, as leading AI is called, require huge amounts of computing power to get better. Tech giants and start-ups don’t see any way around the spending spree for now, since it’s the only reliable way to improve AI and stay at the forefront. Even as their financing gets stretched and grows riskier, big tech firms will forge on. Expect glimmers of lower-cost AI to make investors jumpy in 2026, especially as analysts closely scrutinize the cheaper AI models coming out of China.
9) SpaceX’s IPO will be a wild ride with lots of risk to early investors. The targeted valuation — reportedly $1.5 trillion — stems from very rosy predictions for the future of the rocket and satellite broadband firm. Its Starlink internet service is poised to gross about $16 billion in 2026, and future growth could get harder. SpaceX needs fresh funding for data centers in space, a Mars mission, a moon base and more. We think space data centers are an interesting tech project, but could take a decade or more to pan out, and even then, will be small in scale.
Foreign policy
10) 2026 will see the hardest push yet for a Russia-Ukraine peace agreement. Washington badly wants one, and Kyiv clearly sees the writing on the wall, so it has moved to compromise on some important sticking points, including land, in exchange for NATO Article 5-like security guarantees from the U.S. and Europe. Moscow remains the major wild card. Russian President Vladimir Putin has so far not been willing to budge on his maximalist demands for a peace deal. If Putin does ultimately accede to a U.S.-negotiated agreement, don’t be surprised if Moscow starts making plans to reignite the conflict a few years down the line.
This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.
