PUBLISHER’S NOTE: This is part one of a two-part series.
RICK: If nothing else, I am very consistent. In January, I provided you with my economic and business predictions for the coming year, as I have done in this space for each of the past few years. Another regular occurrence has been that midway through the year, I assess how accurate my predictions have been to this point in the year and how they might do for the remainder of the year.
So, as the third quarter of 2026 begins, it is time for my mid-year assessment and prognosis. Please note that I will only give the “headline” for each prediction. My original 2026 prediction column is found here.
Let’s see how I am doing in my three categories of predictions: i) The U.S. Economy, Financial Markets, and the Federal Reserve; ii) Business Environment; and iii) Government and Politics (impacting business and our finances). This week, I’ll tackle the U.S. Economy, Financial Markets, and the Federal Reserve.
- The U.S. Economy, Financial Markets, and the Federal Reserve
- Prediction #1: GDP Growth for the year at or near 3%.
Assessment: Slightly behind but moving in the right direction. U.S. GDP was 2.1% for the first quarter of 2026, more in line with what economists were predicting for 2026 as opposed to my more optimistic forecast. However, while the second quarter GDP will not be released until July 30, the Federal Reserve Bank of Atlanta’s forecast is between 3.1% and 3.8%.
Prognosis: The jury is still out. Continuing inflation (see #2 below) will likely dampen GDP, causing my prediction to be too high.
- Prediction #2: Inflation rate will remain sticky and likely remain in the 2.5% to 3.0% range.
Assessment: Inflation has been worse than I predicted, but much of that has to do with the unexpected conflict with Iran. While the annual rate of inflation is 4.2% through May, much of that has to do with higher energy prices due to the conflict. Core inflation, which does not include food and energy, is at 2.9% annually, in line with my prediction.
Prognosis: Much will depend on what happens with Iran, particularly the movement of oil through the Strait of Hormuz. While oil prices have come down recently, the situation is tenuous and volatile. Increased tensions could further increase energy prices and overall inflation.
- Prediction #3: Job Market will be better than anticipated.
Assessment: From January through May, this prediction was spot on. While there was much doom and gloom predicted for the job market, hiring was robust for the first five months of the year. However, June was a different story, with only 57,000 jobs added, well below estimates.
Prognosis: Jury is out, particularly after the June numbers. Most are predicting an increase of 70,000 to 100,000 jobs per month, but the June numbers have increased uncertainty.
- Prediction #4: Equity Markets will continue their winning ways, with the S&P increasing by 10-12% for the year, but it will be a bumpy year with multiple corrections of 10% or more.
Assessment: Through the first half of the year, this prediction looks pretty good, but the second half of the year will determine how good it is. The S&P 500 is up 10% for the first half, while the NASDAQ composite is up 16% and the Dow Jones Industrial Average is up more than 8%. We have had one correction of at least 10% back in February, so despite the overall positive returns, things have been bumpy.
Prognosis: Predictions are all over the place for the second half of 2026, although the consensus is about 3% higher than the current S&P 500. However, some are predicting a more than 10% increase. Alas, many are also predicting another 10% correction in the second half. As of right now, my prediction for markets in 2026 looks pretty good.
- Prediction #5: Kevin Hassett will be nominated by President Trump as the next Federal Reserve Chair.
Assessment: I am happily wrong. President Trump chose Kevin Warsh over Hassett, which I believe was the better choice, particularly for the future of Fed independence. Warsh has gone to work right away, creating multiple task forces to improve aspects of how the Fed operates, and based on his previous experience and political acumen, has quickly earned the respect of the international monetary policy community.
Prognosis: No change.
- Prediction #6: The Federal Reserve will make three interest rate cuts (0.25%) this year prior to the midterm elections.
Assessment: The Fed has kept interest rates steady since the start of the year, both at the end of the Jerome Powell era and the start of the Kevin Warsh era. Three cuts are not looking likely.
Prognosis: The Federal Open Market Committee (FOMC), which sets the rates, will meet three more times (July, September, and October) prior to the midterm elections. Given the high rate of inflation, rate cuts appear to be off the table.
