Bank of America (BofA) forecasts that the U.S. economy will grow 2.4% in 2026. According to the bank, five major factors will help support economic activity even as inflation stays slightly above the Federal Reserve’s target.
1. OBBBA Stimulus Will Boost Growth
The ongoing support from the OBBBA stimulus package is expected to add 0.3–0.4 percentage points to GDP. This comes mainly from increased consumer spending and stronger capital expenditure.
2. Fed Rate Cuts Will Start Working in Late 2026
BofA says the lagged impact of Federal Reserve rate cuts will lift economic activity in the second half of 2026, helping businesses and households through cheaper borrowing costs.
3. Trade Policy May Turn More Growth-Friendly
BofA expects U.S. trade policy in 2026 to be less restrictive and more supportive of growth, regardless of tariff-related legal decisions. A smoother trade environment could help exports and supply chains.
4. AI Investment Will Remain Strong
Artificial Intelligence investment—across data centers, chips, software, and automation—will continue to be a major driver of economic activity. Companies are expected to maintain high spending on AI infrastructure.
5. Base Effects Will Lift GDP
Because of earlier shutdowns and disruptions, the economy will benefit from a mechanical uplift known as base effects. This makes year-over-year GDP look stronger.
Inflation and Labor Market Outlook
BofA expects headline PCE inflation at 2.6% and core PCE at 2.8% in 2026—still above the Fed’s 2% target. The labor market is projected to cool gradually, with unemployment falling to 4.3%.
JPMorgan Warns of Major Risks Ahead for 2026
JPMorgan says the strong 2025 rally (S&P 500 up 14%) doesn’t eliminate dangers looming in 2026. The bank highlights big risks: uncertainty over tariffs affecting $350B in revenue, escalating US-China tensions over critical materials, a weakening labor market, rising cost pressures, and political instability heading into the midterm elections.
Overall Outlook for 2026
Bank of America views 2026 as a broadly positive year for the U.S. economy. While risks remain, the combination of stimulus, rate cuts, AI investment and more supportive trade policy should keep growth steady.
