The U.S. economy heads into 2026 in an unusual place: is from its peak , than many expected, and yet American households say that things . , especially with a major on the horizon.
To find out what’s coming next, The Conversation U.S. checked in with finance professors and , how . held up notably well. Here’s what they’re expecting from 2026 – and what that could mean for households, workers, investors and the Federal Reserve:
What’s next for the Federal Reserve?
The Fed closed out 2025 by by a quarter of a percentage point – the third cut in a year. The move reopened a familiar debate: Is the Fed’s easing cycle coming to an end, or does the signal a on the horizon?
While unemployment remains , it has , and are starting to feel more pressure. What’s more, history reminds us that , . So economists are continuing to .
So far, the broader labor market offers little evidence of widespread worsening, and the most recent than the top-line numbers made it appear. Layoffs remain low relative to the size of the workforce – though – and more importantly, to hold up. That’s in spite of the economy adding .
; it’s faster than the pre-pandemic norm and on par with . That said, the has important that Federal Reserve policymakers use to make their decisions. Does that raise the risk of a policy miscue and potential downturn? Probably. Still, we aren’t concerned yet.
And we aren’t alone, with many economists noting that . Other .
Consumers, the largest driver of economic growth, – – with strength becoming increasingly uneven. Delinquency rates – the share of borrowers who are behind on required loan payments , – from historic lows, while savings balances have declined from unusually high post-pandemic levels. A more pronounced in household financial health has emerged, with and financial hardship.
Still, other households are stretched, even as . This contributes to a continuing a term popularized by to between strong aggregate economic data and weaker lived experiences amid economic growth. As lower-income households feel the pinch of tariffs, wealthier households continue to .
For the Fed, that’s the puzzle: solid top-line numbers, growing pockets of stress and noisier data – all at once. With this unevenness and , the next big question is what could tip the balance toward a slowdown or another year of growth. And increasingly, all eyes are on AI.
Is artificial intelligence a bubble?
The , to everything from to the .
undoubtedly look expensive . This may be because from the Fed soon, are . In some ways, this looks similar to bubbles of the past. At the risk of repeating : Is this time different?
Comparisons are always imperfect, so we won’t linger on the between this time and two decades ago when the dot-com bubble burst. Let’s instead focus on what we know about bubbles.
Economists often categorize bubbles into . Inflection bubbles are driven by genuine technological breakthroughs and ultimately transform the economy, even if they involve excess along the way. Think the internet or transcontinental railroad. Mean-reversion bubbles, by contrast, are fads that inflate and collapse without transforming the underlying industry. Some examples include the and .
If – and early productivity gains and rapid cost declines suggest it may – then the more important questions center on .
for predictable, cash-generating investments, while equity is more . and often signals that traditional financing is unavailable. So we’re watching and the of AI investment closely. This is particularly important given the growing reliance on debt financing in some large-scale infrastructure projects, especially at and , which .
For now, , is warranted. Concentrated bets on single firms with limited revenues remain risky. At the same time, it may be premature to lose sleep over “technology companies” broadly defined or even . across the economy, . And, as always, if it helps you sleep better, and cash is rarely a risky decision.
A quiet but beneath the surface. are , the largest and most heavily weighted companies in major stock indexes. , and are benefiting from improving sentiment, cost efficiencies and the prospect of greater policy clarity ahead. Still, and housing with midterms looming.
Will things ever feel affordable again?
Policymakers, economists and investors have increasingly with housing remaining one of the for many Americans, particularly first-time buyers.
In some cases, have over the past decade, forcing households to delay purchases, take more risk or even on hopes of homeownership entirely. That pressure matters not only for housing itself, but for sentiment and consumption more broadly.
Still, there are early signs of relief: in many markets, especially where new , like in . such as zoning rules, housing supply, population growth and job markets continue to dominate, but even modest improvements in affordability can meaningfully affect household balance sheets and confidence.
Looking beyond the housing market, inflation has since 2021, but certain types of services, such as insurance, remain sticky. Immigration policy also plays an important role here, and changes to and inflation dynamics going forward.
There are real challenges ahead: , , amid and .
But there are also meaningful offsets: , , and that may help cool inflation without breaking the labor market.
Encouragingly, greater clarity on taxes, tariffs, regulation and monetary policy may arrive in the coming year. When it does, it could help unlock delayed business investment across multiple sectors, an outcome the Federal Reserve itself appears to be anticipating.
If there is one lesson worth emphasizing, it’s this: Uncertainty is always greater than anyone expects. As the oft-quoted baseball sage Yogi Berra memorably put it, “It’s tough to make predictions, .”
Still, these forces may converge in a way that keeps the expansion intact long enough for . Perhaps 2026 will be , as attention shifts from markets and macroeconomics that .
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