'Inflation will surprise to the downside in 2026': Why Wall Street expects juiced economy, stock gains this year

Economic Outlook - Wall Street strategists predict stock market gains in 2026 driven by Fed rate cuts, tax incentives, and lower-than-expected inflation [1] - Longview Economics anticipates inflation will surprise to the downside in 2026, despite a weak job market in 2025 [2] Federal Reserve and Interest Rates - A cooling labor market may prompt the Federal Reserve to cut rates, leading to lower bond yields and cheaper borrowing costs [3] - Lower yields could stimulate economic activity and maintain high corporate capital expenditures [3] Corporate Capital Expenditures - Companies are expected to accelerate capital expenditures in 2026 to take advantage of 100% depreciation benefits from the OBBB Act [4][5] - CFOs are incentivized to maximize multi-year capital spending in 2026 to avoid missing tax benefits [5] Consumer Market Dynamics - Economic growth is occurring alongside affordability challenges, with a K-shaped divide affecting consumer spending [6] - Easing rents and fading tariff impacts are expected to help the PCE index trend toward the Fed's 2% inflation target [6]