New Federal Reserve research examines the relationship between high tariffs and reduced inflation.By completing this form, you agree to receive marketing communications from PYMNTS and to the sharing of your information with our sponsor, if applicable, in accordance with our Privacy Policy and Terms and Conditions .Complete the form to unlock this article and enjoy unlimited free access to all PYMNTS content — no additional logins required.The research note from the Federal Reserve Bank of San Francisco, pu ...

Key Points The S&P 500 has suffered an average intra-year decline of 18% during midterm election years, and volatility may be heighted in 2026 because of President Trump's tariffs. The S&P 500 currently trades at 22.2 times forward earnings, a rich valuation seen during just two periods in the past: the dot-com bubble and the Covid-19 pandemic. The median forecast among 19 Wall Street investment banks and research organizations puts the S&P 500 at 7,600 by the end of 2026, implying 11% upside from it ...

4 January 2026 | 5:40PM EST Economics Research US ECONOMICS ANALYST 2026 Inflation Outlook: Traveling Toward Target Ronnie Walker +1(917)343-4543 | ronnie.walker@gs.com Goldman Sachs & Co. LLC Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html. c45a43530f604d12bcb9a82b5aa6b9f6 n Progress on core PCE inflation stalled this year at 2.8% ...

Core Insights - Tariffs are negatively impacting U.S. families, but President Trump's proposed $2,000 tariff rebate checks could offset these costs, particularly benefiting low-income families [2][4] - The Tax Policy Center's report indicates that the lowest 40% of income earners could see a tax burden reduction of over $2,300 due to the rebate checks, while the top fifth of earners would not experience a tax decrease [3][9] Tariff Impact - Without the rebate, tariffs are projected to increase the average tax burden on families by $2,110 in 2026, with the bottom fifth facing a $400 increase and the top quintile facing a $7,330 increase [6][9] - A family of four could receive a total tariff rebate of $8,000, but eligibility may be limited to those earning $100,000 or less [8] Legislative Context - Senator Josh Hawley has proposed a smaller tariff dividend check of at least $600, phasing out for individuals earning over $75,000 [10] - Administration officials are working on the tariff rebate proposal, which requires Congressional approval, but some legislators express skepticism regarding its funding [11] Financial Implications - Trump asserts that tariff revenues, which totaled $31 billion in November, would be sufficient to fund the rebate checks and contribute to reducing the federal debt [12]

A blow to consumer and business demand likely explains why tariffs' impact on inflation is limited. ...

Core Viewpoint - The S&P 500 has experienced significant growth over the past three years, but 2026 may present challenges as the market faces uncertainties related to AI and tariffs [1][4]. Group 1: S&P 500 Performance - The S&P 500 index recorded a growth of 16% in 2025, following gains of 23% in 2024 and 24% in 2023 [1]. - Historically, the S&P 500 has only achieved three consecutive years of double-digit growth in the post-war era, indicating the rarity of such performance [2]. Group 2: Market Predictions - Analysts at Bank of America predict the S&P 500 will reach 7,100 by the end of 2026, a 3.72% increase, while Deutsche Bank forecasts a more optimistic target of 8,000, representing a 16.87% gain [5]. - Other analysts, including those from Barclays, JPMorgan Chase, and HSBC, expect the index to fall between 7,400 and 7,500 points, while firms like Goldman Sachs and Citigroup suggest a range of 7,600 to 7,800 [6]. Group 3: Economic Factors and Uncertainty - Analysts at Vanguard warn that high AI stock valuations and tariff uncertainties could lead to a potential 10% decline in the S&P 500, although a more likely outcome is a 6% increase amid slowing economic growth [7]. - The adaptability of Wall Street was demonstrated in 2025, as markets quickly recovered from a steep crash due to tariff announcements, suggesting resilience in the face of geopolitical challenges [8]. Group 4: AI Sector Valuations - The AI boom has raised concerns about inflated valuations, with approximately 30% of the S&P 500 concentrated in AI companies, which could lead to a sharper market correction [10]. - Nvidia, a leading AI performer, has seen its stock price increase by over 1,300% in five years, with a trailing P/E ratio of around 46, indicating speculative behavior among tech leaders [11]. Group 5: Future Outlook - Despite concerns about a potential market correction, many analysts believe the AI boom will not result in a bust, although investors may face disappointing returns in 2026 [13]. - Diversifying portfolios away from AI could provide stability as analysts express caution regarding the S&P 500's growth prospects moving forward [13].

Core Viewpoint - The S&P 500 has experienced significant growth over the past three years, but 2026 may present challenges as uncertainties around AI and tariffs loom [1][4]. Performance Overview - The S&P 500 index recorded a growth of 16% in 2025, following gains of 24% in 2023 and 23% in 2024 [1]. - Historically, the S&P 500 has only achieved three consecutive years of double-digit growth three times since the post-war era [2]. Market Sentiment and Predictions - Analysts from Bank of America predict the S&P 500 will reach 7,100 by the end of 2026, a 3.72% increase, while Deutsche Bank forecasts a more optimistic target of 8,000, representing a 16.87% gain [5]. - Other analysts, including those from Barclays and JPMorgan Chase, expect the index to fall between 7,400 and 7,500 points, while firms like Goldman Sachs and Citigroup suggest a range of 7,600 to 7,800 [6]. Economic Factors - Analysts at Vanguard warn that high AI stock valuations and potential tariff issues could lead to a 10% decline in the S&P 500, although a more likely scenario is a 6% increase amid slowing economic growth projected at 2.8% [7]. - The adaptability of Wall Street was demonstrated in 2025, as markets quickly recovered from a steep crash due to tariff announcements [8]. Valuation Concerns - The AI sector's valuations are drawing comparisons to the dotcom bubble, with approximately 30% of the S&P 500 concentrated in AI companies, raising concerns about a potential market correction [9][10]. - Nvidia has seen a remarkable increase of over 1,300% in five years, with a trailing P/E ratio of around 46, indicating speculative behavior among tech leaders [11]. Future Outlook - Despite the speculative nature of the current market, many analysts believe the AI boom will not lead to a bust, but investors may face disappointing returns in 2026 [12][13]. - Diversification away from AI could provide more stability in investment portfolios as analysts express caution regarding the S&P 500's growth prospects [13].

4 January 2026 | 5:40PM EST Economics Research US ECONOMICS ANALYST 2026 Inflation Outlook: Traveling Toward Target c45a43530f604d12bcb9a82b5aa6b9f6 Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html. c45a43530f604d12bcb9a82b5aa6b9f6 n Progress on core PCE inflation stalled this year at 2.8% year-over-year, still noticeably above the F ...

Core Insights - The article emphasizes the importance of reviewing investment plans for 2026, highlighting factors such as tariffs, interest rates, and the AI boom that significantly impacted investments in 2025 [1] Investment Plan Overview - An investment plan tailored for the average American was created, considering a median income of $62,192 per year for full-time workers [2] - Recommendations include building an emergency fund and paying down debt before making substantial investments, along with setting goals and establishing a time horizon [3] Recommended Investment Allocation - The suggested core portfolio allocation for 2026 includes: - U.S. Stocks: 45% (Vanguard Total Stock Market - VTI) for long-term growth - International Stocks: 15% (Vanguard Total International - VXUS) for global diversification - U.S. Bonds: 25% (Vanguard Total Bond Market - BND) for stability and income - REITs/Real Estate: 10% (Vanguard Real Estate - VNQ) as an inflation hedge - Cash/Treasury bills: 5% for liquidity and safety [4][5] Monthly Investment Plan - A monthly investment plan is proposed with a contribution of $900, or approximately 17% of income, allocated as follows: - 401(k) – S&P 500 Index: 40% ($360) - Roth IRA – Target-Date 2060 Fund: 35% ($315) - Brokerage – International ETF (VXUS): 10% ($90) - Brokerage – REIT (VNQ): 10% ($90) - High-Yield Savings/T-Bills: 5% ($45) [6][7] 2026 Economic Outlook - Key economic trends to monitor in 2026 include: - Interest rates may decline by mid-2026, positively affecting stocks and bonds - Inflation is expected to stabilize between 2.5% and 3% - Real estate may slowly rebound as mortgage rates ease - AI, clean energy, and infrastructure are identified as key growth sectors [8][9]

Summary of Key Points from the Conference Call Industry Overview - The conference call discusses the overall performance of the US stock market, particularly focusing on the S&P 500, which is projected to rise nearly 17% for the year 2025, despite trading lower on the last day of the year [1][28]. Core Themes 1. Market Dynamics in 2025 - The year 2025 is characterized by three key themes: noise, quiet, and transition [2][3]. - **Noise**: This includes significant political changes, such as the second Trump Administration, tariff implementations, and new forms of stimulus targeting individual companies [3]. - **Quiet**: Despite geopolitical tensions, such as the ongoing Russia-Ukraine war, the market has shown consistent upward earnings momentum, with S&P 500 EPS estimates for 2026 rising by 6% to $305 from $288 at the beginning of the year [4][6]. - **Transition**: Notable transitions in major themes like AI and GLP-1 drugs are highlighted, with a shift towards custom chips and new drug approvals [7]. 2. Economic Forecast for 2026 - The US GDP growth is expected to average 2.6% in 2026, up from 2.1% in 2025, driven by tariff relief, stimulus, and AI productivity improvements [10]. - S&P 500 EPS growth is forecasted to accelerate to 12.1% in 2026 from 10.5% in 2025, with a year-end target for the S&P 500 index set at 7600, reflecting an approximate 11% increase from current levels [10]. 3. Investment Opportunities - The call emphasizes gaining exposure to pro-cyclical areas, including the Russell 2000, non-residential construction stocks, and AI productivity beneficiaries [11]. - Specific sectors to watch include: - **AI & Power**: Transitioning infrastructure with new companies emerging as leaders [15]. - **Drug Development**: A significant shift in GLP-1 drug performance, with LLY outperforming NOVO [15]. - **E-commerce and Advertising**: Blurring lines between in-store sales and online commerce, creating new revenue opportunities [15]. 4. Policy and Regulatory Environment - The upcoming Supreme Court ruling on the legality of tariffs and potential changes in monetary policy are expected to have significant market implications [9][10]. - The political landscape may shift with mid-term elections approaching, which could introduce further policy noise [9]. 5. Global Economic Factors - China's economic growth is projected to exceed consensus expectations, driven by technological advancements and sustained export leadership [16]. - The potential for productivity-driven margin growth is highlighted, with concerns about a jobless expansion due to a shrinking workforce [16]. Additional Insights - The call notes the retirement of two leading analysts from Goldman Sachs, indicating a transition within the firm [13]. - The discussion includes the evolving landscape of alternative investments, particularly in private credit markets and cryptocurrencies [16]. - The re-emergence of nuclear power and the rise of rare earths are identified as critical components in the energy transition, with significant implications for technology and investment [19]. Conclusion - The conference call provides a comprehensive outlook for 2026, emphasizing the importance of monitoring economic indicators, policy changes, and sector-specific trends to identify potential investment opportunities and risks in the evolving market landscape [25].