Expert sees rising risks for 2026 US economyーNHK WORLD-JAPAN NEWS

Key Concepts

• Stagflation: A situation characterized by slow economic growth and relatively high unemployment – economic stagnation – accompanied by rising prices (inflation).
• Consumer Price Index (CPI): A measure of the average change over time in the prices paid by urban consumers for a basket of consumer goods and services.
• Tariffs: Taxes imposed on imported goods and services.
• Geopolitical Risk: Risks arising from political events or developments in international affairs.
• Personal Consumption: Spending by households on goods and services.
• Income Inequality: The extent to which income is distributed unevenly among a population.

US Economic Forecast for 2026: Risks and Opportunities

This analysis, based on the insights of Joseph Croft, CEO of Roshchack Advisory, outlines the projected economic landscape for the United States in 2026, focusing on potential risks related to inflation, unemployment, and geopolitical factors, alongside observations on consumer spending and investment strategies.

Inflation and the Impact of Trump’s Policies

Croft anticipates a “soft landing scenario” for the US economy, but cautions against dismissing the risk of stagflation – a combination of rising inflation and unemployment. He attributes potential inflationary pressures primarily to the tariffs implemented by President Trump and ongoing supply chain disruptions exacerbated by geopolitical risks. Specifically, he predicts these factors will maintain relatively high prices, particularly for essential goods like food and natural resources (metals and minerals).

While the US Consumer Price Index (CPI) remained below 3% for most of 2025, lower than initial expectations based on Trump’s policies, Croft highlights the sensitivity of US consumers to price increases in essential items. Recent CPI data illustrates this point: coffee prices rose 19% year-over-year in November, bananas increased by 7%, and beef by 16%. He emphasizes that these high prices pose a significant political challenge for the Trump administration. Croft suggests a likely response from the administration would be to lower tariffs or exempt specific items, citing Trump’s previous action of exempting 220 food items from tariffs following affordability concerns raised in the New York City mayoral and Virginia/New Jersey gubernatorial races.

Consumption Patterns and Income Inequality

Despite inflationary pressures, personal consumption has remained surprisingly robust, driving the majority of economic growth. Croft attributes this to spending by the wealthiest segment of the population and a widening gap in income inequality. He states that the top 10% of the income bracket currently accounts for 50% of total consumption, while the bottom 60% contributes only 20%.

This disparity is flagged as a potential source of instability. Croft warns that continued concentration of consumption within a small portion of the population could lead to “a major disruption in the social order or nationwide protest,” and is “financially or economically… unstable.”

Investment Strategy and Emerging Risks

Croft strongly advises investors to reduce risk exposure in anticipation of increased volatility. He identifies several contributing factors: geopolitical tensions, political stagnation or turmoil (including US midterm elections), and the potential for climate or social disruptions. He acknowledges the stock market’s performance in 2025 as “euphoric” or “overly optimistic,” and, drawing on his experience, suggests that such periods necessitate caution.

He specifically points to the optimism surrounding Artificial Intelligence (AI) technology as a potential area of concern. While AI drove investment in 2025, Croft believes investors may begin to recognize its “dark side” in 2026, leading to a reassessment of the technology and potentially impacting market valuations.

Notable Quote

“I expect a soft landing scenario, but with some stagflation risks, meaning uh increasing upward pressure on inflation and unemployment.” – Joseph Croft, CEO of Roshchack Advisory.

Logical Connections

The analysis establishes a clear connection between Trump’s trade policies and potential inflationary pressures. It then links these pressures to consumer behavior, highlighting the role of income inequality in sustaining consumption despite rising prices. Finally, it connects these macroeconomic factors to investment strategy, advocating for risk reduction in light of emerging geopolitical and technological uncertainties.

Conclusion

The forecast presented by Joseph Croft paints a cautiously optimistic picture of the US economy in 2026. While a full-scale economic crash is deemed unlikely, the risks of stagflation, fueled by tariffs, supply chain issues, and income inequality, are significant. Investors are advised to adopt a more conservative approach, recognizing the potential for a reassessment of current market optimism, particularly regarding AI technology. The political implications of rising prices on essential goods are also highlighted as a key factor to watch.