Top Takeaways from SIFMA’s Economist Roundtable

The U.S. economy heads into 2026 with more momentum – and more complexity – than many expected.

From an AI-driven investment surge to shifting tariff dynamics, a cooling labor market, and an uncertain monetary policy path, the latest SIFMA Economist Roundtable survey captures a landscape defined by resilience but tempered by risk.

Last week, SIFMA published the results of its year-end survey and held a briefing to discuss the findings. The SIFMA Economist Roundtable is composed of the chief U.S. economists from over 20 global and regional financial institutions. The survey assessed what’s driving growth, what’s slowing it, and what may lie ahead for markets, policy, and investor sentiment.

Below are some top insights from the report and briefing:

Key Takeaways

• The U.S. economic outlook has improved since mid-year, with stronger growth expectations and easing recession concerns among Roundtable economists.
• The AI investment boom and a rebound in consumer spending have played major roles in supporting economic performance, even amid tariff uncertainty, labor-market softening, and a still-restrictive monetary policy environment.
• The Roundtable was divided on the monetary policy path as inflation is expected to slightly decrease but remain above target, with added concerns around a softening labor market.
• Roundtable participants voiced some caution on future market performance, pointing to the potential for a meaningful equity correction and higher long-term Treasury yields in 2026 as rising debt issuance, concerns about interest-payment sustainability, and limited deficit-reduction prospects weigh on investor sentiment.

Growth Expectations Brighten

The U.S. economic outlook has improved since the mid-year Economist Roundtable survey. One-third of survey participants reported an improved 2026 outlook, with only half as many reporting a deterioration. The median outlook for real GDP in SIFMA’s H2 2025 economic forecast stands at 1.8% Q4 2026 vs. Q4 2025 and 2.2% for Q4 2026 vs. Q4 2025, both above H1 2025 forecasts. This marks a notable improvement from projections from the mid-year survey (0.9% for 2025 and 1.9% for 2026).

Recession Fears Cool

Survey respondents expressed less concern over recession risks in H2 2025 compared to H1 2025. 70% of participants now put 2026 recession risks at 30% or below, compared with a much higher share earlier in the year who projected recession risk in the 30–50% range.

AI Investment Boom Fuels Economic Performance

The AI investment boom has continued unabated and even accelerated this year. This occurred despite rising tariff uncertainty, signs of labor softening, and a still-restrictive monetary policy environment. The equity market rally off the April lows has been one for the record books, helping to sustain higher-income household spending due to the positive wealth effect despite rising consumer prices and growing labor market concerns.

Tariff Concerns Ease

The economy has proven more resilient than expected in the mid-year economic forecast when tariffs were at the forefront of the economic policy discussion. Several trade agreements helped to lower the average effective tariff rate. Notably, the U.S. has not faced major retaliation from global trading partners thus far.

Consumer Spending Rebounds

Trade agreements helped to dial back the tariff impacts on consumer spending, inflation, business investment, and corporate profits. Survey participants highlighted the upside risks to growth from stronger productivity and household spending as well as an improving business environment as uncertainty eases.

Labor Market Softens

The labor market remains a primary source of downside risks. U.S. job growth has seriously deteriorated and narrowed across sectors in 2025, and new job growth has become increasingly concentrated in just two sectors: healthcare and leisure and hospitality. Labor demand has weakened significantly, even as reduced immigration has constrained labor supply growth. As a result, monthly net job creation is expected to average roughly 58,000 a month in 2025 and is projected to improve to a meager 74,000 a month next year. This represents a sharp decline from the average of 168,000 jobs per month in 2024 and the 380,000 jobs per month recorded in 2022. The unemployment rate is forecast to average 4.3% in Q4 2025 and 4.4% in Q4 2026, nearly a full percentage point above its post-pandemic low, and a signal that slack in the labor market continues to increase.

Inflation Remains Slightly Elevated but Well Anchored

Core CPE inflation is projected to be 2.9% for Q4 2025 vs. Q4 2024 and 2.5% for Q4 2026 vs. Q4 2025, remaining above the Fed’s 2% target. The forecast for annual growth in core CPI, at 3.1% Q4 2025 vs. Q4 2024, is modestly lower than the forecast made earlier in the year. On a brighter note, the forecasts for consumer inflation for 2025 are also modestly lower than the forecast for the mid-year survey as tariff levels have begun to recede and energy prices have decreased. Inflation remains above target, but Roundtable participants are encouraged that long-term expectations continue to appear stable, as 90% of respondents expect inflation to remain well anchored. Core PCE inflation is expected to be 2.9% in 2025 before gradually easing to around 2.5% by the end of 2026. The Roundtable expects domestic demand and rising labor market slack to become increasingly more important in shaping price pressures.

Roundtable Divided on the Monetary Policy Outlook

Roundtable survey participants, much like the Federal Open market Committee (FOMC), have divided views regarding inflation risks and the implications for the extent and pace of future rate cuts. Most agreed with the Fed’s decision to end its quantitative tightening policy, but opinions diverged on the path ahead. 60% of respondents believe the Fed will cut rates more than twice by the end of 2026; however, the same percentage expressed growing concern that the Fed will ease too aggressively and should avoid cutting by that amount. At the same time, one-third of respondents anticipate that the Fed will need to add liquidity in 2026 beyond what is supplied through the standing repo facility, most likely through reserve management purchases or a limited restart of quantitative easing. Expectations for a return to the neutral policy rate have also shifted, with 67% of respondents now anticipating a return to neutral by 2027 compared with 50% in the first half of the year.

Market Outlook Remains Uncertain

Roundtable participants voiced some caution on future market performance. More than half see the possibility of a 10% or greater equity market correction before the end of 2026, and a quarter foresee the potential for a 20% or greater decline. Despite anticipated Fed rate cuts, the median forecast calls for higher 10-year and 30-year Treasury yields over the coming year. Economists cited rising debt issuance, growing concerns about the sustainability of U.S. interest payments, and limited prospects for reducing the federal deficit as factors likely to exert upward pressure on long-term rates and weigh on investor sentiment.

Conclusion

The SIFMA Economist Roundtable survey results underscore an economy that has proven more resilient than many expected earlier in the year, supported by the ongoing AI investment boom, rising equity prices, and fading tariff concerns. At the same time, the outlook is marked by uncertainty, particularly around the sustainability of consumer spending, the trajectory of inflation, and a softening labor market. Looking ahead, survey participants are cautiously optimistic but mindful of the risks, including the potential for an equity market correction and the sustainability of the debt and implications for Treasury yields.

For more information on SIFMA Research and the Economist Roundtable, visit www.sifma.org/research.

Author

Scott Anderson, Ph.D., is Chief U.S. Economist and Managing Director at BMO and Co-Chair of the SIFMA Economist Roundtable