Bessent believes there won't be a recession in 2026 but says some sectors are challenged

Treasury Secretary Scott Bessent said the U.S. is unlikely to enter a recession in 2026 and expressed optimism that the Trump administration’s policies — including making the 2017 tax cuts permanent, a senior “bonus” offsetting Social Security taxes, a larger SALT deduction and targeted tax breaks for tip income, overtime and auto loans under the One Big, Beautiful Bill Act — will deliver stronger, noninflationary growth; he also said health-care costs should become more affordable with further administration action. Bessent acknowledged near‑term strains in housing and other interest‑rate‑sensitive sectors and blamed services for keeping inflation elevated, while predicting lower energy prices will help ease inflation; he warned a congressional deadlock over extending enhanced ACA subsidies is likely to raise costs for millions. NEC director Kevin Hassett warned fourth‑quarter data could look weak after the 43‑day government shutdown, and polls show political vulnerability on the economy with two‑thirds of voters saying the administration has fallen short and a JPMorgan survey revealing wide confidence gaps by income (6.2 for high‑income vs. 4.4 for low‑income respondents).

Analysis

Treasury Secretary Scott Bessent stated the U.S. is not at risk of recession in 2026 and argued that the One Big, Beautiful Bill Act — which makes the 2017 tax cuts permanent and adds a senior "bonus," a larger SALT deduction and targeted tax breaks for tip income, overtime and auto loans — will support "very strong, noninflationary" growth; he also signaled forthcoming administration action to make health-care costs more affordable.

Bessent acknowledged visible weakness in housing and other interest-rate-sensitive sectors and attributed persistent inflation to the services economy while forecasting that lower energy prices should help bring down prices. He warned a congressional deadlock over extending enhanced ACA subsidies is likely to push up health-care costs for millions, creating a material near-term cost risk.

NEC director Kevin Hassett cautioned that fourth-quarter data could look weak because of the 43-day government shutdown, and polling shows political vulnerability (two-thirds of voters say the administration has fallen short) with a pronounced consumer confidence gap by income (JPMorgan: 6.2 for high-income vs. 4.4 for low-income). Market signals in the report are mixed (sentiment score 0.05, market impact 0.35), implying modest market reaction but clear sector-level risks tied to policy implementation timing and the ACA subsidy outcome.

Key Decisions for Investors

• Monitor the implementation timeline and specific details of the tax and credit provisions from the bill for potential earnings and consumer cash-flow revisions, and be prepared to re-rate tax-sensitive and consumer-facing sectors if benefits are realized
• Reduce or hedge exposure to housing and other interest-rate-sensitive assets until clearer signs of stabilization appear, given explicit acknowledgement of strain in those sectors
• Defer large directional healthcare positions until Congress resolves the ACA subsidy extension risk, because a deadlock is expected to raise costs for millions and could pressure payors and beneficiaries
• Watch incoming Q4 macro prints for shutdown-related distortions and track energy prices and services inflation closely; consider tactical duration adjustments or inflation-sensitive asset tilts if energy-driven disinflation materializes