US economy expected to grow faster in 2026 despite stagnant job market: Goldman Sachs

Goldman Sachs expects U.S. real GDP to accelerate to 2.6% in 2026 versus Bloomberg consensus of 2%, citing fading tariff drag, about $100 billion in consumer tax refunds (≈0.4% of annual disposable income) from the One Big Beautiful Bill Act and more favorable financial conditions from expected Fed rate cuts, deregulation and AI-driven capex. The firm notes tariffs raised the average effective rate by ~11 percentage points, subtracting roughly 0.6 percentage points from GDP in H2 2025 and keeping core PCE inflation elevated at ~2.8% in 2025, though it forecasts core PCE falling to just above 2% by end-2026 while unemployment stabilizes around 4.5% without a near-term meaningful decline.

Analysis

Market structure: Slower tariff pass-through and a $100bn lump-sum boost to households (~0.4% of annual disposable income) shift near-term demand toward consumer goods and accelerate capital spending from full expensing. Direct winners: heavy equipment and semiconductor-equipment makers (capex beneficiaries), import-dependent retailers and branded consumer-goods companies; losers: domestically sheltered producers who benefitted from tariffs and firms with high labor intensity if AI-driven cost-cutting accelerates. Expect import volumes to recover in 2H26 as tariff drag fades; commodity demand (copper, specialty metals) will tilt up from capex, while headline PCE should ease toward ~2.0% by end-2026 if tariffs stop rising.

Risk assessment: Key tails are tariff re-escalation (policy shock), a faster-than-expected AI productivity hit that spikes unemployment >5.0% and amplifies consumer weakness, or sticky inflation from wages keeping core PCE >3.0% and derailing Fed easing. Timewise: immediate (days) headline moves on Fed/tariff headlines, short-term (weeks–months) materialization of IRS refunds and capex order flows, long-term (quarters) true AI productivity gains. Hidden dependencies include timing lags between tax refunds and spending, and capex phasing—equipment orders can lead reported GDP by 2–4 quarters; monitor capex shipments and IRS disbursement schedule as primary data points.

Trade implications: Position for lower real yields and selective equity upside from capex/AI hardware. Expect 10y to fall ~40–70bps by mid-2026 on Fed cuts and easier financial conditions; that justifies modest long-duration exposure and long positions in CAT, DE, AMAT/LRCX and semiconductor supply-chain names, while avoiding cyclicals that rely on a hot labor market (high-end retail, leisure). Use call-debit spreads on AI leaders (NVDA, MSFT) with 6–12 month expiries to capture upside and buy protective puts on discretionary (XLY) or regionals with loan exposure.

Contrarian angles: Consensus underestimates the front-loaded impact of the $100bn refunds on Q1–H1 2026 retail sales and overestimates immediate AI productivity gains; markets may underprice capex acceleration from full expensing through late-2026. Conversely, if firms aggressively cut labor in 2026 to chase margin, that could flip consumption negative — a risk the market is discounting. Historic parallel: 2018 tariff shocks had delayed inflationary pass-through and volatile margins; watch 2–3 monthly data points (capex orders, core goods CPI, weekly jobless claims) for signs of regime change before scaling positions.

Key Decisions for Investors

• Establish a 2–3% net long equity allocation to capex beneficiaries: 1.5% in CAT (Caterpillar) and 1.0% split between AMAT and LRCX, targeting 6–12 month horizon; trim if quarterly equipment orders/shipments fail to rise by Q2 2026 or if company guidance is cut by >10%.
• Allocate 1.5–2.0% to duration: buy TLT or equivalent 10y futures exposure anticipating 10y yield decline of 40–70bps by Jun 2026; reduce/hedge if core PCE prints above 3.0% or 10y yield closes >4.5% on a weekly basis.
• Implement a 1% notional 6–9 month call-debit spread on NVDA (or MSFT if preferred) to capture AI hardware upside while limiting premium, paired with a 1% short position in XLY (or a specific high-end retailer) to hedge consumption risk as unemployment drifts toward ~4.5–5.0%.
• Establish a 0.5–1.0% FX position long EURUSD using forwards or vanilla calls for 3–6 months expecting USD pressure from Fed cuts and fiscal-driven consumption; unwind if Fed signals hawkish pause or EUR macro prints (GDP/PMI) miss by >0.5pp.