TD Securities projects US economic growth will stall through 2026 as lingering oil shock effects and escalating Iran tensions create stagflationary headwinds for markets. The bank forecasts GDP will close 2026 at 2.1% quarter-over-quarter in Q4, with unemployment holding steady near 4.2%. Despite these subdued expectations, TD Securities places recession odds at just 25% over the next twelve months.
The forecast highlights mounting concerns over oil supply disruptions stemming from Middle East geopolitical tensions, particularly surrounding Iran. These energy market pressures threaten to push inflation higher while simultaneously constraining economic expansion, creating a challenging environment for policymakers and investors alike. Traders should prepare for potential volatility in energy-linked currencies and commodity markets as these risks materialize.
The sideways growth trajectory suggests limited upside momentum for risk assets while elevated oil prices could force central banks to maintain restrictive policy stances longer than markets currently anticipate.
FXnCO Insight
Position for prolonged stagflation risk by hedging energy exposure and favoring defensive sectors as oil volatility threatens to squeeze margins and consumer spending simultaneously.
Source: FXStreet