TD Securities forecasts the United States economy will experience sideways growth throughout 2026, projecting Real GDP at 2.0% Q4/Q4, marginally below trend levels. Unemployment is expected to hover around 4.3%, indicating a relatively stable labor market despite the subdued expansion. The outlook comes as markets weigh multiple crosscurrents affecting the economic trajectory.
Stagflationary risks loom from ongoing Iran conflict tensions and potential oil price shocks that could simultaneously dampen growth while pushing inflation higher. However, artificial intelligence adoption and sustained spending from high-income consumers are providing offsetting support to demand. This creates a challenging environment where inflation remains sticky even as growth stalls near trend.
The forecast suggests the Federal Reserve may face difficult policy decisions if geopolitical energy disruptions materialize while the economy loses momentum. Traders should prepare for continued volatility in rate expectations as policymakers balance growth concerns against persistent price pressures.
FXnCO Insight
Position portfolios defensively for a stagflation scenario while monitoring oil markets and Fed commentary closely, as energy shocks could force hawkish holds despite weakening growth metrics.
Source: FXStreet