While top-line GDP figures appear strong, the US labor market has been in recession since mid-2024. The key question for 2026 is whether the economy can resolve this underlying weakness without it surfacing and triggering a broader downturn, a risk that intensifies if the stock market stumbles.
The recent economic resurgence in Southern European countries like Spain is not the start of a new growth cycle. It is fueled by end-of-cycle drivers like large-scale immigration into low-productivity sectors such as tourism. This type of growth is not sustainable long-term and lacks the labor productivity gains needed for a durable recovery.
The era of economic-led globalization is over. In the new world order, geopolitical interests are the primary driver of international relations. Economic instruments like tariffs and export restrictions are now used as levers to assert national interests, a fundamental shift from the US-centric view where the economy traditionally took the lead.
The Fed faces a catch-22: current interest rates are too low to contain inflation but too high to prevent a recession. Unable to solve both problems simultaneously, the central bank has adopted a 'wait and see' approach, holding rates steady until either inflation or slowing growth becomes the more critical issue to address.
The old narrative of China's IP theft is outdated. Today, China's competitive advantage in sectors like biotech comes from its massive scale, significant resources, and collective lack of profit sensitivity. This combination allows it to dominate industries and destroy profitability for other global players, as previously seen in solar and EVs.