February 5, 2026
On January 28, 2025, we hosted our annual State of the Economy webinar featuring a special guest: Mark Peterson, Director of the Market & Portfolio Insights Team at BlackRock, the world's largest asset manager. Mark joined us last year to such positive feedback that we invited him back for a return visit. We appreciate him taking the time to share insights from himself and his colleagues at BlackRock.
During the webinar, FJP Wealth Manager Scott Manley and Mark discussed the state of the U.S. economy, the outlook for 2026, and the topics where we receive the most questions from our clients. This article recaps the key takeaways.
In the blog this month, we will share our discussions about:
- The Current State of Inflation
- U.S. Federal Reserve and Interest Rates
- Employment
- Economic Update
- The “K-shaped” Economy
- The Trump Administration's Impact on the U.S. Stock Market
- Gold and Silver
- Areas to Watch in 2026
Sign up for our email newsletter for views of the economy, stock market, and top news stories from our Wealth Managers at Financial Journey Partners.
“How do you think the U.S. economy will do in the next 12 months?”
We started the webinar with a poll for the audience asking: “How do you think the U.S. economy will do in the next 12 months?”
Our webinar attendees had the following responses.
- High growth environment (>2% GDP): 13%
- Low growth environment (0% to 1% GDP): 36%
- Mild recession (-1% to 0% GDP): 47%
- Severe recession (<-1% GDP): 4%
As the responses show, nearly half of the audience leaned toward concern that the economy could slip into a recession in 2026. In this blog, we'll present a wide range of data so you can draw your own conclusions about where the U.S. economy may be headed.
Current State of Inflation
On January 13, 2026, the Bureau of Labor Statistics released the Consumer Price Index (CPI) through December 2025. Headline (all items) inflation came in at 2.7%, while core inflation (all items less food and energy) stood at 2.6%. Both figures have been trending downward since the middle of last year.
NOTE: The Oct 2025 data values are not available due to the 2025 lapse in appropriations.
Source: Bureau of Labor Statistics, December 2025 Report
When we dig into the CPI categories, a few stand out. Electricity and gas services saw some of the largest increases, while shelter and medical costs also ranked among the biggest drivers of inflation. On the other end, gasoline was one of the areas that declined the most.
Source: Bureau of Labor Statistics, December 2025 Report
US Federal Reserve and Interest Rates
Shifting gears to the Federal Reserve — one of the biggest stories of 2026 will be a change at the top. The Fed cut interest rates three times in 2024 and another three times in 2025, and most analysts now expect one or two additional cuts in 2026.
Source: TradingEconomics.com
That pace could accelerate under new leadership. Kevin Warsh was recently nominated to succeed Jerome Powell as Federal Reserve Chair when Powell's term ends in May 2026. Warsh is widely expected to favor lower interest rates and a smaller Fed balance sheet. We'll be watching closely throughout the year to see how the new Chair's views influence the economy and the U.S. stock market.
Employment
At 4.4%, the unemployment rate remains relatively low compared to historical averages over the past 75 years.
Source: U.S. Bureau of Labor Statistics, Federal Reserve of St. Louis
One factor that may be helping to keep unemployment low: there are still over 7 million job openings across the U.S.
Source: Federal Reserve Bank of St. Louis
Here in Silicon Valley, the major tech companies are cutting jobs in targeted areas. The good news? It appears that most of those affected are landing new roles relatively quickly.
With most Americans employed, consumer spending remains strong — and it's showing up in the numbers. GDP grew 4.3% in the third quarter of 2025, a sign the economy still has real momentum.
Source: Bureau of Economic Analysis
U.S. Consumer Spending
Another way to look at the health of the economy is through U.S. Consumer Spending. Again, we see strong numbers, with an increase in Q3, 2025.
Source: Bureau of Economic Analysis
Again, we see strong numbers, with an increase in Q3, 2025. Some of these increases may come from rising prices, i.e. consumers are paying more for the same goods. Regardless, the total value of consumption in the U.S. continues to rise quarter after quarter.
Increase in Gross National Debt
However, there's a cloud on the horizon: As Scott often says, "The U.S. Federal Government has a spending problem." The federal government continues to spend far more than it brings in, and the result is a national debt that is ballooning to unsustainable levels.
Source: U.S. Treasury
This is an issue that we would like to see both parties address, but so far, neither seems willing to take it on.
What is the K-shaped Economy?
Beyond the headline numbers, there's a deeper story about who is thriving and who is struggling. You may have heard about the K-shaped economy, but what does it actually mean?
Think of the letter K. When applied to the economy it is a metaphor for an economy splitting into two diverging paths.
The Upper Arm(Rising): Those who own assets like homes, stocks, and bonds are more or less thriving. With the U.S. stock market and home values near all-time highs, their wealth has grown substantially. Spending from this group remains strong, while consumers in the lower half are feeling very different.
The Lower Arm (Falling): Those without significant assets, i.e. no home, no investments, in stocks or bonds, etc. are struggling. They’re living paycheck to paycheck with little savings. Their wages haven't kept pace with inflation, which has made essentials like food and rent far more expensive over the past five years.
Below are a few real-world examples from companies that recently highlighted the spending patterns for consumers in both the top and bottom of the K economy.
United Airlines: Their CEO reported that the five highest booking days in company history all occurred in 2026 - premium travel is booming.
Yahoo Finance, 1/21/2026
Walmart: December 2025 sales exceeded expectations, driven primarily by more affluent customers.
NBC News, 12/9/2025
Costco: They sold a record 4.5 million pies in Q3 and saw Halloween pizza sales jump 31% year-over-year. Their private-label Kirkland brand grew faster than overall sales, but financially strained consumers avoided discretionary purchases.
Hardika Sing, Fundstrat, 12/2/2025
We are continuing to monitor how this economic divide evolves throughout 2026, tracking consumer spending in both the upper and lower arms of the K economy.
What Trump Policies Could Impact the U.S. Stock Market in 2026?
With so much happening in Washington, a natural question arises: what Trump administration policies could impact the U.S. stock market in 2026? Mark and Scott discussed several recent headlines, including:
- Arrest of Nicolas Maduro in Venezuela
- Greenland
- Federal Reserve leadership changes
- Possible limits on maximum credit card interest rates
Scott noted that 2025 was full of stories that had our clients concerned — tariffs, immigration, and more. Yet despite all those headlines, the U.S. stock market has been reaching record highs. In fact, it hit new highs on the very day of our webinar. The market, it seems, has been shrugging off the noise.
Mark offered a piece of wisdom for our webinar attendees:
'Keep your politics out of your portfolio.' — Mark Peterson
His point: regardless of where we stand politically, we shouldn't let those views drive our investment decisions. Over the long term, the stock market cares far more about corporate profits than the headlines of the day.
Gold and Silver
Turning to precious metals, gold and silver have had a remarkable run. Both saw dramatic price increases over the past year, likely driven by a combination of factors — though it's difficult to point to any single driver.
The days following the webinar brought the largest single-day drop in both gold and silver prices, but they rallied significantly on February 3rd. Our clients hold gold and silver ETFs in their portfolios with strong gains. For now, we still believe these are excellent diversifiers, but we're keeping a close eye on them.
Gold and silver are often called 'the chaos trade' — meaning they can serve as a stabilizing force amid global uncertainty.
Areas to Watch in 2026
As the webinar drew to a close, Mark and Scott summarized the factors they believe are most important to watch in 2026:
- Federal Reserve: New leadership under Kevin Warsh and potential rate cuts
- AI investments: Continued growth and innovation
- Consumer spending: Will it remain robust?
- Midterm elections: November voting and its impact on policies
- Geopolitical developments: Venezuela, Iran, Ukraine, and Greenland
Scott and the Investment Team at Financial Journey Partners will continue monitoring these stories to see how they could impact the U.S. economy and stock market. We're only one month into the year, and it already feels like we've gotten a year's worth of news. We expect 2026 to keep delivering major headlines.
Scott also asked Mark about BlackRock's outlook for 2026. Here's where they stand:
- One to two expected Fed rate cuts should support the stock market
- Unemployment remains relatively low
- Consumer spending and the broader economy are still strong
- BlackRock is cautiously optimistic on 2026, but continually watching for factors that could shift this outlook
That last point is especially important. Looking at the data, the U.S. economy is performing well, companies are reporting record earnings for Q4 2025, and the stock market is responding by pushing to new all-time highs. We'll be watching closely to see if this changes during the year and whether client portfolios need adjusting.
If you're a Financial Journey Partners client with questions about the economy, stock market, or your portfolio, don't hesitate to call your Wealth Manager. We're here to help you navigate whatever 2026 brings.
Schedule Your Complementary Initial Consultation
For our clients, if you want to talk more about your specific situation, contact your Wealth Managers Elaine Manley, Scott Manley or Linda Tjiputra.
References:
1Bureau of Labor Statistics – December 2024 Report
2Bureau of Labor Statistics – December 2024 Report
3TradeEconomics.com – U.S. Fed Funds Interest Rate
4Bureau of Economic Analysis – GDP, Corporate Profits Q3, 2024
5Federal Reserve Bank of St. Louis – Federal Surplus/Deficit
Investment advisory services offered through Mutual Advisors, LLC DBA Financial Journey Partners, an SEC Registered Investment Adviser. Securities offered through Mutual Securities, Inc., Member FINRA/SIPC. Mutual Securities, Inc. and Mutual Advisors, LLC are affiliated companies.