The consensus on Wall Street is that the US economy will grow at a modest pace in 2026—around 2% according to most forecasters. Goldman Sachs disagrees. The bank is projecting 2.6% GDP growth, a full 0.6 percentage points above the consensus estimate and meaningfully above the economy's long-run potential growth rate.

It's a bold call at a time when many investors remain fixated on recession risks, persistent inflation, and policy uncertainty. But Goldman's economists argue that the stars are aligning for what could be the US economy's strongest year since the post-pandemic rebound.

Three Pillars of the Bull Case

Goldman's above-consensus forecast rests on three key assumptions about policy and its economic effects:

1. Tax Cuts Deliver a Boost

The One Big Beautiful Bill Act (OBBBA), which extended and expanded Trump-era tax provisions, is expected to provide significant stimulus to the economy. Goldman estimates consumers will receive an extra $100 billion in tax benefits in 2026, money that should flow directly into spending.

Unlike the 2017 tax cuts, which provided permanent benefits to corporations and temporary relief to individuals, the new legislation locks in individual rate cuts while expanding various credits and deductions. This creates a meaningful boost to disposable income.

"The fiscal impulse from tax legislation is front-loaded, meaning we expect especially strong GDP growth in the first half of 2026 as consumers adjust to higher after-tax incomes."

— Goldman Sachs economics research

2. Federal Reserve Rate Cuts

Goldman expects the Federal Reserve to reduce its policy rate by 50 basis points over the course of 2026, bringing the federal funds rate to a range of 3.0% to 3.25% by year end. This monetary easing should support interest-rate-sensitive sectors like housing and auto sales.

The bank's forecast assumes inflation continues its gradual decline toward the Fed's 2% target, giving policymakers room to ease without reigniting price pressures. With core PCE inflation expected to fall below 2.5% by mid-2026, the Fed should have confidence to act.

3. Tariff Drag Fades

One of the biggest headwinds to growth in 2025 was uncertainty around tariff policy. Business investment stalled as companies waited for clarity on trade policy. Consumer prices on imported goods spiked.

Goldman expects this drag to diminish in 2026 as businesses adapt to the new tariff regime and supply chains adjust. While tariffs themselves won't disappear, the one-time adjustment costs and uncertainty premiums should fade.

The Consensus View: More Cautious

Goldman's optimism stands in contrast to more muted forecasts from other institutions:

  • Blue Chip consensus: 1.9% GDP growth
  • Congressional Budget Office: 2.2% growth
  • Federal Reserve median projection: 2.0% growth
  • RBC Economics: Below-trend growth with stagflation risks

The Conference Board is particularly cautious, noting that "real GDP growth is expected to weaken amid a fragile balance of resilient labor markets and softening consumer demand due to tariff-induced inflation."

RBC Economics goes further, warning of a "stagflation lite" scenario with below-trend growth and uncomfortably high inflation persisting through the year.

Where Goldman Could Be Wrong

Goldman's economists acknowledge significant risks to their forecast. The bank's own research identifies several scenarios that could derail the optimistic outlook:

Labor Market Crack

"The main vulnerability remains a crack in the US labor market," Goldman notes, "if jobs softness tips into a zone where recession becomes a serious prospect again." The December employment report showed payroll growth slowing, and while still healthy, the trend bears watching.

A meaningful deterioration in hiring could trigger a negative feedback loop: job losses lead to reduced spending, which leads to more job losses. This dynamic can accelerate rapidly once it begins.

Inflation Resurgence

If tariffs prove more inflationary than expected, or if strong growth itself reignites price pressures, the Fed may be forced to pause or reverse rate cuts. This would undercut a key pillar of Goldman's bullish forecast.

The December CPI report, due on January 13, will provide important evidence on whether inflation continues declining or has stalled.

Policy Uncertainty

While Goldman expects policy clarity to improve, the opposite could occur. Escalation of trade conflicts, unexpected regulatory actions, or legislative battles over spending could all undermine confidence and investment.

Global Context Matters

Goldman's optimism isn't limited to the US. The bank expects "sturdy global growth of 2.8% in 2026, versus a consensus forecast of 2.5%," with the US as the primary outperformer.

This global strength provides a tailwind for US exporters while reducing risks from overseas economic weakness. Europe's stabilization after years of energy-related struggles and China's gradual improvement both support US multinational earnings.

US Outperformance

Morgan Stanley notes that "US resilience will lead global growth," a view shared by most major forecasters. The combination of fiscal stimulus, monetary flexibility, and structural advantages like energy independence and technological leadership gives America an edge over other developed economies.

This outperformance has implications for currency markets. Goldman and others expect dollar strength to persist, which helps keep imported inflation contained but creates headwinds for US exporters.

What This Means for Investors

If Goldman's forecast proves correct, several investment themes should perform well:

Consumer Discretionary

Tax cuts flowing to households should boost spending on non-essential goods and services. Retailers, restaurants, and entertainment companies stand to benefit from higher consumer cash flows.

Housing-Related Sectors

Fed rate cuts should support mortgage rates, helping homebuilders, building materials companies, and home improvement retailers. Goldman's forecast of monetary easing is a key input for these sectors.

Small Caps

Smaller, more domestically-focused companies typically outperform when US growth exceeds expectations. The Russell 2000 hit record highs recently, and the trend could continue if Goldman's forecast materializes.

Financials

Banks benefit from economic growth through higher loan volumes and lower credit losses. The combination of strong GDP growth and stable rates is particularly favorable for bank earnings.

The Risk Factors

Investors should also consider positioning for downside scenarios:

Recession Hedges

While Goldman is bullish, recession risk hasn't disappeared. Treasury bonds, defensive equity sectors, and gold all provide protection if growth disappoints.

Inflation Protection

If inflation proves stickier than expected, Treasury Inflation-Protected Securities (TIPS), commodities, and pricing-power stocks can help preserve purchasing power.

The Bottom Line

Goldman Sachs is making a bold call: the US economy will outperform expectations in 2026, driven by fiscal stimulus, monetary easing, and fading policy headwinds. It's a view that runs counter to widespread concerns about recession risk and stagflation.

Whether Goldman proves right will depend on factors that remain uncertain—the path of inflation, the resilience of the labor market, and the resolution of policy debates. But the bank's framework provides a useful lens for thinking about the year ahead.

For investors, the message is nuanced: Goldman sees upside that the consensus is missing, but also acknowledges meaningful risks. Positioning for the bull case while maintaining protection against downside scenarios seems prudent.

The US economy has surprised to the upside repeatedly in recent years, defying predictions of recession and stagflation. If Goldman is right, 2026 will be another year where American exceptionalism wins out over Wall Street worry.

Time will tell. But as you plan for the year ahead, the bull case deserves serious consideration.