2026 After an Extraordinary 2025: AI, Tariffs, Inflation, and the Next Phase of the US Equity Cycle
2026 After an Extraordinary 2025: AI, Tariffs, Inflation, and the Next Phase of the US Equity Cycle
Author: Zion Zhao Real Estate | 88844623 | ็ฎๅฎถ็คพๅฐ่ตต
Author’s note: This essay is written for education and market literacy, not as financial advice or a solicitation to buy or sell any security. Markets can fall as well as rise, and past performance is not indicative of future results. This essay is written based on the Odd Lots | Bloomberg podcast discussion with Jan Hatzius and Ben Snider (recorded December 19, 2025).TL;DR
This outlook matters for Singapore property because 2026 interest rates, inflation, employment, and AI driven growth shape buyer affordability, rental demand, and investment returns. Understanding equity valuations, tariff risks, and policy uncertainty helps you time entry and exit, structure financing, and diversify intelligently across private homes, rentals, and commercial assets.
2025 delivered exceptional equity returns and resilient real-economy performance despite persistent recession concerns, policy shocks, and widespread debate about market “bubbles.” The key analytical takeaway for 2026 is that it is less about repeating 2025 and more about proving that 2025’s outcomes were fundamentally earned through durable earnings, manageable inflation dynamics, and a labor market that cools without breaking.
A central clarification is measurement: headline “AI buildout” spending does not automatically translate into GDP growth because national accounts subtract imports and classify some semiconductor-related activity in ways that can obscure direct investment contributions. In other words, AI can be transformative without showing up cleanly in near-term GDP contribution charts. The more investable macro question for 2026 is the timeline and breadth of AI diffusion into productivity and corporate margins.
On inflation, tariffs are best understood as a price-level shock (tax-like) rather than a guaranteed, persistent inflation spiral. However, late-2025 inflation interpretation is complicated by data disruptions tied to the government shutdown, including gaps that can distort specific CPI components. The correct stance for 2026 is disciplined humility: separate signal from statistical noise.
For equities, the 2025 story is not only mega-cap dominance; broader earnings growth matters. Still, valuations are elevated, which increases sensitivity to catalysts even if the base case remains constructive. High multiples do not cause a selloff by themselves, but they amplify reactions to negative surprises.
The labor market is the pivotal dashboard for 2026. Watch the unemployment rate for cycle direction and jobless claims for early warning signals. A rise in frictional unemployment (longer job searches) is plausible as productivity improves, even without sustained mass job losses.
Finally, policy and geopolitics remain meaningful tail risks: a Federal Reserve leadership transition could add uncertainty, and China’s export competitiveness (and strategic resource leverage such as rare earths) can influence supply chains, inflation tails, and risk premia.
1) Why 2025 Felt “Impossible,” Yet Still Happened
If 2025 had a single defining feature, it was the persistence of growth and risk appetite in the face of widely discussed recession risks and policy shocks. The Odd Lots conversation with Goldman Sachs’ Jan Hatzius (Chief Economist) and Ben Snider (Chief US Equity Strategist) is valuable precisely because it tries to separate narrative from measurement: what the data can actually support, what markets truly priced, and what might plausibly carry into 2026.
In hard data, the US labor market softened without collapsing. The unemployment rate reached 4.6% in November 2025, and the Bureau of Labor Statistics explicitly noted major discontinuities because the federal shutdown disrupted October data collection. (BLS, 2025a, 2025b). Bureau of Labor Statistics+1
This matters for two reasons. First, “cooling” labor markets often change investor psychology faster than they change consumer behavior. Second, statistical gaps are not cosmetic: they complicate trend detection, especially when macro narratives are already crowded.
In markets, the core of Snider’s explanation for strong equity performance is disarmingly traditional: earnings. His point is not that AI is irrelevant, but that the 2025 rally is easier to defend when you start with realized profit growth rather than futuristic stories. This framing aligns with how equity research conventionally decomposes returns: earnings, margins, discount rates, and multiples.
2) A Useful Alignment: Macro Reality Versus Market Discounting
A key strength of the discussion is the explicit bridge between Hatzius’ macro forecast and Snider’s equity framework. Snider describes equities as a discounted stream of future cash flows, emphasizing that the US economy remains the dominant driver of broad earnings outcomes.
This is not merely textbook rhetoric. When valuation is elevated, the market becomes more sensitive to catalysts (growth surprises, inflation surprises, policy surprises). FactSet’s work around late-2025 valuation levels shows forward multiples at historically stretched territory relative to long-run averages, which mechanically increases vulnerability to disappointment even if the baseline remains constructive (FactSet, 2025a). FactSet Insight
The practical implication is not “bullish” or “bearish” by default. It is conditional: when the starting multiple is high, the distribution of outcomes widens. That becomes one of the central risk-management themes for 2026.
3) AI: The Great 2025 Narrative, and the Measurement Trap
3.1 The Hatzius Pushback: “AI Capex ≠ GDP Growth”
One of the most instructive moments is Hatzius pushing back on a popular claim that AI infrastructure spending drove a dominant share of 2025 GDP growth. His critique is fundamentally national-accounts-based:
Imports are subtracted in GDP accounting, so investment that arrives through imported equipment does not translate one-for-one into domestic GDP. BEA’s own GDP materials emphasize that imports are a subtraction in the calculation and can mechanically change measured contributions (BEA, 2025a, 2025b). Bureau of Economic Analysis+1
Some AI-related spending may be captured as intermediate inputs rather than final investment, which can further complicate “AI share of GDP growth” claims.
Even if one ultimately disagrees with Hatzius’ quantitative conclusion, the methodological warning is correct: gross capex headlines can be psychologically persuasive while net domestic value-added is smaller.
3.2 The Counterpoint: Why Others Still See AI as a Major GDP Driver
A competing view in 2025 is associated with analysis that attributes a large fraction of GDP growth to “information processing equipment, software, and data centers.” For example, reporting on Jason Furman’s framing and related breakdowns emphasizes that AI-linked categories can appear disproportionately large in contribution tables, even if they represent a smaller share of the overall economy (Furman as covered in Fortune/Barron’s-style reporting, 2025). Fortune+1
Here is the synthesis I consider most defensible:
Both things can be true: AI-related investment can dominate a contribution chart while still translating into less domestic value-added once import content and classification issues are handled correctly.
The 2026 question is therefore less “Was AI most of GDP?” and more “Does AI diffusion measurably lift productivity and profits, and on what timeline?”
That timeline question is what truly connects AI to the labor market, margins, and ultimately equity durability.
4) Tariffs and Inflation: Price-Level Shock, Not Necessarily a Persistent Spiral
4.1 What Actually Happened in April 2025
The Bloomberg podcast references the early-April tariff shock, colloquially branded “Liberation Day.” Reuters reporting documents the April 2, 2025 announcement and the broad structure: a baseline tariff plus higher “reciprocal” rates on major trading partners, with implementation dates in early April (Reuters, 2025a). Reuters+1
The White House also published an annex listing country-level tariff rates, underscoring the breadth of the policy move (White House, 2025). The White House
4.2 Pass-Through: Why the Literature Rarely Supports “Someone Else Pays”
In the podcast, Hatzius notes that pass-through into inflation was meaningful but not as large (or as immediate) as some feared, and he frames tariffs as closer to a tax-like price-level effect than a permanently higher inflation rate. This aligns with a large body of empirical work from the 2018 tariff episode, where researchers found substantial pass-through to US importers and consumers rather than foreign exporters absorbing most of the burden (Amiti, Redding, & Weinstein, 2019). American Economic Association
4.3 The 2025 Data Problem: Shutdown-Driven Missing CPI Observations
This is not a minor footnote. The BLS November 2025 CPI release explicitly states that October 2025 CPI survey data were not collected due to the lapse in appropriations and could not be retroactively collected (BLS, 2025c). Bureau of Labor Statistics
Reuters further reported that the BLS could not provide specific guidance for navigating the missing October observations, and the year-over-year figures should be interpreted with caution (Reuters, 2025b). Reuters
This supports the podcast’s caution about reading “soft CPI” too literally, especially around shelter-related components.
5) Earnings, Margins, and the Real AI Question: Who Captures the Productivity Dividend?
5.1 Why Margins Matter More Than Most Narratives Admit
Snider emphasizes a classic equity truth: big earnings years are often margin years. In 2025, margins did not collapse under tariff pressure, but they also did not necessarily deliver the “automatic” operating leverage one might expect in a healthy nominal growth environment. His interpretation is that firms used three broad levers: selective price increases, supplier pressure/supply-chain adjustment, and internal cost control.
From an analytical standpoint, this is plausible because it matches what a tariffs-and-competition environment usually produces: incomplete pass-through, operational adaptation, and distributional effects across industries rather than a single uniform outcome.
5.2 “AI in Earnings” Has Begun, But Still Looks Small in the Aggregate
One of the most concrete, externally reported figures in this debate is Goldman strategists’ estimate that AI-driven productivity gains contribute only a small fraction to near-term earnings growth. Bloomberg reporting attributes to Snider’s team an estimate of about 0.4% AI productivity contribution to 2026 earnings growth, rising later (Bloomberg, 2025). Bloomberg.com
This is where academic evidence helps calibrate expectations. Micro-level studies can show large localized gains even when macro-level detection remains weak. For example, Brynjolfsson, Li, and Raymond’s work on a generative-AI assistant in customer support finds meaningful productivity improvements and heterogeneity across worker experience (Brynjolfsson et al., 2025). OUP Academic
The “bridge” interpretation is:
Micro gains are real in specific workflows.
Macro visibility is delayed by diffusion time, complementary investments, measurement limitations, and reorganization lags.
Therefore, 2026 is likely to be a year where investors increasingly argue about second-order effects (margins, labor intensity, pricing power) rather than only first-order capex beneficiaries.
6) Valuation and “Speculation Indicators”: A More Nuanced Bubble Discussion
Snider’s most useful behavioral point is not “there is no bubble.” It is that the type of market enthusiasm matters. He describes watching for moments when investors justify prices with flimsy second-order narratives rather than earnings reality.
In parallel, the quantitative backdrop is clear: valuation is elevated. FactSet documented the S&P 500 forward multiple moving above long-run averages and reaching levels not seen in years (FactSet, 2025a). FactSet Insight
High multiples do not predict an imminent decline, but they do increase sensitivity to catalysts, which is consistent with Snider’s “potential energy” framing.
If 2026 is “cautious optimism,” the cautious part is largely valuation discipline: the market can still rise, but it needs either (a) better earnings than expected, (b) lower discount rates than expected, or (c) a durable belief that AI raises long-run growth enough to justify structurally higher multiples. The last of these is the most narrative-heavy and therefore the most fragile.
7) Concentration: A Market Feature With Deep Economic Roots
The conversation notes that concentration is not only about market cap; it is about earnings power. This is where modern industrial organization research is directly relevant. The “superstar firm” literature argues that technological change and globalization can shift sales toward the most productive firms, raising concentration and altering labor share dynamics (Autor et al., 2020). OUP Academic
This is a helpful lens because it reframes concentration away from moral panic and toward structural economics:
If concentration reflects persistent productivity and scale advantages, it can last longer than most cyclical narratives assume.
If concentration invites regulatory and political responses, it can also create tail risks that are difficult to model with standard earnings tools.
Snider’s answer is again disciplined: the regime changes when earnings concentration changes. That is analytically coherent, even if it underweights “policy shock” probability.
8) Labor Markets in 2026: Productivity, Friction, and the “No-Hire, No-Fire” Risk
Hatzius’ forecast logic, as presented in the discussion and echoed in Goldman’s published outlook material, rests on a potentially underappreciated combination: solid growth with weaker labor-market momentum as productivity improves (Goldman Sachs Research, 2025a). Goldman Sachs
The late-2025 data pattern is consistent with a “no-hire, no-fire” labor market: layoffs remain low, but hiring is cautious. Reuters reporting on jobless claims described continued low initial claims alongside elevated continuing claims, consistent with slower re-employment dynamics (Reuters, 2025c). Reuters
From a 2026 market perspective, this creates a clean hierarchy of indicators, which the guests essentially endorse:
Unemployment rate (Hatzius’ “desert island” indicator) as the broad-cycle signal (BLS, 2025a). Bureau of Labor Statistics
Initial and continuing jobless claims as the high-frequency warning system (Reuters, 2025c). Reuters
Real income and consumption as the confirmation layer.
The AI-specific risk is not necessarily mass permanent unemployment; it is higher friction: longer job transitions, skill mismatch, and uneven wage pressure, especially if diffusion accelerates faster than the economy can reallocate labor.
9) The Fed, Leadership Transition, and the Policy Premium
The Bloomberg podcast references a new Fed chair in 2026. This is factually grounded: Jerome Powell’s chair term ends in May 2026, and credible reporting anticipates a nomination and transition timeline that could place new leadership around mid-2026 (Brookings, 2025; Reuters, 2025d). Brookings+1
Two implications follow:
Near-term continuity is likely because the FOMC is a committee and institutional inertia is meaningful.
The risk premium can still rise if markets perceive threats to independence, changes in reaction function, or policy uncertainty at a time when valuation is already high.
In other words, even if the modal outcome is continuity, the distribution thickens in the tails. With high starting multiples, tails matter.
10) China, Exports, and Rare Earth Leverage: A 2026 Externality
Hatzius’ discussion of China is subtle: exports remain resilient even when targeted by tariffs, while domestic property remains a drag. Goldman’s published outlook similarly expects China growth supported by exports despite sluggish domestic demand (Goldman Sachs Research, 2025a). Goldman Sachs
The rare earth point is also broadly supported: CSIS analysis describes China’s dominance across mining, processing, and magnet manufacturing at roughly the magnitudes cited in the conversation (Center for Strategic and International Studies, 2025). CSIS
For 2026, the macro takeaway is not simply “China strong” or “China weak.” It is that supply-chain leverage and industrial policy are now macro variables. They can influence inflation tails, capex decisions, defense-related demand, and geopolitics, all of which feed back into discount rates and multiples.
11) A Practical 2026 Risk Register: What Would Break the “Cautious Optimism” Regime?
The podcast implicitly converges on a set of catalysts that can actually move markets, as opposed to background concerns that remain noise until they hit data:
Labor deterioration that becomes visible in claims and unemployment. A few consecutive weeks of rising claims would challenge the soft-landing narrative quickly (Reuters, 2025c). Reuters
Inflation that re-accelerates for structural reasons, not one-off measurement quirks. Given the 2025 shutdown distortions, 2026 inflation interpretation must separate real trend from missing-data artifacts (BLS, 2025c; Reuters, 2025b). Bureau of Labor Statistics+1
Tariff escalation or broader trade fragmentation. The breadth of April 2025 tariffs shows that trade policy can shift quickly and materially (Reuters, 2025a; White House, 2025). Reuters+1
AI capex deceleration plus financing stress. This is the core “infrastructure anxiety” Snider flags: slowing capex growth and rising debt sensitivity can compress the earnings narrative into a narrower set of winners, increasing dispersion.
Valuation-driven vulnerability. Elevated forward P/E increases market sensitivity to any disappointment even if the base case remains expansionary (FactSet, 2025a). FactSet Insight
Policy uncertainty around Fed leadership transition. Even if outcomes are stable, uncertainty itself can widen risk premia (Brookings, 2025; Reuters, 2025d). Brookings+1
12) Conclusion: 2026 Is Not “Repeat 2025,” It Is “Prove 2025”
My central synthesis of Hatzius and Snider is that 2026 is best framed as a proving ground:
Prove that earnings breadth is real beyond the largest AI-linked balance sheets.
Prove that productivity gains can accumulate without destabilizing labor-market transitions.
Prove that tariffs behave like a level shift, not a permanent inflation engine.
Prove that high valuations can be sustained by fundamentals rather than narrative drift.
If those proofs hold, the “least enthusiastic market that keeps being called a bubble” can continue to climb, but likely with higher dispersion and more frequent drawdowns. If they fail, valuation becomes the accelerant rather than the cause.
In that sense, Hatzius’ desert-island indicator and Snider’s favorite weekly signal converge into a single disciplined approach: watch the labor market. When labor breaks, the macro story breaks. When macro breaks, earnings break. And when earnings break at high multiples, markets move fast.
In 2026, your property decisions should not be made in isolation.
AI driven productivity shifts, tariff shocks, inflation trends, and Federal Reserve policy all shape capital flows, interest rates, currency dynamics, and investor sentiment. These forces directly affect Singapore home prices, rental demand, financing costs, and exit liquidity, especially for international families, ultra high net worth investors, and institutions.
That is why I work differently.
I dedicate hours every day to study macroeconomics, geopolitics, equities, and digital assets, then translate what matters into practical, Singapore specific property strategy. I write these research essays to pressure test narratives, verify data, and stay continuously current, not to chase headlines. This discipline allows me to advise clients with a portfolio manager’s lens, not a single asset mindset.
When you engage me, you get an advisor who can connect the dots across asset classes and policy regimes: how rates and inflation influence mortgage structure and holding power, how market concentration and risk appetite affect wealth effects and demand, and how global uncertainty changes the timing and positioning of your Singapore entry.
For families relocating, studying abroad, or building a family office footprint, I help you align residency goals, school planning, and long term wealth preservation with compliant transaction execution under Singapore Land Law and relevant statutes. For investors, I structure decisions around risk, cash flow durability, and downside protection.
Real estate should be part of a resilient portfolio. It is typically less volatile than equities and crypto, can provide stable rental income that resembles dividend cash flow, and offers long term capital appreciation when chosen correctly.
If you want a Singapore property advisor who is macro fluent, research driven, and relentlessly diligent, reach out for a confidential, no pressure strategy consultation. Let us build a disciplined plan for your next move in Singapore.
References (APA Style)
Amiti, M., Redding, S. J., & Weinstein, D. E. (2019). The impact of the 2018 tariffs on prices and welfare. Journal of Economic Perspectives, 33(4), 187–210. doi:10.1257/jep.33.4.187 American Economic Association
Autor, D., Dorn, D., Katz, L. F., Patterson, C., & Van Reenen, J. (2020). The fall of the labor share and the rise of superstar firms. The Quarterly Journal of Economics, 135(2), 645–709. OUP Academic
Bureau of Economic Analysis. (2025a). Gross Domestic Product. Bureau of Economic Analysis
Bureau of Economic Analysis. (2025b). Gross Domestic Product, 3rd Quarter 2025 (Initial Estimate). Bureau of Economic Analysis
Bureau of Labor Statistics. (2025a). The Employment Situation: November 2025. Bureau of Labor Statistics
Bureau of Labor Statistics. (2025b). The Employment Situation: September 2025 (and notice regarding October 2025). Bureau of Labor Statistics
Bureau of Labor Statistics. (2025c). Consumer Price Index: November 2025 (and shutdown notice regarding October 2025 collection). Bureau of Labor Statistics
Brynjolfsson, E., Li, D., & Raymond, L. (2025). Generative AI at Work. The Quarterly Journal of Economics, 140(2), 889–942. OUP Academic
Center for Strategic and International Studies. (2025). China’s new rare earth and magnet restrictions threaten US defense supply chains. CSIS
FactSet. (2025a). Highest forward 12-month P/E ratio for the S&P 500 in more than 5 years. FactSet Insight
Goldman Sachs Research. (2025a). The global economy is forecast to post sturdy growth in 2026. Goldman Sachs
Reuters. (2025a, April 1–3). Reporting on April 2 “Liberation Day” tariff announcement and market impacts. Reuters+1
Reuters. (2025b, December 18). US annual consumer inflation slows in November; BLS guidance on missing October observations. Reuters
Reuters. (2025c, December 24). US weekly jobless claims and continuing-claims dynamics. Reuters
Reuters. (2025d, December 9). Powell term ends in May 2026; transition dynamics and independence risks. Reuters
The White House. (2025). Annex I: Country reciprocal tariff rates (April 2025). The White House
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