Here are six key takeaways:<\/p>\n
\u2018Cautiously pessimistic\u2019<\/p>\n
Economic indicators like job numbers and inflation aren\u2019t particularly alarming right now, yet people still don\u2019t feel good about the economy. In other words, a vibe-cession persists. \u201cI would call the mood, at least my mood, \u2018cautiously pessimistic,\u2019 \u201d Edelman said. \u201cI don\u2019t think things are going to fall apart, but they are slowing down and continuing to slow down as we head into the new year.<\/p>\n
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A recession is unlikely in 2026, but we\u2019ve been wrong before <\/p>\n
Edelman notes most economists don\u2019t think there will be a recession in 2026. Bloomberg\u2019s US Recession Probability Forecast<\/a> puts the chances of a downturn at 30 percent, which is low. <\/p>\n But like economists, business journalists like to predict when the next recession might hit. Leung admits the only time she got it right was in 2020 during the height of the COVID pandemic. That\u2019s only because the economy literally shut down. But Leung really did think President Trump\u2019s tariffs<\/a> would almost certainly send the economy into a recession this year. They did not.<\/p>\n \u201cMy economic \u2018spidey sense\u2019 has been off,\u201d Leung said. <\/p>\n Consumer spending, which fuels 70 percent of the economy, is holding up so far, even during the holiday season<\/a>. But as Edelman pointed out, there\u2019s a growing divide.<\/p>\n \u201cIf you listen to the retailers on their conference calls with analysts after earnings, they are noting a bifurcation in consumer spending,\u201d he said. \u201cThe Walmarts of the world, that cater to middle- and lower-income consumers, are seeing them hunker down, whereas the higher-end consumer is still spending a lot.\u201d <\/p>\n \u2018Inflation\u2019s not dead yet\u2019<\/p>\n The inflation continues to exceed the Federal Reserve\u2019s 2 percent target<\/a>. Edelman thinks it was a bit of a risk for the Fed to cut interest rates a quarter point in December<\/a>, but the central bank seems more worried about the job market, and lower rates could stimulate hiring.<\/p>\n \u201cInflation\u2019s not dead yet,\u201d Edelman said. \u201cThey decided to err in the favor of supporting the job market. Hopefully, inflation will not become a problem.\u201d<\/p>\n Federal research cuts will continue to stress out the Massachusetts economy <\/p>\n The Trump administration\u2019s threat to cut federal research grants at universities like Harvard and MIT will continue to force belt-tightening in two key pillars of the state economy<\/a>: higher education and hospitals. <\/p>\n \u201cHarvard cuts back, and MIT cuts back, and Boston University, and that sends a shockwave through the economy,\u201d Edelman said. \u201cPeople go out to dinner less. People shop less. People don\u2019t renovate their kitchen. They put that on hold. People may not buy that new car.\u201d<\/p>\n What to watch in 2026: AI and job numbers<\/p>\n Artificial intelligence will continue to have an outsize impact on the economy and the stock market. As widespread adoption of AI continues, the valuations of companies in the sector are soaring, and that\u2019s helping to send the market to near record highs. But AI could also hurt hiring<\/a>.<\/p>\n \u201cYou\u2019re already starting to hear that employers are being more cautious because they\u2019re just waiting to see how the implementation of AI goes before they hire real people,\u201d Edelman said. \u201c2026 will be when we see whether the job market is merely slowing down a bit and just kind of catching its breath, or whether we have a more serious downturn.\u201d<\/p>\n Anna Kusmer of the Globe staff and Kara Mihm contributed to this report.<\/p>\n