Once again, it’s time for the New Year’s forecasts.
Economics and Finance
This is actually the easiest to forecast despite the common assumption that markets are hopelessly or unpredictably random or efficient. There are patterns which are easy to exploit. Dips in the stock market tend to be brief. The market quickly recovers whenever Trump tweets something bad. So buying the dips is almost always a consistently profitable strategy.
1. No recession. The U.S. economy continues to hum along as it did in 2025. The media’s insistence of ‘Trump being bad for the economy’ will continue to be a figment of their imagination.
2. Low inflation. As I correctly predicted in 2025, Trump’s tariffs will not lead to meaningfully elevated inflation, but the ‘affordability crisis’ will continue to persist. So while CPI remains low, necessities such housing and healthcare will keep being super-expensive, with no relief in sight.
I remember in 2022-2023 getting tons of pushback for arguing that inflation would have still surged had Trump won instead of Biden. Given how affordability has become an issue, even among some of Trump’s supporters, it looks like I was right again. Short of recession as seen with Carter and both Bushes, the POTUS does not have magical power to lower inflation, even if he wanted to.
Trump cares much more about GDP and the stock market going up, than inflation or affordability. As I wrote in the October 2021 post “The inflation debate, continued,” Trump in many ways continued the economic policies of Biden, such as stimulus spending:
The options of POTUS to lower inflation are limited to raising taxes, cutting off stimulus, or compelling the fed to aggressively raise interest rates. Such solutions would probably also cause the stock market to fall, particularly by raising interest rates. As president, Trump was obsessed with the stock market, so raising rates or raising taxes to stem inflation at the cost of the economy and stock market, would without a doubt be off the table had he won in 2020. Like Biden, Trump was fully onboard more stimulus spending and forever-low interest rates. Raising taxes and cutting stimulus would also be politically unpopular, either under Trump or Biden.
3. Stocks keep going up. Tech stocks will surge for 2026, just as they did in 2025. This is a no-brainer prediction.
4. No Bitcoin reserve. Trump has abandoned support for Bitcoin and doesn’t even talk about Bitcoin anymore. Bitcoin went up so much in 2024 in anticipation of a BTC reserve–that is no longer happening, hence why Bitcoin keeps falling.
Bitcoin will continue to underperform QQQ for 2026, just as it did in 2025. Trump’s donors will feel empty-handed as hopes for a BTC reserve fade. I was the first in early 2025 to mention this on my blog, predicting a link between Bitcoin falling and Trump’s abandonment of support for Bitcoin. There was a lot of denial at the time, and still is. But as I am fond of saying, I was right again.
AI
1. No AI bubble. Predictions of an AI bubble will keep being wrong. Valuations of private AI companies will keep rising. There will be no reckoning as many are hoping or expecting. Alarmist headlines of spending, such as recently by The Economist “OpenAI’s cash burn will be one of the big bubble questions“, will continue to be premature.
2. No signs of ‘takeoff‘, inflection, AGI or any ‘phase shift’ of AI intelligence. Forecasts of AI capability will have to be revised lower or further out. There will continue to be incremental improvement of AI, but this will be far short of a ‘generalized intelligence’.
3. Unemployment rises a bit, but no meaningful signs of AI taking people’s jobs.
4. AI makes incremental progress at math proofs, but still far short of optimistic forecasts.
Foreign Policy
Foreign policy forecasts are always the hardest. I don’t know anyone who can do this consistently well. Unlike the above, it’s not possible to extrapolate geopolitical outcomes to the future. Things can change on a whim. So I am not going to bother trying to predict these.
Trump’s approval rating, however, remains stuck in the low 40% approval, similar to Biden. This is not surprising and reflects a shared dissatisfaction with political elites, in general. There will always be the 10-20% of the electorate who are liable to changing their minds, and elections are won or lost on this margin.