FAVORABLE FORECAST

2026 could well be pretty good economically given favorable household and capex tax policy from the OBBBA, lagged effects of steadily easier monetary policy, and an economic bounce from the government closure. Additionally, federal employment, which shrank by 271K in CY2025, is unlikely to shrink further as additional cuts become increasingly difficult given already sizeable reductions. Lastly, tariff policy may become less volatile as the Administration focuses its energies elsewhere.