No More Fireworks: Berenberg’s 2026 U.S. Economic Outlook

Atakan Bakiskan doesn’t just forecast. He dissects. In Berenberg’s (Europe's oldest privately-owned bank) U.S. Economic Outlook 2026¹, his headline sets the tone: “No more fireworks.” But don’t confuse the absence of fireworks for the absence of risk. Rather, Bakiskan’s report offers a sobering, intricately layered narrative: the post-pandemic boom is over, structural weaknesses are exposed, and policy choices are beginning to bite.

If 2025 was a year of inertia buoyed by stimulus and AI-fueled optimism, 2026 is the year the scaffolding starts to creak. Below, we unpack the full architecture of his argument — and what it means for markets, advisors, and policymakers.

I. The Macro Picture: A Shallow Descent

Bakiskan forecasts real GDP growth to slow from 2.4% in 2024 to 2.1% in 2025, and down to 1.5% in 2026, warning that without tailwinds from AI investment and temporary fiscal support, “the US economy would likely stagnate this year”.

Why the slide? Policy, primarily. “President Donald Trump’s anti-growth policies, tariffs and an immigration crackdown, will continue to weigh on economic activity in 2026”.

II. The Consumer Paradox: Spending Amid Suffering

Despite historic lows in consumer sentiment — Bakiskan calls it “the lowest since 1950s” — spending remains robust. Prices have risen ~30% since April 2020, and “the affordability crisis has never gone away”.

Still, consumers are spending. The bifurcation is stark: “Wall Street thrived while Main Street struggled”. The report offers a sharp visual of this K-shaped recovery: high-income consumers are driving retail sales, while lower-income households face rising credit delinquencies and stagnant income.

Yet Bakiskan warns: “Consumption... now relies more on spending by wealthy households... a sharp equity market correction could push the US towards a recession potentially more severe than the downturn after the dot-com bubble burst”.

And here's the kicker: 40% of stock market wealth is owned by Americans 70 and older. Aging, asset-rich, and pivotal — if markets wobble, the consumption engine stalls.

III. Inflation: Sticky, Distorted, and Misread

The Fed’s favored PCE inflation has remained above 2% since 2021. Bakiskan's tone shifts to exasperation: “The trend is not your friend anymore”.

He argues convincingly that if you remove portfolio management fees (linked to equity markets) and shelter inflation (a lagging measure), core PCE inflation would be 2.3%, not 2.8%. Thus, “inflation is closer to 2% than you think”.

But political and structural drivers may disrupt disinflation:

• Tariffs are still inflating prices — “firms should continue to pass through remaining costs” into mid-2026.
• “Greedflation” may return — companies could “raise prices more than they need to”.

Meanwhile, long-term inflation expectations remain “anchored, so far” — but fragile.

IV. Labour Market: Tight, Tired, and Shrinking

Bakiskan introduces a disturbing demographic inflection: for the first time since 1918, the U.S. working-age population may decline year-over-year in 2026.

Trump’s immigration policies are directly implicated:

“The post-pandemic surge in immigration was a key factor in helping the US economy remain resilient… [but] restrictive immigration policies... are now slowing growth and contributing to inflation”.

Further:

“President Donald Trump signed a proclamation requiring a $100k application fee to obtain an H1B visa” — a move Bakiskan calls “The $100k H1B blunder”, undercutting the very sectors leading productivity growth (AI, tech, business services).

The labour market is stuck in a “low-hire, low-fire” phase. Companies, still scarred by past shortages, hesitate to lay off workers. Yet hiring is sluggish, and indicators like job-switching wage premiums have evaporated.

V. Investment & Productivity: AI Carries the Torch

In a landscape of waning demographic growth and limited labour input, all eyes turn to productivity. AI is positioned as the main hope:

“Without an inflow of workers... productivity must do all the heavy lifting”.

And yet: AI adoption remains low — under 15% of businesses plan to use it in the next 6 months. While Big Tech continues to invest heavily (see capex charts on page 32), broader business investment remains soft.

Still, productivity growth has come from AI-heavy sectors: information, finance, and professional services. But the cause-and-effect is unclear: is AI boosting productivity, or are productive firms more able to invest in AI?

VI. The Structural Faultlines

Some core risks Bakiskan highlights:

• Equity Market Risk: Heavy reliance on asset-rich households for consumption exposes the economy to “a major risk” if equities fall.
• Data Quality Deterioration: A federal hiring freeze is undermining statistical capacity, especially in labour market surveys — a major issue for markets reliant on real-time data.
• Tariffs and Supply Chains: Price pressures from tariffs remain persistent, and opportunistic pricing risks are returning.
• Small Business Stress: Elevated uncertainty and immigration restrictions are hurting small firms the most. Capex plans are back at Global Financial Crisis lows.

VII. Conclusion: What’s Holding the Economy Together?

The report offers this paradox: economic resilience is real, but so are structural fragilities. Bakiskan’s parting synthesis:

“The next crisis, when it occurs, could be a challenging one”.

It’s not an alarm bell — but a nod to fragility hidden beneath the surface. Growth is positive. Consumption is stable. But the undercurrents — policy missteps, a shrinking labour base, over-reliance on asset bubbles, and constrained fiscal space — signal a system increasingly dependent on staying lucky.

Key Takeaways for Advisors & Investors

1. Rebalance for Equity Sensitivity: With consumption tied to wealth, any equity correction could have cascading macro effects.
2. Watch Immigration Policy: Labour supply is the new macro lever. Every restriction carries productivity and inflation implications.
3. Bet selectively on AI: The productivity payoff is real but uneven — tilt toward sectors already reaping gains.
4. Prepare for Policy Uncertainty: Fiscal space is limited. The economy is exposed if another crisis emerges.
5. Disaggregate the Consumer: “Main Street” and “Wall Street” are not recovering equally. Tailor strategies accordingly.
6. Beware Misleading Inflation Metrics: Shelter inflation lags, portfolio fee inflation distorts. Look past headline PCE.
7. Track Data Quality: Deteriorating survey response rates may lead to more market volatility around labor prints.

There may be no fireworks in 2026 — but Bakiskan’s report makes one thing clear: the smoke hasn’t cleared either. The U.S. economy, though not on fire, remains under tension. And tension, in markets and politics alike, is often a prelude to something more. ```

Footnote:

1 Bakiskan, Atakan. No More Fireworks: The US Economy in 2026. Berenberg, Jan. 2026. PDF.