Previously Bullish Top Economist Turns Cautious | Anna Wong, Bloomberg

**Anna Wong** (0:00)
We have seen several headwinds from 2025 turning into tailwinds, and that was why three months ago, the 2026 outlook of my team is that we are bullish. We think that GDP growth this year will be over 2.5 percent, at the same time while core PCE inflation will be coming down below 2.5 percent. However, I will have to say, Adam, so now we are a little bit more than two months into the new year. I am becoming more cautious about our bullish outlook.

**Adam Taggart** (0:43)
Welcome to Thoughtful Money. I'm its founder and your host, Adam Taggart. The jury is still out for many analysts on the outlook for economic growth, inflation, and the labor market this year. Some see lots of reasons for concern in the road ahead. Others are much more convinced that 2026 is going to be a blockbuster year. So which is more likely? To find out, we've got the good fortune to talk today with Dr. Anna Wong, Chief US. Economist for Bloomberg Economics. Prior to her current role, Anna also worked at the Federal Reserve Board, the White House Council of Economic Advisers, and the US. Treasury. Anna, thanks so much for joining us today.

**Anna Wong** (1:20)
Happy to be here again, Adam.

**Adam Taggart** (1:23)
Thank you so much. Happy 2026 and Happy Valentine's Day. I think when we're recording this the day before, when it airs, I think it's going to be the day after. But I hope you and your family have a great Valentine's.

**Anna Wong** (1:33)
Thank you.

**Adam Taggart** (1:35)
All right.
Well, look, I get a lot of questions for you, most notably about economic growth, inflation, and the labor market. But why don't we start, Anna, just with what's your general macro outlook right now? I talked at the beginning there that there are lots of reasons that a lot of people I talked to are concerned for 2026 But there are a lot of reasons why people think that there's reasons to be pretty optimistic here, especially if you listen to the administration. They think a bunch of tailwinds are coming. What are the most important trends you're looking at right now when it comes to the macro landscape?

**Anna Wong** (2:13)
If we look at the US economy from a very high level, just thinking about broad macrophoresis, we have seen several headwinds from 2025 turning into tailwinds. And those are reducing trade policy uncertainty, including fiscal impulse turning from contractionary to expansionary. And then we also have AI productivity, showing up in productivity data already. And also credit impulse is also changing because of the deregulatory effort that the administration started last year is going to start affecting lending patterns of small to medium banks. So, I mean, these forces, just to name four, should be adding to growth this year. And that was why three months ago, the 2026 outlook of my team is that we are bullish. We think that GDP growth this year will be over 2.5 percent. At the same time, while core PCE inflation will be coming down below 2.5 percent, because of both a combination of productivity growth and also these strong tailwinds, headwinds turning to tailwinds. However, I will have to say, Adam, so now we are a little bit more than a month or two, you know, a month and a half, two months into the new year. I am becoming more cautious about our bullish outlook. There are a few things that has happened that made me a bit more concerned of downside risks to the economy.
The first thing is the sentiment around the AI investment seem to be more fragile. And, you know, last year when one of the question that I got a lot was, how do we know we're in a bubble and how do we know it will pop? When will the AI bubble pop? And my answer consistently has been, it would happen when firms start to discount, start to lose their monopolistic edge over the AI specific product they sell. So what we are starting to see early this year is, and it's quite similar to what we saw last year in the beginning of the year when DeepSeek came out with this seemingly more efficient model than the US is that you have, it seems like firms within the US in the AI space are almost like competing more of each other and therefore each of the firms are losing that markup. And so when firms lose that markup, it's actually great for innovation adoption because then more of firms from other industries can adopt it, so for the real economy is actually good. However, for the stock market, since the stock market, the valuations has been concentrated, the rally has been concentrated in these handful of firms, hyperscalers, if there are any doubts about whether these firms can maintain their margin, then you start having a stock market correction. And I think I'm seeing a little bit of that enhanced competition among the various key companies of AI. And in my team, we had run a model assimilation of what happens if the stock market were to correct by 20 percent. And that would produce a drag on GDP growth by about 0.7 percentage point.