As 2025 draws to a close, the trajectory of the United States economy has become a central question for global markets. Despite a year marked by significant investment in artificial intelligence, growth faced headwinds from trade policies and data disruptions. Renowned economist Nouriel Roubini, in an analysis published on 2 December 2025, outlines three distinct scenarios for what 2026 may hold for the world's largest economy.
The Three Paths for America's Economic Future
According to Roubini, the baseline and most likely outcome is a 'Goldilocks scenario'. This involves a short period of below-trend GDP growth—a growth recession—followed by a recovery. Crucially, inflation would gradually decline toward the US Federal Reserve's 2% target during this period. Roubini attributes the likelihood of this scenario to market discipline and a still-independent Fed, which have already prompted the Trump administration to moderate the high tariffs announced on 2 April 2025. Subsequent trade deals have featured more modest increases.
The second possibility is a shallow recession lasting several quarters, followed by a slower recovery than in the baseline case. This could be triggered if the lagged effects of tariffs push inflation higher, eroding real wages and consumer confidence. The emergence of a 'K-shaped economy,' where high-income households thrive while lower-income ones struggle, alongside a potential correction in equity markets worried about an AI bubble, could further dampen business sentiment.
The third and final scenario is a 'no-landing' outcome. Here, economic growth remains robust, but inflation stubbornly stays above the Fed's target, possibly around 3%. This could occur if the economy proves more resilient than expected, potentially due to tight labour markets from reduced immigration and early productivity gains from new technologies.
Drivers of a Potential 2026 Recovery
Roubini points to several forces that could fuel a US economic recovery by mid-2026, particularly in the baseline Goldilocks scenario. These include further monetary easing by the Federal Reserve, pending fiscal stimulus (with most legislated spending cuts delayed until after the 2026 midterm elections), and strong household and corporate balance sheets.
Additionally, easy financial conditions—characterised by high equity prices, low bond yields and credit spreads, and a weaker dollar—would provide support. A significant tailwind is expected from continued capital expenditure related to artificial intelligence. Furthermore, inflation may peak and start to fall as the base effects of tariffs diminish and technology-driven productivity gains help reduce costs.
Global Implications and Cautious Optimism
The professor emeritus at NYU's Stern School of Business emphasises that the global economic outlook is closely tied to the fortunes of the US and China. If the US economy stages a recovery in 2026 and China maintains resilient growth close to 5%, the outlook for both advanced and emerging economies would improve significantly compared to 2025.
While geopolitical shocks, such as a worsening of Sino-American trade tensions or an oil price spike from a new conflict, remain key downside risks, Roubini suggests they have been largely contained so far. He concludes that, even with these risks, there is room for cautious optimism heading into the new year. The actions of the Federal Reserve, particularly the interest-rate-setting Federal Open Market Committee (FOMC), will be pivotal in determining which of the three scenarios ultimately unfolds.
