Will We See 5%, 6% or Even 8% GDP Growth in 2026?

Commentary

At a Mar-a-Lago dinner recently, I had the opportunity to chat with Commerce Secretary Howard Lutnick. I told him about my 5% GDP projection, and I was surprised to hear Howard raise the bar to 6%, only to be upstaged by President Trump’s prediction of 15% growth, made on Fox Business with Larry Kudlow. We briefly discussed how 15% is likely “a bar too high,” but Howard reassured me 6% GDP growth this year is very possible.

Even though 15% is a “moonshot” projection by President Trump, I’d say GDP productivity gains of up to 8% are possible via AI, while 4% industrial GDP gains are possible if exports continue to soar, and consumer spending growth above 3% is likely as soon as consumers realize they have more money in their pockets from the 2025 tax cuts. Still, I am concerned the housing market could put a drag on growth.

With corporations, 15% earnings growth is more likely than 15% GDP growth. With earnings season now winding down, I am delighted that the data center-related stocks in our portfolio all beat (and guided higher) due to rising order backlogs. Eli Lilly (LLY) hit the ball out of the park with its earnings announcement, and gold stocks in our portfolio announced record sales and earnings. Our biggest holding, Nvidia (NVDA), should deliver stellar results tomorrow.

With 78% of companies in the S&P 500 having announced their fourth-quarter results, sales growth has risen at a 9% annual pace, while earnings have risen at a 12% annual pace – the tenth quarter in a row when earnings growth has exceeded sales growth. This means operating margins are expanding and productivity is rising. This should help deliver double-digit earnings growth during 2026 as well.

Here are the most important developments recently and what they mean:

– There are a lot of investor distractions out there, so let me address them. First, Wall Street celebrated that the Supreme Court last Friday ruled 6 to 3 that President Trump’s “use of emergency powers” without Congressional authorization is prohibited. Interestingly, since the Supreme Court has no remedy to enforce its decisions, the lower federal courts have to enforce the Supreme Court’s ruling, which means the companies that paid $170 billion in tariffs likely have to request their money back via the federal courts. In fact, the Supreme Court did not address whether the federal government would have to pay back the tariff revenue it already collected.

– The Trump Administration, after the Supreme Court ruling, implemented “Plan B” and imposed new 10% across the board global tariffs. Then, a day later, President Trump announced that he would be increasing the new global tariffs to 15% across the board. So effectively, tariffs remain in place. The Trump Administration is apparently asking its trading partners (e.g., Britain, Brazil, the European Union, China, India, Japan, South Korea, Switzerland, Vietnam, etc.) to stick to the tariffs that they negotiated. It is very apparent that the Trump Administration does not want to return the $170 billion in tariffs collected that the Supreme Court said were prohibited.

– The second investor distraction pertains to the U.S. negotiations with Iran, which have caused crude oil prices to rise based on the fear of a military strike. Iran has apparently proposed a pause in uranium enrichment and even proposed possible business deals with the U.S. Naturally, this is not what the U.S. wants in its negotiations with Iran.

– Gold prices are expected to benefit as the tension between the U.S. and Iran persists. Some of the gold stocks I recommend are Agnico Eagle Mines (AEM), Alamos Gold (AGI), Barrick Mining (B), Compania de Minas Buenaventura (BVN), Coeur Mining (CDE), Centerra Gold (CGAU), Caledonia Mining (CMCL), Eldorado Gold (EGO), Equinox Gold (EQX), Hecla Mining (HL), IAMGold Corporation (IAG), OR Royalties (OR), New Gold (NGD), Idaho Strategic Resources (IDR), Integra Resources (ITRG), Kinross Gold (KGC), SSR Mining (SSRM), Triple Flag Precious Metals (TFPM), and Wheaton Precious Metals (WPM).

– Iran conducted some military operations that briefly shut down part of the Strait of Hormuz, which was apparently a threat of how Iran could cut off critical crude oil supplies. Meanwhile, the U.S. has implemented its largest buildup of forces in the region since the Gulf War to intimidate Iran. Apparently, the U.S. military is reportedly ready to strike Iran within days if negotiations stall. Normally, military actions do not disrupt the stock market, but it is imperative that if the U.S. does strike Iran, it is fast and furious, so it is over quickly. I should add that Elbit Systems Ltd. (ESLT), Howmet Aerospace Inc. (HWN), and Palantir Technologies Inc. (PLTR) are the primary defense stocks in our portfolio.

– Another investor distraction is that private credit firm Blue Owl recently announced that it permanently restricted investors from exiting one of its retail funds. Namely, Blue Owl Capital Corp II. This news caused the stock prices of Ares Management, Apollo Global Management, KKR, Blackstone, and TPG to all sell off. Complicating matters is that BlackRock slashed the value of some of its private credit holdings in the past month. Since private credit is now a $3 trillion per year industry and does a lot of the lending that Dodd-Frank made difficult for banks, the U.S. now has a “shadow banking system.” In the event that there is a private credit “Black Swan” event that disrupts credit markets, then the Fed may have to step in to provide liquidity and/or slash key interest rates to help stabilize the situation.

– The last distraction that I should mention is that The Wall Street Journal reported that President Trump, on Truth Social, ordered the release of the government’s UFO files. Apparently, Trump was irked that former President Barack Obama leaked confidential government data when, on a podcast, he said regarding aliens that “They’re real, but I haven’t seen them.” I texted Christopher Mellon, who released the Tic Tac video to the New York Times and featured in “The Age of Disclosure” movie about President Trump, and he said, “I think Trump is unleashing something he’ll not be able to control that will likely later require him to address the nation.” Hmm. Maybe Steven Spielberg’s new movie, “Disclosure Day,” which is set to be released in late June, will help the world prepare for what is about to be announced.

– In the meantime, life goes on, and it is expected to get progressively better as 2026 unfolds. First, investors are expected to cheer up in the Spring as it warms up after a brutally cold and snowy winter for much of the U.S. Second, when the Fed meets in May for their Federal Open Market Committee (FOMC) meeting and Kevin Warsh takes over as the new Fed Chairman, the FOMC is expected to cut key interest rates and provide guidance for additional key interest rates cuts. Finally, S&P 500 earnings have been growing faster than sales for ten straight quarters, which signals that operating margins and productivity are rising. The S&P 500’s forecasted earnings remain in double digits for all of 2026 and are expected to get even stronger later in the year.

In conclusion, we are in the midst of the strongest economic growth that we will witness in our lifetimes. Whether GDP growth hits 5% as I predicted on Fox Business or 6% as Howard Lutnick predicted, or even possibly 15% as President Trump said is possible, there is no doubt that 2026 will go down as the strongest year for GDP growth ever recorded. With an accommodative Fed that will be cutting key interest rates due to AI productivity gains, the stock market is expected to gather even more momentum in the upcoming months. Growth stocks in our portfolio are off to a strong start, so I am expecting at least 60% gains this year, which I predicted on Fox Business. So, I hope investors are enjoying the ride and having fun, since 2026 is shaping up to be the strongest year in decades.

*Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.