TD Securities expects US output growth to slow towards potential by late 2026, as Iran-related stagflation risks keep the Federal Reserve cautious. It forecasts 1.9% Q4\/Q4 GDP growth in 2026, unemployment near 4.3% by Q4 2026, and a 30% chance of recession over the next year.<\/p>\n
The firm anticipates growth easing to potential by the end of this year, with larger tax refunds supporting consumers facing higher petrol prices. It expects 2026 growth to be front-loaded due to a rebound in government consumption after a shutdown.<\/p>\n
Higher energy prices and tariffs are expected to lift consumer prices in the near term. Core CPI is projected to peak at about 3.0% year-on-year in Q2 2026, with similar figures expected for core PCE.<\/p>\n
It expects most oil-price effects to show up in headline inflation. Disinflation is forecast to resume in the second half of 2026.<\/p>\n
We are facing immediate stagflationary risks from the conflict in Iran, which should keep the Federal Reserve on hold for most of this year. WTI crude oil futures have remained elevated, trading above $90 per barrel through most of April 2026, directly impacting gasoline prices for consumers. This suggests volatility will remain a key theme in the energy and equity markets.<\/p>\n
The expectation is for core inflation to peak right now, during this second quarter. The most recent Core CPI data for March 2026, which came in at 2.9% year-over-year, supports the view that we are at or near the cycle high for inflation. Therefore, traders should watch for opportunities in interest rate derivatives that price in a Fed pause through the summer, with disinflationary trends taking hold later in the year.<\/p>\n
Given the uncertain growth outlook, hedging equity exposure is prudent. The VIX has been hovering in the high teens, reflecting market anxiety but not outright panic, which could make buying protective put options on major indices relatively affordable. Looking back to the sharp market swings in 2025, we saw how quickly sentiment can shift based on geopolitical headlines, reinforcing the need for defensive positioning.<\/p>\n
The forecast for disinflation to resume in the second half of 2026 presents a forward-looking opportunity. This suggests that the current pressure on growth and earnings may begin to ease by Q3 or Q4. As we move into summer, positioning for a decline in long-term bond yields could become a viable strategy if inflation data confirms a downward trend.<\/p>\n
A gradual slowdown, rather than a collapse, is the base case, with unemployment expected to rise to just 4.3% by the end of 2026. The latest jobless claims data has shown a slight uptick for three consecutive weeks, aligning with this forecast of a gently cooling labor market. Still, we must consider the 30% probability of a recession over the next twelve months as a significant tail risk to this outlook.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" TD Securities sees US growth slowing by 2026, Fed cautious amid Iran stagflation risks; inflation to peak.<\/p>\n","protected":false},"author":38,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[46],"tags":[],"class_list":["post-46004","post","type-post","status-publish","format-standard","hentry","category-live-updates"],"acf":[],"aioseo_notices":[],"featured_image_src":null,"featured_image_src_square":null,"author_info":{"display_name":"josephine","author_link":"https:\/\/www.vtmarketsglobal.com\/en\/author\/josephine\/"},"_links":{"self":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts\/46004","targetHints":{"allow":["GET","POST","PUT","PATCH","DELETE"]}}],"collection":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/users\/38"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/comments?post=46004"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts\/46004\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/media?parent=46004"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/categories?post=46004"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/tags?post=46004"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}