Renowned economist Nouriel Roubini stated that massive investments in artificial intelligence gave a strong impetus to the economy in 2025, but uncertainties arising from President Donald Trump's tariffs and policies suppressed growth in the second half of the year, and drew three different scenarios for 2026. As the new year approaches, the U.S. economy could head into a “growth recession,” a “shallow recession,” or “strong growth without a dip,” according to Roubini, but the most likely scenario is the Goldilocks scenario, which is also the most positive. Roubini argues that the failure to properly release official employment and inflation data for months due to the longest government shutdown in history has clouded the economic management's view. Despite this, he notes that the prevailing scenario is one where the economy recovers after several months of below-trend growth and inflation gradually declines toward the Fed's 2% target. This outlook was made possible by the administration's reversal of the high tariffs announced in April, replacing them with trade agreements that include more moderate increases, and preserving the Fed's independence. In this positive scenario, the key drivers of a strong recovery towards mid-2026 are the Fed's additional easing measures, fiscal stimulus that has not yet been activated, robust household and corporate balance sheets, the financial comfort created by high stock prices and low bond yields, and strong capital spending driven by AI investments. This is further supported by the easing of tariffs due to the base effect and the return of inflation to decline as productivity growth takes hold. The second scenario, a “short and shallow recession,” is less likely but not entirely ruled out. Roubini says the lagged effects of tariffs could push up inflation, erode real wages, weaken consumer confidence, and create a “K-shaped” divergence between income groups. Additionally, if the debate about a bubble in AI investments intensifies, a sharp correction in stocks and companies' capital spending cuts are also risks. However, even in this negative scenario, the recession is expected to be overcome quickly with the Fed's more aggressive interest rate cuts and fiscal policy providing additional support. Related News: Billionaire Anthony Scaramucci Says “A Brutal Reset Is Coming for Altcoins,” Speaks Very Differently About Bitcoin The third, more bullish scenario is “no decline, continued growth.” According to this scenario, the US economy is proving more resilient than many estimates; the slowdown in employment is thought to be due to a reduced labor supply due to immigration pressures. If artificial intelligence and new technologies generate early productivity gains, wages and growth could remain strong, while core inflation could hover around 3%. In such a scenario, the Fed could hold off on interest rate cuts for an extended period due to concerns about the economy overheating. However, Roubini emphasizes that this scenario is not the most likely scenario, as recent data indicates weakness. Roubini points out that global risks, such as escalating US-China tensions or a new geopolitical shock driving oil prices, create vulnerabilities that could push the US economy into the latter scenario. However, he points out that these risks are largely under control. According to the renowned economist, if the US economy recovers in 2026 and China maintains growth near 5%, the global economy is poised for a significantly more positive year compared to 2025. Despite all the downside risks, Roubini argues that “cautious optimism” is a reasonable approach as we enter the new year. *This is not investment advice. Continue Reading: What Lies Ahead for the US Economy in 2026? Renowned Economist Nouriel Roubini Weighs In
