Economic Outlook
By: Russ Colbert
Fall 2026 (Vol. 44, No. 3)
The U.S, economy grew 2.0% in 2025 and it looks like it may come in close to the same for this year. So far for the first nine months of this year, we are around 2.2%.
This doesn’t mean everything is fine and steady as she goes. The Data Centers have been on the news a lot and are springing up everywhere. They continue to grow at a rapid rate and are where the action continues to be. The construction value is up 23% from a year ago. Also, the shipments of computers and computer related products, plus communications equipment are also up over 23% from a year ago.
Capital spending by some of the largest Tech companies such as Google, Microsoft, Amazon, Meta, and Oracle are projected to be around $700 billion in 2026. This is going to outpace 2025 by over $300 billion. That will most likely account for over one percentage point of the GDP growth for this year.
The additional investment of companies in Artificial Intelligence (AI) has caused not only expansion in the Tech sector, but also in other sectors outside the technology sector, like water supply, and power generation, etc. At least as far as we can tell, despite the growth of AI and technological innovation, the overall economy is not booming, it is just growing slowly. But the year is not over, and we still have time and may see a pickup in the economy as we proceed toward the new year. We feel that after the outcome in the upcoming election and winding down the war with Iran, could have a more positive effect on the stock market.
Most people don’t follow the moves on interest rates the Federal Reserve makes. They notice when costs go up, such as when the grocery bill jumps, or a car loan costs more, or a job takes longer to find. As I previously mentioned above, the economy is still growing slowly. Hiring has slowed, and prices such as gasoline have continued to climb. The Federal Reserve meet October 27th and 28th, and again in December to decide on whether to raise interest rates or leave them alone. They raised interest rates by a quarter of one percent at the last meeting in September. That was the first increase in more than three years. Many officials think they are not finished.
Most forecasters expect at least one more small increase before the end of 2026. We feel if we have a rate hike it will be in December after the election. One of the main reasons to raise interest rates is to slow down the rise in inflation. Recently the Consumer price index measuring retail inflation came in over a 4% annual rate and the Producer Price index measuring inflation for the wholesalers came in over a 6% annual rate. Much higher than the 2% annual rate the President and Administration are aiming for that we experienced during Trumps first term. The Federal Reserve rate affects the interest rates charged on cars and housing loans. When Federal Reserve interest rates go up so do the interest rates on cars and Houses.
We feel that things will settle down and improve once we get past the elections in November and after that the war with Iran starts to wind down and end. We should then start to see oil prices begin to fall having a positive effect on our economy and the stock market.
If you have any questions or need a free portfolio review to keep you on track with your investments or retirement plan, please call me.
Russ Colbert
Senior Portfolio Manager
1-888-878-0001
Advisory services offered through Royal Palm Investment Advisors, Inc., a Registered Investment Advisor.