LIVE MARKETS-Five reasons the economy may not actually be fine

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FIVE REASONS THE ECONOMY MAY NOT ACTUALLY BE FINE

To assume the economy is 'fine,' you may need to overlook "five underlying forces quietly eroding economic momentum, which will become increasingly evident as we head into 2026,” according to EY-Parthenon's chief economist Gregory Daco.

First, Daco points to how tariffs are "reshaping the economic landscape." His point is that while the inflation impact is still emerging, it's "increasingly visible" while businesses are reporting severe impacts to earnings and investment plans as well as slower hiring.

Second, he points to immigration restrictions and says that labor force participation is edging down and that a “growing climate of fear is quietly restraining household consumption”.

Third, he says that while the One Big Beautiful Bill Act will "cushion the blow,” its design “disproportionately benefits larger firms and higher-income households — blunting its effectiveness as a fiscal stimulus lever.”

Fourth, he eyes political pressure on the Federal Reserve saying that threats to its independence are “reverberating through markets with yields drifting higher, elevating borrowing costs and tightening financial conditions."

Fifth, Daco worries about warning signs from the housing sector with single-family starts not growing in the last three months and "running 18% below December 2024 levels."

(Sinéad Carew)

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