Five forces backing US markets in 2026
Five powerful forces are lining up to support the US economy and US share markets in 2026.
Hello, it’s Callum Newman from Marcus Today. I’m going to outline five different factors that I believe will support the US economy and US markets over 2026. There’s a lot to get through, so let’s get started.
The AI capital expenditure boom
The first factor I believe will support US markets in 2026 is the AI capital expenditure boom. You may have heard a lot about the valuations of AI firms in the US market. But one thing cannot be denied – they are spending a lot of money.
In 2026, they are projected to spend between $400–$500bn on everything they need to fulfil their AI ambitions. The current AI spending boom compares with historic CapEx booms in US history, going all the way back to the railroads in the 19th century, the post-World War Two boom, the energy boom in the 1970s and, of course, the telecommunications and internet boom of the 1990s.
Those figures are around 1.5% of US GDP in 2026, and some funds suggest that could even go higher in future years. If you look at the chart from Vanguard, they compare previous CapEx booms in US history and suggest that AI spending is still in the early phase of this upswing. I expect that growth outlook to support the US economy and markets.
The expanding US federal deficit
The second factor I expect to support US markets in 2026 is the US federal deficit.
You may love him or hate him, but there’s no doubt Donald Trump likes spending money. During the election campaign he suggested he was going to reduce the US deficit, and Elon Musk got involved, but that has fizzled out. The US deficit is on track to be over $2 trillion this year, around 6% of GDP. That’s a very high level against historical norms.
You may have seen a recent post from Donald Trump that he wants to expand the US military budget by 50% to take it to $1.5 trillion. Whether he gets that, I’m not sure. But as long as the US deficit continues to rise, that supports the US economy, and a lot of that spending shows up as US corporate profits. The ongoing expansion of the US federal deficit is another strong factor for 2026.
Strong credit growth
The third factor supporting US markets in 2026 is strong credit growth.
We’re in January 2026, and US banks are reporting their fourth-quarter results for the 2025 calendar year. They are reporting very strong lending growth. JP Morgan, for example, expanded lending by 9% year over year. That’s a very high rate of growth.
The US money supply is expanding. All that lending drives spending and investment across the private sector, which expands the economy. Growing money supply is very bullish for the US. If you look at the chart of the US bank index, it has risen consistently over 2025 and is likely to keep rising. If the market were expecting a US downturn, that chart would likely be falling. While US banks remain in an uptrend and are reporting strong results, I expect credit growth to remain solid.
Lower interest rates
The fourth factor supporting the US in 2026 is lower interest rates.
The Federal Reserve sets short-term rates. At the moment, markets are pricing in an 80% probability that rates will fall by 0.25 percentage points over 2026. We also know the US president is a strong proponent of lower interest rates and is putting pressure on the central bank. There is a new chairman due by May 2026, and markets are expecting what they call a dovish chairman to take control.
Lower rates help US consumers and home buyers and support the broader economy as extra spending power flows through.
Lower energy costs
The final factor I expect to support the US economy in 2026 is lower energy costs.
Oil was down 20% over 2025. If you look at the chart of West Texas Intermediate, which is applicable to the domestic US market, it remains in an overall downtrend.
We also know that US actions in Venezuela mean those barrels of production, previously going to China, are being rerouted to the US Gulf Coast. That helps US refiners feed extra barrels into the domestic market. Lower petrol prices support the US consumer.
US gas exports are also helping bring down LNG prices in Asia, which is important for countries like Japan, Taiwan and China. Lower energy in 2026 is another supporting factor for the global economy and asset markets in general. It helps keep inflation contained and supports lower interest rates.
So there you have it – five factors that should support the US economy in 2026. The US remains the leader for global growth. Markets are volatile and unpredictable, and black swan events can occur. These factors could change. But as of right now, I expect the US economy to remain solid over the next year.
If that’s the case, Australia should also remain relatively solid, given its exposure to global and Chinese growth. That means there may be opportunities on the ASX and in US markets over the year ahead.