Macro Visions for 2026

Part III

by Macro D

This is the third and final part of my macro vision series.

You can find my first two parts below.

As is only natural, the first inflation to raise fears of the worst will be American inflation, and this time, the damage could truly be irreparable. In the second half of next year, there won’t even be a single souvenir photo of Powell in the corridors of the Fed, and the new occupant of the Eccles Building will understand that some positions are hotter than the fires so dear to Tomas de Torquemada[1]. Hassett (or someone like him) could suddenly have to deal not only with inflation once again on the rampage, but also with a government deficit ready to explode. In short, it all starts with a straightforward statement: “More supply means lower prices and higher yields”.

Central bankers around the world will look around and see yield curves steepening, causing a shock to those poor investors clearly lying on a bed of long-dated bonds without any protection (which is a bit like sleeping on the beach under the stars. The idea is beautiful and romantic, but it could rain, and sometimes it does). The fact that the United States of America could be hurt more than many others is because at that time (the second half of 2026), the Fed would be headed by a guy who, unfortunately, is aligned with Trump’s positions. Therefore, the United States of America could find itself with both shoes in a scenario already outlined: “rate cuts underway accompanied by inflation well above the 2% target”.

Let’s explore those thoughts further.