Positive 2026 Outlook Amid Affordability Concerns

MIKE TOWNSEND: In politics, there's always a word or a phrase that captures the most important issue of the moment. The issue that's resonating with voters. The issue that's top of mind when they go to the polls to cast their ballots. It becomes the word that candidates repeat over and over on the campaign trail. Either to remind voters what they're doing to address it or to remind voters how the people in office right now aren't addressing it.

As the calendar gets ready to turn from 2025 to 2026, the word of the moment in politics is affordability. Affordability was the key theme of some of the most notable off-year elections last month in places like New York City, New Jersey, and Virginia. And I suspect it'll be one of the main talking points over the next 11 months as the battle to control Congress in next November's midterm elections heats up. I've been thinking a lot about affordability in the political context.

What is affordability? Are we talking about the price of a cup of coffee, the cost of groceries, the price of a new home? What about stocks? The S&P 500^® is up 17% year to date. But are stocks affordable at these prices? It's a hard issue to pin down because it means something different to everyone. And it's very dependent on an individual's particular situation. It's one of those words that's more of a feeling, an impression about whether you can afford the things you want and need. With inflation sticky, the jobs market slowing, tariffs increasing the cost of imported goods, a growing number of Americans have the sense that the economy is really struggling, even if data shows that it's not necessarily the case. I think that's part of why affordability has become such a buzzword at the moment. 

Welcome to WashingtonWise, a podcast for investors from Charles Schwab. I'm your host, Mike Townsend, and on this show, our goal is to cut through the noise and confusion of the nation's capital and help investors figure out what's really worth paying attention to. 

Coming up in just a couple of minutes, Kevin Gordon, the head of macro research and strategy at the Schwab Center for Financial Research, is going to join me to discuss why affordability has become such a hot topic, where the economy is right now, and what's causing the big disconnect between what people appear to think about the economy and how the economy is actually doing. Kevin will also share his perspective on Schwab's 2026 market outlook. I want to leave the bulk of this episode for that conversation. But before we get to Kevin, here are a couple of quick updates on things I'm watching in Washington right now. 

First, Congress is pushing toward the finish line for the year, with both chambers hoping to adjourn for the holidays by December 19. Lawmakers have made little progress on the appropriations bills that fund the federal government. The deal to reopen the government last month after the 43-day shutdown only funds government operations through January 30. As part of that agreement, Congress did pass three of the 12 appropriations bills, but those cover only about 10% of federal spending, and there are still nine more bills that need to be passed, including the largest, which covers defense spending.

There was hope in the Senate at the beginning of December that they could package four or five of the remaining spending bills together and pass them as a group, but those hopes quickly faded. It sets up a difficult start to 2026 where Congress will be facing the possibility of a second government shutdown if lawmakers can't pass the remaining appropriations bills by that January 30 deadline. I'm also watching this week the ongoing drama on Capitol Hill over those expiring subsidies that help about 22 million Americans purchase health insurance through the Affordable Care Act. Senate Majority Leader John Thune promised Democrats a vote on extending those subsidies by December 12. There are a number of bipartisan ideas floating around about possibly extending those subsidies for a couple of years with new income caps restricting who is eligible and some fraud prevention measures added. But those behind-the-scenes discussions have not yet coalesced into a package both parties can get behind. As a result, we expect a vote in the Senate this week on a Democrat proposal to simply extend the subsidies with no changes for three years. That won't get the necessary 60 vote supermajority. Barring some unexpected last-minute breakthrough, it looks likely that those subsidies will expire as scheduled at the end of the year. Expect that issue and the cost of health care generally to be another of the most contentious policy debates during the 2026 midterm campaign. 

Finally, there was a notable political development last week when voters in Tennessee went to the polls for a special election to fill a vacant seat in the House of Representatives. The Republican candidate, Matt Van Epps, won by nine points, which sounds convincing.

But President Trump won the district in 2024 by 22 points. A drop from a 22-point win to a nine-point win is sounding alarm bells for Republicans. After some big wins for Democrats in the off-year elections last month, this result is another concerning sign for Republicans that they may not be able to retain their House majority in next fall's elections. New Congressman Van Epps took the oath of office on December 4, which means that Republicans now have a 220 to 213 majority in the House. But with Republican Congresswoman Marjorie Taylor Greene from Georgia planning to resign her seat in January and two Democrat-leaning seats set for special elections in early 2026, that already narrow margin for Republicans in the House is about to get smaller. 

On my deeper dive today, I want to explore what's going on in the economy. In my comments at the top of this episode, I spoke about the word affordability and how it's become a bit of a political football that means different things to different people.

That may be part of why there's an increasing gap between how people feel about the economy and what the data says is actually going on in the economy. Even the Federal Reserve seems to be struggling to interpret what's happening with the economy. So to help me sort through all of this and to talk about his outlook for 2026 for the economy and the markets, I'm pleased to welcome back to the podcast my good friend and colleague Kevin Gordon. Kevin is the head of macro research and strategy at the Schwab Center for Financial Research. And someone who I think is really thoughtful about these issues. Kevin, thanks so much for making the time to talk today.

KEVIN GORDON: Hey, thanks, Mike. Always great to be back. Happy almost 2026.

MIKE: Well, Kevin, I want to dig into a few interconnected issues with you today and get your insights into how to tie them together. As I said earlier, I've been thinking a lot about affordability because it's become such the buzzword here in Washington. The president has sometimes embraced it. In November, for example, he quietly lowered tariffs on agricultural products coming into this country—fruit, vegetables, coffee, meat—as part of the White House's effort to lower costs for people. But then last week, he called affordability a con job by the Democrats. So how do you think about affordability and the effect the debate is having on the broader economy and the markets?

KEVIN: I think that this discussion of affordability is perfectly capturing the zeitgeist of the American economy right now. And as you mentioned, this was a dominant theme of the recent elections. But I do think it's increasingly going to influence the economy. Right now, it's not negatively impacting the economy in terms of growth. So yes, you have dozens of surveys that are showing this large share of Americans saying that the cost of living is too high. But when you square that against the economic data, there's a mismatch.

So you have GDP at an all-time high. The stock market is right back near an all-time high. The unemployment rate is low at 4.4%. Personal income and spending growth are both up over the past year. I could go on with the statistics, and I know we'll be diving into them, but to me this really underscores that despite affordability being top of mind for people, the economic backdrop is rather firm. And that might sound counterintuitive, but it mostly boils down to the fact that we still have this split between the hard data, so actual economic data like GDP, and the soft data, such as anything that's just survey-based. And to me, this has been driven by, number one, the massive inflation spike that we saw coming out of the pandemic. Number two, more recently, these concerns in the labor market propelled by things like AI and the prospect of more jobs that are potentially vanishing due to technological changes. And then number three, the fact that tariffs remain high, and they're squeezing lower-income consumers. And as you mentioned, there's been some recent tariff relief at the margin, but the reality is that prices have already been pushed higher by higher import costs. And tariffs are a regressive tax. So they tend to hurt individuals more so on the lower end of the wealth and the income spectrum.

MIKE: Yeah, I'm going to come back to tariffs in just a minute, but let's go deeper on some of what you're saying about the economy and particularly the consumer. From Thanksgiving through Cyber Monday, more than 202 million Americans went shopping, producing record breaking sales online, including $14.25 billion in Cyber Monday sales alone. But there's evidence that those records were powered by higher prices, not by people buying more.

Salesforce found that order volume on Black Friday was down about 1% compared to Black Friday in 2024, and that the volume of goods in shopping carts was down about 2%. I really think there are two larger stories going on with consumers. One is that there's this increasing gap between wealthier people who are spending and lower income people who are not. And that gives maybe a bit of a false picture of the economy.

And second is that there seems to be a gap between what consumers think about the economy and what's actually going on with the economy. So how do you interpret what you've been seeing in terms of consumer behavior, maybe more importantly, consumer sentiment?

KEVIN: Well, you're right to point out that split between the wealthier consumers and those who either don't earn as much, or they're not exposed to the stock market. This is the now widely discussed K-shaped economy, and it's actually a central theme of our 2026 outlook that just published. On the upper part of the K, you have asset owners. You have high-income consumers. On the lower part, you've got those without assets, whether it's stocks or homes, and those are who are living paycheck-to-paycheck.

And I want to preface this next statement with the fact that it is indeed a fact. This is not an opinion or what I think is necessarily morally right. But the reality is that when you look at the multiplier effect of individuals who make more money and who have assets, it's just simply much stronger than the multiplier for those at the bottom. That is essentially the main reason that you've seen the economy continue to grow over the past several years, in addition to the fact that we have not had a true layoff cycle in the United States.

We have not seen mass layoffs leading to what is traditionally a recession, in which job growth plummets, the unemployment rate skyrockets, and consumption falls markedly. Instead, what we've seen, and what we continue to see right now, is that the total stock of labor remains high. And I know this might seem too in the weeds, but this is really crucial, I think, for investors to understand when looking at these mechanics of how the labor market works. So when we get the monthly jobs report, that's a flow.

It shows on a net basis how many payrolls were created each month. If you add up several months' worth of flows, you get a stock. It's not a stock price. Think of it as a stockpile of payrolls. So if you take them all together, we know that there are roughly 160 million non-farm payrolls in the U.S. as of September. That's the most recent data that we have from the government. That's an all-time high. In other words, with a record number of people employed right now and those people earning money, they continue to spend it, even if they say economic conditions are poor. So month to month, spending holds up. And if we know one thing, it's that Americans will definitely spend money when they're employed. That isn't to say things are perfect. I do think it's worth looking at the fact that the flow of labor has slowed considerably in the second half of the year because we have started to see some months in which job growth has been negative.

MIKE: Yeah, well, speaking of jobs, we're going to see delayed jobs reports eventually, although it sounds like we won't ever have good numbers for October due to the government shutdown. But we have seen private sector data that has been in some ways a little worrying. There's also anecdotal data as well. Layoff announcements at big companies like Amazon, UPS, and Target this fall. Those three companies together have laid off about 60,000 people in recent months.

On the other hand, federal workers going back to their jobs after the long shutdown potential, that may temporarily skew the numbers a bit in a positive direction. So there's lots of competing information here. Maybe tell us a little bit more about how you're viewing the jobs market. How long do you think it'll take before we have reliable jobs data?

KEVIN: Building on the stock-versus-flow points I was just making, I do think that the labor market is continuing to slow and show more signs of stress. But I think right now I would consider it, or classify it, as bending, not breaking. And if you start with payrolls, it is the case that private sector data have shown a more material slowing of late. So if you look at November, for instance, which is the most recent data we have for payrolls from firms like ADP and Revelio Labs, which have sort of become these key private sources that we all look to now as we wait for the government data to get cleaner and come back online. Both of those show declines in November. So you had ADP reporting a drop of 32,000 jobs, and you had Revelio reporting a drop of 9,000. And importantly, ADP just reports on the private sector and both of those sources, neither of them are perfectly correlated with non-farm payrolls that come out of the Bureau of Labor Statistics. But they at least tell us this similar story of labor demand continuing to drop, not just most recently in November, but really in the second half of the year. 

That said, despite payrolls having softened a lot, we are in this unique labor environment where most of the weakness has been driven by labor supply weakening, not necessarily layoffs picking up. So what that means is, as of now, it's somewhat normal to see very low or even slightly negative payroll numbers each month, along with an unemployment rate that stays relatively low.

So just as an example, in the two months this year when non-farm payrolls fell, which was June and August, the unemployment rate was 4.1% and 4.3%, respectively. And that low unemployment rate is consistent with the fact that initial jobless claims have stayed very low relative to history. And in fact, if you look at the most recent week, they actually fell close to their lowest point of the year. That underscores that, in aggregate, layoffs are not picking up. Any layoff announcements that we've seen, such as the ones that you just pointed out, those are mostly confined to either certain companies or certain industries. They're not to be totally dismissed. But I think that if they're not corroborated by the broader layoff data, then they're less likely to be telling us that the labor market is about to fall off of some cliff. On your last question, I think the whole notion of data quality will remain a very hot topic next year for a couple of reasons. The first one just being that we've yet to get a replacement for the head of the BLS. And I can see that being a persistently contentious issue.

But second, the BLS has not recovered much in terms of staffing and resources, especially after some of the cuts from the Department of Government Efficiency. And adding that to the fact that survey response rates for things like the payroll survey have been incredibly low and remain incredibly low, I think you'll probably continue to see some controversy around the quality of government data. I do think it's important to note, though, that it's not necessarily the case that low response rates and fewer staff make for poor data.

It just means that we should continue to expect fairly large revisions for payrolls and more imputed items in the Consumer Price Index. So my sense right now is that you probably won't have a clean read on labor or the inflation backdrop until maybe late January or well into February, because I think by that time you'll start to see revisions for November, we'll be exiting some of the soft patch of not getting a lot of clean data for October. And importantly, for labor, we'll have the annual benchmark revisions for payrolls.

MIKE: Yeah, Kevin, I think this question of the quality of data is such an interesting one. It's probably the question that I have gotten asked by investors at my events over the course of this year more than any other question. I think there's a real concern about the data even before the government shutdown and the lack of data for October. Just think there's a growing concern about the reliability of that data. And that's something I'll be watching very closely in 2026.

There is another piece of this puzzle, and that's tariffs. Tariffs have been really interesting this year. The president's Liberation Day announcement in April sent the stock market plummeting on fears that tariffs would spark a big increase in inflation as companies raised prices on consumers to cover the cost of those tariffs. But that's not what has happened. I saw a Harvard Business School report that Americans are paying about 5% more for imported goods since the tariffs were imposed, but companies are absorbing the bulk of the tariff costs and paying an additional 18% that they're not passing on to customers. That doesn't seem sustainable. 

And a recent Goldman Sachs report said that, in fact, by the end of next year, consumers could be paying as much as 70% of the cost of the tariffs. If that level of higher cost is passed on to consumers, could have real consequences for economic growth, and those increased costs would disproportionately affect small businesses, which of course employ nearly half the workers in the United States.

KEVIN: Yeah, I think that tariffs are going to continue to be this dominant macro theme next year for a few reasons. So first, as you mentioned, companies have been shouldering most of the burden thus far. And that's due to the fact that when you look at the larger firms in this country, in aggregate, they're financially healthy, they built up inventories before the tariffs kicked into high gear, and they've been able to pull back on hiring with very few consequences. And that's been a pretty big cost saver.

At some point, though, our sense is that inventories will need to be rebuilt. And we think that it'll get increasingly difficult, even if it's just marginal, but it'll get increasingly difficult for companies to continue to eat most of that cost. Another reason for that is because foreign countries have not been reducing their prices. And if you just look at something like the Import Price Index, which excludes tariffs, it's actually unchanged this year. So in other words, that means that exporters are not cutting their prices for goods that are entering the United States.

There have been some cuts for certain subsectors like Japanese cars, but at the aggregate level, there really hasn't been much of a change. It sort of goes against the argument that you'll often hear from those who are in favor of high tariffs that exporters are going to be eating the costs. That just hasn't been the case. To your point about maybe consumers potentially shouldering more of the burden next year, we just haven't been seeing it in the data that exporters have been eating the cost.

MIKE: Well, all this makes for really tricky environment for the Fed, of course. And let me stipulate right here that we're recording this conversation while the Fed is literally meeting down the street from my office here in downtown Washington. But we're recording before we know what their decision will be on whether to cut the interest rate. I think we're both expecting a 25-basis-point cut, but we're also expecting some dissenting views. The Fed is deeply divided.

There are some politics in play, of course, but I also think it's just a difficult situation for the Fed. The two pieces of its dual mandate, maximum employment and low inflation, appear to be acting somewhat in conflict with each other. And that has been exacerbated by the lack of economic data due to the government shutdown that basically wiped out key data from October on jobs and inflation. So how concerned are you about the Fed's ability to manage things in an environment in which the members themselves seem so deeply divided. What does it mean to have monetary policy decisions that are nowhere near unanimous?

KEVIN: Yes, I'm still bummed that we were not invited to this meeting. I do agree that the Fed is at an increasingly tricky juncture here, because, on the one hand, you have all of the struggles and the stress on the lower end of the income and the wealth spectrum that we've discussed. But on the other hand, you have this business investment in the AI space that is just soaring, and you have inflation that's been above the Fed's target for four and a half years.

So I think what we're starting to see in the Fed's response is where the biases are showing up among the members. You have those who are in the more dovish camp, like Stephen Miran, who continue to argue that the Fed should lower rates to help the labor market and prevent any further deterioration. I know you can argue that he's a bit skewed by politics, given his most recent role in Washington in the White House, but he's not the only one who's in favor of continuing to cut rates.

On the other hand, on the more hawkish side of the spectrum, you have members like Kansas City Fed President Schmid, who almost consistently points out this issue of the Fed being above target on inflation. And I actually think that the disagreement is a healthy thing, not least because it emphasizes the fact that the FOMC is made up of humans who are looking at the same data as us, humans who have biases just like all of us, I might add.

So to me, this wider dispersion in views underscores the difficulty of managing policy in this K-shaped environment, because do you lower rates to help those at the lower end of the income and wealth spectrum, or do you raise rates because credibility might be lost on the inflation side if you go five years without hitting your target? In terms of the government data, I do think that the shutdown has complicated things a bit in the near term, but I don't think it's a fatal hit to the FOMC's ability to set policy.

I mentioned a lot of the private-sector data earlier for the labor market. I think that's been enough evidence for policymakers to assess the health of the labor market. Certainly far from perfect, but at least it's something. Plus, we've had corporate earnings data that have been helpful, along with things like market-based inflation expectations. So I think if you add all of that together, signs are probably pointing to a cut here in December. But regardless of what happens this week, I do think that the Fed's ability to cut rates next year is a bit more limited, just given some of these upward pressures that we see for inflation. Just even as it stands now, you've had goods inflation that's been pushed higher by tariffs at the same time that services inflation has remained relatively sticky. If that doesn't change, it's going to be hard for the Fed to justify more cuts because it's going to be hard for inflation to get back towards its target.

Plus, we do have two members that are rolling onto the voting committee who lean a bit more hawkish, and that's the presidents of the Cleveland and the Dallas Fed banks.

MIKE: I think it's also important to note that there's a lot of potential change coming to the Fed next year. We have Jerome Powell's term as chair ending in May and his successor coming on board. We have the uncertainty around the Supreme Court case challenging the president's ability to fire a Fed governor, Lisa Cook, and we have the possibility of some changes to the leaders of the regional Fed banks. So a lot of potential area for disruption in the Fed next year.

All right, we've talked affordability, consumer behavior and sentiment, tariffs, inflation, jobs, the Fed, all of that is mixed together in this kind of confusing stew. So let's talk about the markets. S&P 500 is up about 17% year to date, strong year, yet that growth has been concentrated or feels like it's been concentrated in just a handful of companies, maybe 10 or so, while the other 490 stocks in the index have at times really struggled. The Nasdaq is up 21% for the year. Small caps are up sharply in the last couple of weeks. December is historically pretty strong for the markets. We often get the so-called Santa Claus rally in the second half of the month. Does any of it feel sustainable to you?

KEVIN: Well, I would emphasize that the bulk of the S&P 500's return is concentrated in a small share of companies, which is different than saying that only a small share of companies have moved higher this year. And this is just the reality of the mega-cap world that we live in now, which is one in which the 10 largest stocks in the S&P 500 account for nearly 40% of the index's market cap.

When that's the case, it's really just simple math that will show you that if the largest companies do see positive performance, the nature of their size is such that the multiplier effect of their gain is just immense. So at times it seems like it's a lopsided market, but that's not necessarily the case in performance terms. So I'll give you an example. There are only two members of the so-called Magnificent Seven that are outperforming the S&P 500 this year.

And the best performer in that group, which is Alphabet, is not even in the top 10 performers in the index year to date. So it just shows you how often people will conflate mega caps and top performers. And for a good chunk of this year, the largest members in the S&P 500 have been lagging the index. Doesn't mean that they're bad companies. It just means that other segments of the market have had a chance to catch up. And you see that in the equal weighted S&P 500. So that index is just assigning an equal weight to every single member. And that's up slightly more than 9% this year.

That's not terribly far behind the gain for the cap-weighted S&P. I actually think there's a bit more runway for the equal-weighted index to do well, especially after this digestion period that we've gone through recently for the tech sector. That sector actually went through a correction. It fell by 10%. And it's been a little bit more sluggish in its rebound lately. But I actually think that's a relatively good thing because it's given a chance for this year's laggards to catch up.

And importantly, the market is not sending this overly defensive message. So you do have sectors like health care and consumer staples, which are traditionally considered defensive, they have been doing well. But we've also had areas like financials and energy, which are traditionally more cyclical. They've also been doing well. So the underlying tone of the market more recently has been mostly good. And I think that if we continue to see that kind of broad participation, it could set us up well heading into 2026.

MIKE: Kevin, when you talk about the mega caps, I think a lot of investors immediately go to artificial intelligence and the AI-led boom. How long do you think that AI boom can continue?

KEVIN: Well, the short answer is nobody knows. And I think that nobody should be investing based on the question of when it does end. Plus, I think that if you asked 10 investors to define the AI trade today, you might get 10 different answers. Is it just the big tech companies that make the chips? Is it the utilities companies that are supplying the power for data centers? Is it healthcare companies that are implementing AI for research capabilities?

The theme has spread to essentially the whole market. So I think it's important for investors to focus more on fundamentals of what they own, whether it's a stock or an industry or a sector, and really what makes the most sense for their portfolios. I will say from a sentiment perspective, I think we have more room to run before this becomes more of an issue. Because of the dozens of indicators that we look at both on the attitudinal and the behavioral side, on balance, I wouldn't say that we're seeing euphoric sentiment in the market.

Much of that is due to this recent correction in tech stocks and the more speculative junkier parts of the market. And actually history is quite consistent with the fact that when we go through those digestive periods, and you have market breadth that actually holds up relatively well, which has been the case, the market can continue to do well over the next several months. That's not to say that there are no risks. You've got the dominance of these mega caps, and when they see big swings either to the upside or the downside, that tends to influence the S&P 500 at the index level pretty markedly. And it's actually become quite normal recently to analyze the S&P's moves in two ways. Number one, what is the index doing? And then number two, what are the majority of the members doing? Just as an example, the S&P 500 could be up with a majority of the members declining or vice versa.

It's really no longer the case in this mega-cap-dominated world where you can just look at the index moving higher and say that's a healthy market move. And conversely, when the index is falling sharply because of just a few mega-cap names, that doesn't necessarily indicate that it's a bad market setup.

MIKE: A lot of really interesting observations there and you brought many of these together in your 2026 outlook for the markets and for the economy that you just published with our colleague Liz Ann Sonders. So what are you expecting next year? What should investors be focused on?

KEVIN: For us, everything really just comes back to economic growth and ultimately the labor market. And if I were to pick one aspect of the outlook to focus on, it would be labor. And we are expecting this continued drift higher in the unemployment rate, but nothing that necessarily looks recessionary or at least what we think of as—air quotes—"traditional recessions" in the past. I think current labor dynamics are just sort of strange enough where we could see this continued stall speed in payrolls. Just as an example, and this is a loose example, but, say, 50,000 jobs created per month, and really just the slow gradual move higher in the unemployment rate. That dynamic is almost entirely due to the fact that we expect to remain in this environment of slower immigration, if any at all. It's also due to the fact that we don't think companies will be falling over themselves to boost hiring as we start 2026.

We still have to wrap up the Supreme Court cases for whether the bulk of the president's tariffs are legal and whether the president can fire a Fed governor. We have to see what new tariffs, if any, are implemented, if some of the tariffs happen to be struck down. I think once you get through that, there could be some more clarity in the second half of the year. There could be more of an easing and uncertainty. But that's very loose timing. We don't know the exact dates for when we're going to get these decisions. 

Regardless, though, I think that if we do see that easing an uncertainty at some point throughout the year, if you get this AI build out that continues, if you start to see some marginal benefits from the Fed rate cuts that we've had so far in 2025, as well as some of the stimulus coming from the Big Beautiful Bill, I do think that could provide a relatively solid backdrop for the stock market. And that is corroborated by what is looking like a relatively healthy earnings backdrop that's expected for 2026.

Right now, if you look at estimates for earnings and we get our estimates data from LSEG, every sector so far in the S&P 500 is expected to see earnings growth next year. And there's actually only three sectors that are expected to see slower growth than they did in 2025. That's a pretty optimistic scenario. And to me, it underscores that there has been this broadening out of profits growth in the market.

And I think that the benefit is if you continue to see these AI adopters benefit from technology and bolster their bottom lines, I think that makes for a solid year, especially for the so-called average stock. That's not to say that there won't be choppiness. I think that we've all sort of agreed that there's probably going to be this elevated volatility backdrop because we still have these policy risks that are with us. We do have a labor market that is slowing. It's gradually getting more fragile.

And that together, it causes the potential for more scares for the stock market, especially with investor sentiment leading more in the optimism zone, but also because valuations have been pretty stretched. So it's just a signal for us to be on the lookout for some of these sharper and faster pullbacks.

MIKE: Well, super observations as usual. Really enjoy your perspective and always enjoy our conversations, Kevin. So thanks again for hopping on WashingtonWise.

KEVIN: Yeah, thanks Mike. Always great to be back with you.

MIKE: That's Kevin Gordon, head of macro research and strategy at the Schwab Center for Financial Research. He's a must follow on X @kevrgordon. And I'll put a link in the show notes to that 2026 market outlook that he and Liz Ann Sonders just published earlier this week.

Well, that's all for this week's episode of WashingtonWise. And that's all for us in 2025, as we'll be off for the holidays. Our next episode will be out on January 15, when we'll preview the policy issues and the political dynamics that are likely to affect the markets in 2026. Take a moment now to follow the show in your listening app so you get an alert when that episode drops, and you don't miss any future episodes. And don't forget to leave us a rating or a review. Those really help new listeners discover the show.

For important disclosures, see the show notes or schwab.com/WashingtonWise, where you can also find a transcript. Finally, as we wrap up the podcast for 2025, I want to take a moment to thank the people behind the scenes without whom this show would not be possible. Gay Matthes, Patrick Ricci, Deborah Hinton-Brown, and Adam Bromberg, you are all the best. Thanks so much for all you do to make this podcast such a success and so much fun to work on. On that note, I'm Mike Townsend, and this has been WashingtonWise, a podcast for investors. Wherever you are, stay safe, stay healthy, happy holidays, and keep investing wisely.