Roaring 2020s II: Refresher Course. There are 10 good reasons for our optimistic update of the outlooks for real GDP and S&P 500 companies’ earnings in 2026. Without further ado, here they are:
(1) Roaring consumer spending. Many taxpayers are expected to see significant refunds this tax season. Early estimates from the Treasury Department suggest the average refund could rise by roughly $1,000, potentially bringing the typical check to nearly $4,000—up from approximately $3,100 last year. This increase is largely driven by the One Big Beautiful Bill Act (OBBBA), which was signed into law in July 2025 and applied many of its tax-cutting provisions retroactively to the 2025 tax year.
Since paycheck withholding was generally not adjusted mid-year to account for these retroactive cuts, many people effectively “overpaid” their 2025 taxes and will recoup that difference as a larger refund now. Like the pandemic-era relief checks from the government, the boosted refunds will increase disposable personal income and personal consumption expenditures (Fig. 7 below).
This should offset the recent flattening of disposable income, which we attribute to the retiring Baby Boom generation. They will continue to boost consumer spending by spending their retirement funds. As a result, the personal saving rate should continue to fall, boosting consumption (Fig. 8 below).
