Moody's Talks - Inside Economics - Resilient or Fragile?

Episode Date: January 2, 2026

The team reunites in 2026 and reflects on the economy's performance in 2025 and looks ahead to the New Year. Mark reviews the forecast accuracy for the past year and is surprised by the results. Mark and Cris quibble over how to characterize the economy in 2025, and the team shares its predictions for 2026, along with the probabilities of the base cases, upside, and downside forecasts.  Hosts: Mark Zandi – Chief Economist, Moody’s Analytics, Cris deRitis – Deputy Chief Economist, Moody’s Analytics, and Marisa DiNatale – Senior Director - Head of Global Forecasting, Moody’s AnalyticsFollow Mark Zandi on 'X' and BlueSky @MarkZandi, Cris deRitis on LinkedIn, and Marisa DiNatale on LinkedIn  Questions or Comments, please email us at [e-mail]. We would love to hear from you.  To stay informed and follow the insights of Moody's Analytics economists, visit Economic View. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Inside Economics. I'm Mark Zandi, the chief economist of Moody's Analytics, and I'm joined by my two trusty co-host, Chris DeRides, Mercedee Natali. Hey, guys. Hi, Mark. Good to see you. Hello. Happy New Year, everybody.

Yeah, happy new year. This is January 6th. 2nd, the morning of January 2nd. You know, I was a little surprised. It wasn't on my calendar. For some reason, I thought the world had taken the day off, but I guess not. So here we are. But good to see you guys.

I hope you had a wonderful New Year's. Yeah, it was nice. It was nice. Okay. All right. You did, good, good. We're going to keep this short. I mean, and really, I'm going to, we're going to.

going to stick to it, so by a half hour, because I, I did think that we were taking the day off and I was going to go to the gym. So I want to get to the gym. You know, after all the festivities, it's, it's always good to get back. It's sort of pump some iron, you know, at my age. You and everyone else at the gym on January 2nd. Yeah. Yeah. Oh, that's a good point. I'm a little worried about that. But yeah. Okay. So maybe we'll, this, this podcast will be centered around the outlook for 2026 and maybe I'll turn to Chris first and ask him about his outlook. So I did a little bit of work on forecast accuracy. I was just, you know, curious because here we were at the start of the new year,

how well we did in 2025. And obviously, we still don't have all the data in. So this is comparing what we expected for 2025 when we did the forecast back in December of 2024. obviously we don't have all data end but we've got a lot of data and so I decided to go ahead and do it and here's the one statistic that we were most accurate on it was jobs so average yeah average monthly job growth in 2025 and this is calendar year 25 versus calendar year 24 was up 125,000 on the nose and again we don't have full data so we've got data through November, doing a forecast for December. We have the year. So with that as a caveat,

125K, you know what our forecast was that we did back in December, 24? Average monthly job growth of 124K. Oh, wow. Yeah, right? Pretty good. It, you know, masks a lot of stuff, right? we were uh job growth is actually stronger at the start of 2025 than we were projecting and it ended up the year being weaker than we were projecting but on average through the year came up to you know 125k so got that just right you want to guess which stat uh or which economic forecast was least accurate chris you have any ideas what would you say uh inflation uh inflation was yeah that was one of the forecast that was less accurate but the one that was most inaccurate stock market oh we we yeah we had the I you know we had a

pretty good expected gain about 10 over 10% on the year that's count again calendar 25 over 24 but the actual was in here we have full data is 15 closer to 15% house prices too came in strong House price growth was stronger than we had anticipated. We expected unrounding of a house price growth on the FHFA House Price Series. That's the series that measures homes that have mortgages from Fannie Mae and Freddie Mac. That was about 2%. That was our forecast.

And it came in closer to 4, 4%. So a little higher than what we expected. Just wait. That one is lagged, right? That is lag. That is lag. You think it will come in a little lower than that. I think it's going to come in.

Yeah. yeah okay all right but anyway i also wonder what the benchmark revisions will do to the job growth numbers for sure for sure you know yeah we'll get that in a couple months next yeah uh and that's always a problem of forecast accuracy what are you how do you right measure it right are you measuring it against your initial estimate or after all the if we waited for all the revisions it'll be 10 years from now when it's right with those as caveat okay well let's turn to 2026 and Chris first how would you characterize 2025 and then how would you just lay out your vision for the economy in 2026 in that context

of what happened in 25 so I'd say that in 2025 the economy proved resilient right we talked a lot about uncertainty throughout the year and the policy. I hate that word. I hate that word. I hate that. Really resilient? Yeah. Okay.

Really? I mean, you consider the job market is resilient? It could have been worse, yes. Oh, really? All right. Okay. Yeah, I'll stop. And in the context of, you know, immigration and lower supply, it's still say it's fairly resilient.

We talked about revisions. We don't know the full picture. picture of this job market just yet for 2025, I'd argue. So that might be, now, that might be the weakest part of the argument here, but certainly in terms of GDP, the economy did perfectly fine, right, just a little bit below potential growth. For 26, I expect much of the same. Again, I mean, if the economy grows below potential, is that resilient?

I mean, that, I mean, that, it's okay. I guess. I mean, it's not recession, but it's not, I wouldn't characterize that as resilient to me connotes a good economy, a solid economy. But if it's growing below potential, is that a good economy? Or maybe that, maybe I'm a great economy, but it's a good economy. Yeah, but a resilient economy, maybe I think about all the things we threw at this economy this year between the trade policies, the tariffs, right? Some unprecedented levels of care, right? We go back to the smooth holly, right? As we were going into that era, we were saying this is unprecedented, this is going to have a pretty major effect, right? All right. I think you're saying, okay, we have, you threw a hard of issues. What's that? Go ahead. No, I was, I hear what you're saying. You're saying, look, we have these massive supply shocks, negative supply shocks. That's right. Despite that, we survived. Of course, and as you're now saying, we also had a positive supply shock.

it was AI. Right. And thus, this economy we got in 2025. That's right. That's right. So, you know, I'd say it's still, if we look at at the totality, I still argue it's pretty resilient. Right. So, Marissa, do you sympathize with what I'm saying around that word, resilient, or do you agree with Chris? I think I agree with Chris more. I mean, I think for me, it surprised to the upside. If we go back a year, I would have thought growth would have been weaker. I wasn't expecting this pickup in growth later in the year. I thought inflation would have been higher. So it turned out better than I think many people were expecting it to be. Right. Well, you know, here's another stat from the forecast accuracy work I did. GDP growth. Of course,

we only have data through Q3 and it will be revised, but it looks like based on our forecast for Q4, real GDP growth in calendar year 25 will be 2.1, 2.2% above what it was in 2012.4. You know what our forecast was as of December of 2024? 2.2%. Was it right below, oh, okay. I was going to say it was it right below 2%. But I guess it's right above. too. I think what's happening is if you think all the way back a year ago, you know, December of 2024, January of 2025, we knew we were going to get these negative supply shocks, the tariffs and the immigration policy, but we didn't think we were going to get anything to the degree that we actually got. So we were actually pretty much on target at this time last year. We got more negative around Liberation Day in April when the president came forward with those massive increases in tariffs and that's when things turned more negative and that was before AI felt it didn't feel like it had come on quite yet at that point wasn't on the kind of on the collective consciousness that's when we were most negative but if you

go back a year ago we were pretty much on track you know for the year but nonetheless you still you still think resilience the word you would use marissa um i'm thinking i'm trying to come up with a better word or a synonym to resilient, and I can't. Okay. Okay. We'll keep thinking about it because I'm coming back to you after. I'll now I'll spell up and like Chris go on because he's going to talk about 2026. So what's your view on 2026, Chris?

I'd say for 20, 26, similar, right, in terms of the growth. You're not going to say resilient again, are you? I didn't say, I said similar. Similar in terms of GDP. Similar to live. All right. Go ahead. I'll be quiet.

I'm going to say not as much resilience because I don't expect as many shocks. I think the political climate is going to temper, at least my view, is that the tariffs, yeah, we'll continue to see some movement there, but I'm not expecting a kind of a return to the Liberation Day-style tariffs. Just, I don't know, as a sidebar, just right at the end of the year, the administration pulled back on the furniture tariffs. and they also pulled back on the pasta tariffs. I know the audience is really concerned. That's good news. So I see that as perhaps a sign that, you know, this administration is going to accommodate

and if things are really moving off the rails, they'll pull back. So that's my working assumption here when it comes to the tariff. So I don't expect to see as much of that uncertainty. I think we'll continue to see that artificial intelligence wind pushing the economy forward. There's a lot of projects already in play here. They're going to continue to build out throughout 2026. I do see that as a tailwind. You have fiscal support.

You have monetary policy support through cuts. So I think those are all things that will continue to help the economy move forward. As we still negotiate some of the tariffs, I still think that the effects of tariffs are still going to play out throughout 26. We'll see inflation continue to be under pressure. The immigration effects, I think, will be felt even more strongly this year, but I think those will be offset by some of those tailwinds. So that's, I see this as kind of a, in terms of GDP, a very similar type of trajectory as what we had last year, do we expect to see a little bit weaker labor market?

Can I ask on the GDP, as you said, in 2025, it was a little bit below potential, which which means that unemployment was edging higher here, and it moved higher throughout the year. So we didn't get enough GDP growth to generate enough jobs to keep unemployment from rising. So we were growing up below potential. In 2026, are we still below potential? Or are we something better than that? I think we're closer to potential. Closer to potential.

We're narrowing the gap. So I do expect that unemployment is going to continue to tick up a little bit here. Right. Right. So there'll be some of that gap. But as we get into the later part of the year, perhaps that gap really closes. I think that we'll stabilize and we'll move back as we continue to digest some of these immigration and tariff shocks. And what about AI?

Do you think AI still provides same kind of tailwind? It provides a tail. I don't know if it's quite as dry. I think we'll get started maybe in terms of the actual buildout. I worry that some of that, you know, data center investment is going to start to plateau. at least moderate relative to the explosive growth that we had in 2025, but perhaps we'll start to see some of the actual gains, productivity gains from AI seeping into the rest of the economy so that, so AI will still continue to provide a benefit to overall GDP, but maybe the composition

of that benefit starts to shift away from the actual investment to the actual productivity gains. Okay. Well, I'm going to come back and ask about the upside and the downside. So that's your base case. Yeah, that's the base. But before we do that, let me turn to you, Marissa. Any blanks you want to fill in or things to flesh out or anything you'd push back on

or things you'd call out? I think for me, AI is a big unknown. It's, I don't know how much we could get a real boost from AI this year, even more so than we got in 2025, that could push GDP well over potential. I do agree that I think the labor market continues to deteriorate. So it would have to be enough to offset that in terms of GDP growth. But so that's kind of my big question mark where I think that could change the forecast significantly. And I'm not quite sure which direction that's going to go in.

Can I ask on that? So on AI, because AI was a surprise, a positive surprise in 25, the two key channels, at least from my perspective, which AI impacted the economy, certainly on the demand side of the economy, was the buildout of the infrastructure, the data center. And actually, that probably was smaller than people think in terms of its GDP contribution. There's a lot of measurement issues around chips and how they're counted in GDP. I won't go down that path unless, you know, you guys want to talk about it. but it was actually pretty small. The big contribution from AI, though, to growth was the wealth effects through the stock market and the surge in stock wealth.

And, you know, if that does not continue, stock prices don't continue to move higher, then that wealth effect will start to fade all else being equal. So is there any other channels through which you think AI would impact, I guess, on the demand side of the economy? I mean, we didn't really see much of an impact on the, well, we saw some impact. on the supply side, I gap, maybe lower hiring, but it was more on the demand side of the economy. Do you think we'll see, like, if that's the, if you buy into that kind of frame of how to think about AI and its macro consequences, you know, where would you get that

extra growth, do you think, in, in 2026? Yeah, I guess for me, the question mark would be the supply side. Will we start seeing real productivity gains from AI? Because we didn't really see much of that. Like you said, most of it came from the build-out and the wealth effect. So those things probably wane, I think. Or maybe, you know, maybe they hold steady, but I don't think they're going to be the tailwind that they were last year. So the other side of it is where I'm not sure. Is this the year that we start to see significant gains in worker productivity due to AI? It could be, you know, based on past what we looked at with past adoption of past technology, we could see it this year.

I just don't know. So that's that, that to me is where it would come from. Right, right. So if we, if you, going back to the question I asked Chris about, are we going to, you agree that in 25,

the economy grew below its potential. Barely. What do you think about? Well, I mean, enough that the unemployment rate went from 4% at the beginning of the year to 4-6 as of November. So meaningful. You're right.

It's small, but meaningful. What about 26? 2026. Do you think we continue to grow below potential, at potential, above potential? I think we'll be right at potential if I had to peg it right now. Yeah. So I think we'll do a little bit better than we did last year. You know, the other question is.

inflation, are we going to see a more meaningful pickup in inflation? And that kind of dovetails with the unknowns around monetary policy. What will a new Fed look like in terms of monetary policies? So we could see higher inflation this year. Then, you know, we were expecting more of that, I think, last year, but maybe we'll see more of it this year. Yeah. I mean, through Through what mechanism? Through the tariffs? Yes, through the tariffs. If there's kind of a delayed impact of the tariffs, right?

If you have more, I think you had a lot of businesses eating the tariffs in 2025. I think that will be less possible for a lot of businesses to do as we move into this year. They could do it for a while. But with margin compression, I think they're going to face pressure to pass it on to consumers. So we may see more of that pass through. this year that we didn't get in 2025. And then we may have a Fed who's less willing to, you know, fight inflation as their top priority.

So, so more rate, right now we have three quarter point cuts in the federal funds rate in 2026, which is more than the markets expect. I think they're one or, they're pricing in one or two. Are you saying that, Do you agree with that forecast, or do you think there's potential for even more rate cutting? I think that, I agree with that forecast. I would not change it. Yeah.

Yeah. Okay. You know, I'm kind of, I'm with you on the characterization of 20, not that it was resilient. I don't think that's the right word. It just sounds too good for what actually happened in 25. If you're going to build a potential, I'm, I'm searching. for the word, too. I keep going back to the word fragile, not resilient, you know, fragile because when you're growing below potential with unemployment moving higher and no job growth, that can't be

sustainable. If that continues, then we've got a problem. We're going to devolve into recession. So that doesn't feel like resilience to me. That feels like fragility to me. But if you look at it, if you think about in the context of, well, given all the slings and arrows that it suffered, this is it was able to do this that then okay fair enough uh but in 26 i expect more growth consistent with higher potential growth because of not because of AI but because of fiscal policy it's all about fiscal policy i mean if you go into 2025 you look at the the impact of fiscal policy on the economy it was basically a wash maybe even a little bit of a drag because of the doge cuts but and the impact that had on sentiment and everything else on uncertainty, but, but broadly

it was zero. And if you do the arithmetic on the stimulus, the deficit financed tax cuts that we're going to get in 2026 because of the one big beautiful bill act, the OBBA for individuals and for businesses, that's going to add almost a half a point to growth, four or five, tenths of a percent, you know, calendar year 2026 growth. So that's how you get from being, if everything else kind of plays out the same way, that's how you get from below potential growth to, you know, consistent with potential growth. You know, something to that effect. So I think that's the big. And the other thing I say is because it is an election here, it does feel like, you know, lawmakers, the president, Congress, the Republican Congress are going to do what they need to do to make sure that the economy performs well in 2026. And they can, right? They have the ability to do another so-called reconciliation bill

where they can pass, you know, policies that affect the budget, like taxes and spending with only majority vote in both the House and the Senate. They don't need to go through, you know, the normal order for that. And I think that, and that's not in our forecast where, you know, I don't know that they need to do that to get the kind of growth that they want in 26, but that's certainly there. So the, I think the prospects are that, you know, we're going to get a better 26 than 25 because of that fiscal support. Does that make sense, Chris? Does that sound right? It does. Do you fear any inflationary impact from that type of fiscal

stimulus? I think free bait or? I'd say more the most likely scenario, in the most likely scenario, no, because I do think the economy is fragile. I think the job market is week. And, you know, going back to what Marissa said about AI, if you see more productivity growth, that may mean more job law, actual outright job loss. And, you know, that means higher potential growth, right? If you're getting more productivity growth, that means higher potential growth. So you need more GDP growth to make sure that unemployment stops rising. And so I think that's the greater risk. But, you know, I, you know, I do think it's a reasonable alternative scenario where we don't get those productivity gain acceleration of productivity you know kind of

stays where it is which isn't bad it's where it's around 2 percent so you know it's not bad so if it stays around 2 percent and you get that juice from the fiscal stimulus you start growing above above potential unemployment not only stops rising it starts going back down again And then you throw in the tariff effects, the lag tariff effects and the lagged restrictive immigration effects, then you might see some impact on inflation might turn out to be higher. But I think that's a lesser scenario than the scenario where, you know, we actually see some outright job loss and that becomes more of a problem. Does that sound, sound right? Do you think that that fiscal tailwind happens early in the year? What's the timing for that?

like. Yeah, I think it's fast. The first half of this year. Yeah. I think we're going to see it in the form of bigger tax refunds. Yeah. Because withholding schedules weren't changed and the tax cuts were already implemented. And you're going to see bigger tax refunds.

It could be as much as $100 billion more in refunds this year compared to last. So that's right there, that's almost three, four-tenths of percent of GDP. So you do the arithmetic, that's pretty significant. And then the tax cuts for businesses, you know, surround accelerated depreciation for investment, not accelerated, but full expensing of investment. That's a pretty big deal. It lowers the cost of capital and that will juice up investment spending. And I think you can already feel it in the durable goods orders.

You know, they've been strong in the recent data that we've gotten. And that's, I think those are orders that are being placed to take advantage of that tax benefits. as we move into 2026. So, yeah, I think the apex, the peak of the benefit from the fiscal stimulus will actually be Q2, 2026. And by the way, by design, the election is, you know, a few months later. So if you get most of the juice hitting in the first half the year, particularly as you move into the summer months, that's when you want it to hit.

And that's when it's going to hit. That's when we're going to see the biggest effects. And so I think we get some pretty strong growth in that period. So you kind of get the sense of where, you know, where my, I think the risks are, you know, positive, negative. Chris, any, if you had to construct a downside scenario or an upside scenario, what would it be? Yeah, I kind of hinted the, I am concerned about the inflationary risks there. I think you're right that in terms of growth, the policy makers, have a number of levers at their disposal, and it is election year, and they're going to use

them to ensure that the growth remains strong. But there could be consequences in terms of the inflation. And then the other thing is the wildcard that Marissa presented in terms of AI, which could go in either direction, right? If we start missing some of the projections and the estimates that are the foundation of some of these investments, right, miss some earnings reports, that could suddenly take the wind out of the stock market, lead to some of those more negative wealth effects potentially. So that's on the downside. But on the upside, you could certainly see more predictivity gains.

Maybe this is the year that we'll start to actually see those AI investments start to pay off. I don't think it'll be rip-roaring type of person. productivity gains, but they may be small but meaningful to continue to propel things forward here. So on that one, on the productivity gains, if we get product, right now there's no job growth or very little job growth. If we get, and that's with 2% productivity growth, non-farm business productivity growth, it feels like it's around 2%. Yeah. Which, by the way, is it's long run average. If you look at productivity growth, non-farm business productivity growth since the beginning of time, since we've got data back to right after World War II, it's just about 2%.

So it's, you know, a very typical kind of productivity gains. It had been depressed in the wake of the financial crisis for a decade or two up through the pandemic, but, you know, now it's around 2%. If we get stronger productivity growth from AI, what? does that mean about jobs? And, you know, it's kind of a weird place to be where, you know, you get the productivity gains. And if you stop right there, you go, oh, that's great. That sounds really good to me. You get more income. You get more profits. You get, you know, more tax revenue to address the fiscal situation. You get higher stock returns, higher asset values. Productivity growth is the elixir for long-term growth in our living standards.

So that all feels good, but what does it mean, here's the weird part, if we're not creating in jobs at 2% productivity growth, then you get stronger productivity gains, then don't we get job loss? And what does that mean? Yeah, if nothing else changes, got a setter's pair of us, yes. But the optimistic view is that you have these predictivity gains and the AI is now able to generate new opportunities, right? You have new business formation, new creation, right? So you have businesses that are forming or expanding to take advantage of the new,

new capabilities. So that's one factor. The other factor, of course, is what's going on with labor supply, right? To continue to see immigration remaining a very depressed level, I don't think any of us expect a resumption of immigration in 2026. You do have some of the demographic headwinds in terms of baby boomer retirements. So, you know, it's not all that clear that it necessarily, the productivity gains necessarily lead to a lot of job losses because of these other factors. But that is a risk. I'd say that's certainly a downside risk.

If the productivity gains are so fast that the, the economy or businesses are unable to adjust, you could see kind of those mass unemployment. figures that we should be worried about. Right. Okay. So the way out of that box I painted you in was you saying, okay, we'll get, we, we, we will get more output, more GDP, but, uh, it doesn't necessarily mean we'll get job lost that the, that the productivity gains will be the result of more output, not less job,

fewer jobs, one way or the other, whatever the mechanism is. Yeah. Yeah. In some sense, if it, if you had to have this. type of technological change occur would be in this environment where you do have the supply being restricted and the demographics shifting, right? Right. You're saying we need it more now than ever because we're not going to get it from the labor

supply because of the immigration policy. That's right. Right. So long-run GDP growth is the sum of productivity growth plus the growth in the labor force, and the growth in the labor force is very constrained because of immigration. therefore we really need the productivity gains to get to the kind of GDP numbers we need. Yeah, if you want to maintain that potential GDP. Okay.

Mercia, what about you? All our baselines are roughly the same. So how do you think about the downside and the upside? How would we get there? Like I said, I think my AI is a big question mark, whether that's an upside for me or a downside, you know, it could go either way, right? Right. I think to what Chris was just saying about, and what you asked him about job losses

associated with higher productivity, I really think it depends on the speed with which things happen. If it goes from zero to 60 in terms of productivity increases with, with AI, then you get major disruption that we don't have this adjustment period with the technology, right? But my assumption is we ease into it, and there are just as many jobs created as there are destroyed, if you will, by AI. So I'm going to say AI is another upside for me this year. That's the way I'm leaning, that this is going to be another positive. We may not get the tailwind from the wealth effect that we got last year, but we may get more productivity gain. So I think that's an upside. The downside, I worry about the Fed. I worry about Fed independence. I worry about inflation. becoming untethered.

And I think we, that could, that could rattle financial markets. It hasn't yet, right? That doesn't seem to be a huge concern to financial markets, but we could see some disruption in the bond market, particularly with the change in Fed leadership in around the middle of the year. So that's my downside. Yeah. Okay.

All good ones. So no one mentioned the stock market or assets. that prices generally, more broadly. Well, through AI-driven stock market declines, certainly a risk, right? Or just generally, right? I mean, the stock market, you're saying the valuation is particularly high for AI companies. Yeah, I think that would be the catalyst, right? The AI bubble, right.

So I guess that's the other alternative downside scenario where, you know, it feels like either investors, stock investors are right about AI, and we're going to get a lot of productivity growth because that generates the profits they need to support the stock prices. And that would be very hard on the job market. This goes to your point, Marissa, about the pace at which productivity growth picks up. It feels like investors are discounting pretty strong productivity gains very soon. So either that's the case or they're wrong about the productivity gains happening quickly and their valuations are too high and you see a correction in the stock market. Right.

So one way or the other, there is, there is a middle path. That's our baseline. They kind of find the way through. Right. But it does feel like it's a pretty tricky path to go down. Yeah. What do you think for sure? Yeah.

Okay. All right. Well, I said this is going to be short about a half hour. So let's end the conversation this way. You have a baseline, you have an upside, and you have a downside. That's the distribution of possible outcomes. What probability do you attach to the baseline, what probability do you attach to the upside, something that's meaningfully better than the baseline, and what probability to the downside?

So to give people a sense of your distribution of risks around the baseline. So, Chris, I'll go to you first. I've been going to you the whole time first. So what are your probabilities, baseline, upside, downside? I'll go with 50 on the baseline, 20 on the upside, 30 on the downside. Okay. All right. So with that 30% downside, that would be a recession or include recession.

That would feel like a recession. You wouldn't be using the word resilient. No. No. Okay. All right. Marissa, how would you, what probabilities would you put on the distribution? So I'm going 50 on the baseline, and I'm doing 25 up and 25 down.

Oh, my gosh. And I wrote that down before Chris said. Oh, you did? Okay. There's no collusion here. Yeah. All right. Okay.

So you're saying the risks to the forecast are symmetric. Yeah. Okay. All right. Oh, this is very fitting. So I'd say 50% baseline. It's almost like you have to say baseline is 50%, don't you? I mean, otherwise...

Almost by definition, right? Is that right? I don't know. Otherwise, I don't need... It's a very flat distribution if you don't say 50% for the baseline. But anyway, 50% for the baseline, 35% for the downside and 15% for the upside. So I'm more skewed. So, Chris, you're more skewed to the upside.

I'm more skewed to the downside. You're still saying downside risks are predominant, but not quite as much as outside. Right, right. Yeah. This is a very interesting turn of events, don't you think? Yeah. With Mark, you've become the, because you've kind of become the most pessimistic of the group. Compared to where I was this time last year?

And like two years ago. And 20 years ago, yeah. 20 years ago? You're always the optimist. Yeah, yeah. I feel like you're always the optimist of the group. And I think in the last year, you've become the most pessimistic of the three of us. Well, you know, fundamentally, it's because I think we're in the process of de-globalizing the economy. The entire world is, you know, de-globalizing.

And I think that's a very heavy weight on the economy. And it's, you know, we got fortunate in 25 and we will get fortunate again in 26 that AI came on to the degree that it did. because we, you know, we would not be using the word resilient, if not for, you know, that positive surprise. And I do worry that, you know, our fiscal situation is eroding. It's gotten worse. And prospects are that it will get even worse going forward here, you know, given the fiscal stimulus is being provided.

Fiscal stimulus means deficit finance. You don't get the juice unless it's deficit finance. And I think that, you know, we're just in a more precarious spot. And, you know, the combination of those things make me more nervous about the economy's prospects, you know, going forward. Are you worried about 26 or 27, 2026 or 2027? Yeah, that's a great question. I mean, I think that scenario you painted about inflation being an issue. If that's really an issue, it's a 2027 problem, not a 26 problem, because there's lags involved with growth.

And then you get the, then you get the inflationary effect. in 27. So I think that's the real threat is, you know, that scenario is in 2027. Yeah. And, you know, I do think the stock market is in asset prices more broadly. I say this with less, I mean, I think stock prices are a big concern. I think the valuations there are stretch, boarding around frothy, and you can feel bubble-like conditions developing. And it's not, in the financial system, more broadly, there's things to be anxious about, you know, what's going on with private credit, private equity. I mean, I think there's a lot of reasons to be nervous about, you know, the direction of

travel there. So, yeah, I think 27 could be, if we got a problem, 27 will be more where it comes to a head as opposed to 2026 because you get all this juice in 2026 from fiscal policy. Yeah. Okay. As promised, I think this was just a little over a half hour. So a brief podcast, but I think a very informative one. Any last parting words?

And we'll be back next Friday. I think don't we get jobs on January 9th? We'll get a jobs report. Back to a jobs Friday. That'll feel good. We'll get Dante back on. And, you know, I called Dante Dr. D. Antonio. We're all doctors.

You know, most of us have PhDs, but I say that in an endearing way. Because I'm, I got, we got an email from one of our listeners worried that I was making fun of Dante. And of course, I'm not doing that. I mean, I respect them very high. I'm just having fun with them. And it's a form of endearment for me to call them doctor. And it just kind of rolls off the tongue, doesn't it? Dr. D. Antonio kind of rolls off the tongue.

Anyway, any last parting words, guys? No? Happy New Year. You good with that? Happy New Year. Happy New Year. Well, with that, dear listener, we are going to call it a podcast. Talk to you next week.

Take care now. Thank you. Thank you. Thank you.