Planet Money - Indicators of the Year, Past and Future

Episode Date: December 31, 2025

2025 is finally over. It was a wild year for the U.S. economy. Tariffs transformed global trading, consumer sentiment hit near-historic lows, and stocks hit dramatic new heights! So … which of these economic stories defined the year?We will square off in a family feud to make our case, debate, and decide it. Also, as we enter 2026, we are watching the trends and planning out what next years stories are likely to be. So we’re picking  which indicators will become next years most telling. On today’s episode, our indicators of this past year AND our top indicator predictions for 2026.Related episodes:The Indicators of this year and next (2024)This indicator hasn’t flashed this red since the dot-com bubble What would it mean to actually refund the tariffs?What AI data centers are doing to your electric bill What indicators will 2025 bring? Pre-order the Planet Money book and get a free gift. / Subscribe to Planet Money+Listen free: Apple Podcasts, Spotify, the NPR app or anywhere you get podcasts.Facebook / Instagram / TikTok / Our weekly Newsletter.This episode of Planet Money was produced by James Sneed. The indicator episodes were produced by Angel Carreras, edited by Julia Ritchey, engineered by Robert Rodrigez and Kwesi Lee, and fact-checked by Sierra Juarez. Kate Concannon is the editor of the Indicator. Alex Goldmark is our executive producer. For sponsor-free episodes of The Indicator and Planet Money, subscribe to Planet Money+ via Apple Podcasts or at plus.npr.org.Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

Hey, Erica Barris here. We are almost at the end of 2025. And there is no way to sugarcoat it. It has been a tough year for NPR and for local stations. But with your support, NPR will keep reporting the news. And here at Planet Money, we'll keep doing what we do best, explaining the economy in the most entertaining and accessible ways we possibly can. If you're already an NPR plus supporter, thank you so much.

If not, please join the community of public radio supporters right now at plus.npr.org. Signing up unlocks a bunch of perks like bonus episodes and more from across NPR's podcasts. Visit plus.mpr.org today. Thanks. This is Planet Money from NPR. Hello and welcome to Planet Money. I'm Waylon Wong. Normally co-host a Planet Money's short daily podcast, The Indicator. Today on the show, I'm here to offer you this Indicator Planet Money crossover event.

We have given thanks, we've stuffed and emptied stockings, we are crossing off the last days of the calendar and spending meaningful time with loved ones. And for us, that means doing what families do best. engaging in brutal, soul-breaking arguments in a fashion most public. We call it Indicators of the Year, a Planet Money family competition to out-nerd each other with stats and storytelling. And with that, I'm going to turn it over for a bit to my colleagues who battled it out. Representing the indicator was Darian Woods.

Darian, take it away. That's right. It's time for another family feud. Today, I'm competing head-to-head with my Planet Money colleagues, Kenny Malone. Bring it, you egg. Is that what they say in New Zealand? Something like that.

That's right. And Greg Rosalski. Can we all just get along? No. Not for the next nine minutes. And in case you aren't up to speed, here are the rules. Each of us has a spiel for our indicator of the year. We will each have 60 seconds or less to make our case or else.

And in the end, you, dear listener, will vote on who had the indicator of 20. Coming up on the show, we have Kenny Malone, rightfully explaining why consumer sentiment for the third straight year is obviously the indicator of the year. And I'm Greg Rosalski. I'm championing the idea that tariffs were the story of 2025. And we'll have me, Derry Woods, seeing terrifying signs in the stock market. Plus predictions for the indicator of 2026. That's coming up after the break.

All right, family feud. Kenny Malone, you are up first. All right, I got my script here. Tyber starts now. It's the economy stupid. That's the famous formula for why people vote the way they do. I am here to say no. It's what people feel about the economy.

You know what? I'm accidentally reading off of my script from two years ago when I also did consumer sentiment and it won indicator of the year. Because you may remember back then, we're all freaking out. It's played out. We were so, so scared. Okay, anyway, this is the right script. Is this the same script?

Right here. Now, in pre-pandemic times, the University of Michigan's Consumer Sentiment Index was hovering around 100, meaning people felt okay about the economy. But for the past year, it's been down around the 70. Nope, you know what? This is Adrian Maas script from last year when he also won for Consumer Sentiment. It's 50s. It's been in the 50s this year.

Historic lows. Here it is. Here's the right script. 2025 was the year we began to full-on drown in bad feelings about the economy. We're sick to our economic stomachs about the future of prices and inflation and jobs and housing. Consumer sentiment is the canary in the coal mine, and it's been chirping louder and louder over the last three years. Or I guess chirping less and less is how canaries work in the coal mine.

Anyway, consumer sentiment for your consideration. You might have made a good argument behind all that buzzing, but it took you a while to get there. I know. There was a big wind-up. Well, I kept getting interrupted by my colleague, so I figured I might just go through. I feel like my individual consumer sentiment was tepid after that display of played-out material. Some good headfakes, though. Third year in a row. I'm just saying.

Consider consumer sentiment. I love the headfakes. Now, let's go to Greg. Okay, guys, so my economic story of the year, it centers on the most beautiful word in the English language. that is at least according to President Donald Trump. Tariffs. You guys ready? Wait, is this part of your argument?

This isn't fair. You got extra time. No, this is not extra time. This is the wind-up. This is like, you know. Okay. This is putting the ball on the tea. I don't call it.

All right. Go. Okay, so the tariff story was huge this year. Remember, Liberation Day and Trump imposing, like, super high tariffs on countries around the world, including, like, a territory whose population was, largely penguins. You guys remember that? Then like the stock market freaked out and then like President Trump paused tariffs and there were like negotiations and the back and forth and the up and down and the drama. Costco just filed a freaking lawsuit against the Trump administration

over them. This is the economic story that keeps on giving. And this story, it's historic. We're talking like a paradigm shift for the economy. In 2024, the average effective tariff rate that US consumers face was 2.5%. That number is now 16.8%. That's the highest tariffs have been since 1935. And this story, it's not over. There are still big questions over what these tariffs are going to do to the economy and whether Trump imposing tariffs without congressional approval was even constitutional. The Supreme Court has expected to rule in this issue soon. Talk about a year-end cliffhanger. This was more drama than White Lotus. That's a good kicker.

Now, one thing I have been thinking about the Costco lawsuit is, do you think that they take the lawsuit and package it into, like, a box that was, like, previously used for oversized olive oil containers, and that's how they deliver it? I don't care how they deliver it as long as hot dogs are still $1.50. Okay. Darian, our final contender for Indicator of the Year, Darian's putting on a coat, a cape. What? A cape? Terian's dressed as Dracula? What is this? Are you a count? Yes, I am Count Dracula.

I've got my cape on. It's keeping my shoulders warm. And this relates to my indicator. Okay. Again, everyone's getting a little pre-clock time. So I want a little generosity on my post clock time. I haven't said anything. Well, you're just talking about my outfit.

I did no wind-ups. I'm talking about my outfit. All right, here we go. All right, here we go. In three, two, one. My indicator of the year is the Cape ratio. This is the cyclically adjusted

Christ to earnings ratio. It measures how expensive share prices are relative to how much money they actually earn. The higher the cape ratio, the more expensive stocks are. And this indicator is the highest it's ever been, apart from just before the dot-com crash.

And that is as frightening as any horror story. Because when stocks are this expensive, they tend to underperform over time. And this indicator touches so many economic stories of 2025. The AI boom, the fears of a bubble, its data center construction, sucking the blood out of investment in industries like manufacturing. Also, the K-shaped economy,

where the rich, who tend to own a lot of stocks, are getting richer, and the poor are struggling. For an indicator that captures a blood-curdling year, the Cape ratio has no peer. I just love that, like, your mind goes to drag. when you go to Cape, why not like Superman, Batman? It's true. Is the Cape draining the economy of something?

Is that the implication? The optimists would see Superman, these AI tech companies saving the world. The pessimist might see Dracula sucking the blood out of the rest of the economy. I will say, I do understand how Cape ratio shows the rich getting richer, but you also mentioned that it shows low income people doing poorly. How does that work? This is a bit of a stretch, I admit. But ultimately, everyday people are the ones who have to buy things so that companies can get earnings.

And at the moment, earnings are not growing fast enough to keep stocks looking cheap. So we're not like buying enough chat GPT subscriptions or something. Exactly. Don't make Sam Altman cry. How many do I need to buy, yes. You're going to prop up the AI economy with multiple subscriptions. Darian, you can't put on that cape and not give us a little Dracula? Can you give us a little...

Yeah. Where's the impression? Just a little impression? You can do what we do in the shadows, the Kiwi, the Kiwi Dracula movie. Yeah, no, that's a great, it's a great movie. All right. You're going to nail this. Come on.

My indicator of the year is the cave ratio. Yes. Yes. I'm making my pitch for the indicator of the year. It's pretty good. The Cape ratio. Okay, you know what? You may have just won my vote, honestly.

That's really good. Fantastic. All right. So, listen, those are your three. options, listeners. We have consumer sentiment. We have tariffs, and we have, say it again, Darian. The cake fresh show. So good. Thank you to Darian, Kenny, and Greg. Tune into the indicator on Friday to find out which indicator takes the crown based on your votes. After the break, we'll bring on Stephen and Cooper to join me as we gaze into the future. We talk about three

indicators that could shape 2026. Welcome back. I'm Waylon Wong, and I'm joined today by Stephen Pesaha. Greetings, Waylon. And our producer, Cooper Katz McKim. Hi, hello. Great to meet you. Hello. Great to meet. Day one. Come here often. It's like we had a little break for the holidays and you just forgot who we were. Exactly. I'm your colleague, Waylon. Oh, okay. And let's talk 2026. We each picked an indicator to watch for this year and I will kick it off. The indicator I'll be watching in 2026 is the federal funds rate, aka the Federal Reserve's benchmark interest rate. So right now the rate is between three and a half and three

point seven five percent. The Fed, you might remember, did three consecutive rate cuts at the end of last year. And these are not unanimous decisions. You are seeing some divisions within the Fed about what to do on interest rates. So my indicator is really about the future of the Fed and how it's going to make decisions this year. Yeah, 20205 felt like this really big year for the Fed and feels like 2026 could be even bigger. I mean, it is the end of the Jerome Powell era. It is.

And we had some close calls in 2025 where we thought maybe President Trump was going to fire Jerome Powell that didn't end up happening, but Fed Independence is still a really big story. So Powell's term as Fed Chair ends in May, the president has been very clear about how he wants lower interest rates. And then he said on Truth Social just before Christmas, anybody that disagrees with me will never be the Fed chairman. So we will most likely get a Trump loyalist as chair. The president wants more allies on the committee that votes on interest rates.

He already tried to fire Lisa Cook last year. Yeah. And the Supreme Court will actually hear arguments in the Lisa Cook case early this year. But you can already see tensions in the committee from the last few interest rate decisions. Like in December, two members of the committee voted for, no cut, and then one wanted a bigger reduction in rates. Yeah, and it seems like the economic data is just really hard to parse right now. I mean, you've got unemployment ticking up, but GDP growth is also looking healthy.

Inflation is maybe slowing down, but it is still above the Fed's 2% target. But also the economic data from the end of the year got disrupted from the government shutdown. Yeah, and so the Fed would have a pretty tricky job even without this added pressure from the president. And that is why I think interest rates and the Fed will be the economic. Story to watch in 2026. Okay, Stephen, you are up. Yes, my indicator is all about affordability, but it is a different indicator than the ones we've been like harping on about forever. Okay, we talking groceries?

Yeah, so grocery prices, they are still up, but you know, food inflation, it is under 3% right now. There's also housing, but we have actually seen rental prices drop recently. No, my affordability indicator to watch in 2026 are electricity rates. Oh, I think my bill's already been up this last year. Almost certainly, yeah. I mean, for a long time, electric rates in the U.S. have been pretty stable for like 20-ish years. But recently, like you said, the cost of electricity in the U.S.

has been climbing way faster than overall inflation. Electric prices have jumped about 7%. Oi. Okay, so 7% compared with, you know, just under 3% for general inflation. So does this have something to do with AI and data centers? Yeah, everything has a different. do with data centers in AI in 2025 and

26. I knew it. In fact, we recently did a plan of money all about how AI data centers are affecting your electric bill.

So you can check that out in our show notes. What you need to know now, though, is that the data centers that power AI need a lot of, you know, power. And that extra demand

is leading to higher electric rates. Yeah. And it's not like the AI race is slowing down anytime soon. So we should expect that demand and those rates

to keep going up, I imagine. Right. And again, We are already seeing rates go up. If you use electricity to heat your home, you can expect that cost to jump by about 12% this winter. That is according to the National Energy Assistance Directors Association. 12%.

So that's even more than the 7% you cited earlier. Yeah, it is not pretty. But this can't be just about AI, right? I mean, I can think of maybe some other factors, like an aging power grid, infrastructure that needs replacing. States like California have been dealing with natural disasters, like wildfires. And that's meant spending more money on repairing lines. Yes. And all these factors are why I predict electric rates are going to keep climbing

and why this is my indicator to watch for 2026. Okay, Cooper, your turn. What is your indicator? Okay, my indicator to watch this year is consumer spending. Oh, not consumer sentiment, huh? I feel like we've been obsessed with consumer sentiment, but this is a little twist. I know. Sorry to Kenny. But, yeah, hard data shows the American consumer is,

actually been resilient in 2025, which is confusing because, as we've heard, consumer sentiment has been pretty bad. It sits 30% below sentiment in December of 2024 this time last year. Yeah, and if I got it right, you know, like the highest rollers are spending so much. It's basically hiding the difficulties of everyone else. Yeah, so just the top 10% of consumers account for a near majority of consumer spending, according to Global Bank RBC. And so that top 10% is basically anyone who makes around $200,000 or more a year, right? Exactly. Yeah, there's that K-shaped economy coming on back for us.

Yeah, and they're making money not just from working, but through assets that accrue value on their own. So these high-income earners are benefiting from their home values going up and a thriving stock market. Well, the thing is that below that 10% are a lot of signs that show reduced consumer confidence, like, you know, you look at auto loan delinquencies, credit card debt, these are both at record high.

So the question is, can this overly powerful 10% keep the good times rolling into 2026? RBC, this global bank, argues yes. They say, look, President Trump's tax cuts through the one big beautiful bill will keep benefiting upper income households. And as long as the stock market keeps on, they'll keep soaking in those dividends. So basically, consumer spending is hinging on the market staying strong? It's at least a big part of it. A stock market correction would be bad for consumer. or spending no matter what, but right now it would have a particularly big impact.

Sounds a lot like trickle-down economics. Interesting. Yeah, it feels like we're rooting for all that spending right now. It's going to be fine. It's going to trickle down. It's going to trickle down. I'll have my cup out and ready. Just keep the water metaphors rolling. We will keep the flow going far into 2026. You know, we're excited to deliver economic stories and news for you for the rest of the year.

We will be watching all of those and so many more on Planned. Money and the Indicator in 2026. And if we missed one or you have more ideas you want to send us, please email us at PlanetMoney at npr.org or tag us on any social media at Planet Money. And remember to find out the winner of this year's family feud, tune into the indicator Friday, January 2nd. Greg Rosalski's next newsletter will recap some predictions from economists generally. So you can get that by signing up at npr.org slash planetmoney newsletter or click the link in the show notes. This episode of Planet Money was produced by James Sneed. The Indicator episodes were produced by Angel Coreras, edited by Julia Ritchie,

engineering by Robert Rodriguez and Kwayze. It was fact-checked by Sierra Juarez. Cake and Cannon is the editor of The Indicator, and Alex Goldmark is our executive producer. For all of us here at Planet Money and The Indicator, thank you for riding along with us in 2025. And thanks especially to everyone who shared an episode with a friend, left to review, or signed up for plus. Every little bit helps. I'm Waylon

Wong. This is NPR. Thanks for listening.