Louis Navellier has witnessed more than his share of good and bad economies over his long Wall Street career. Navellier, a veteran money manager who has been navigating the stock market since the 1980s, is the founder of Navellier & Associates, a firm with about $1 billion in assets under management.

His long career, which began with the highly successful research service MPT Review, means he has managed money through the savings and loan crisis of the 1980s and early 1990s, the internet boom and bust, the Great Recession, the COVID-19 pandemic, and 2022’s bear market.

Over the course of his many years, he has gained valuable insights into the economy and its impact on stock prices—a knowledge that led him to be bullish in 2025, despite reasons for concern due to President Donald Trump’s tariff policy.

Also read: CPI inflation report sparks data backlash

This spring, tariff proposals sparked widespread worry over stagflation, a period of slow growth and rising prices, or worse, recession. It also pushed the Fed to the sidelines, trapped by its dual mandate to set rates at levels that promote employment without fanning inflation.

Those concerns appeared well-founded when the U.S. economy contracted 0.6% in the first quarter. And they strengthened as inflation rose, climbing through the summer into September, even as unemployment increased, causing many households to struggle.

Yet, Navellier remained unfazed, correctly betting stocks would look beyond tariff-driven inflation toward profit growth associated with AI investment, cost cuts, and a rebound in GDP.

Navellier’s economic outlook for 2026 suggests he remains unconcerned by any potential drags on the economy. This week, he offered a blunt prediction of what investors can expect next year, saying in an email to TheStreet, “I believe U.S. GDP growth will exceed 5% in 2026.” 

A trader on the New York Stock Exchange Floor. The U.S. economy could grow by 5% in 2026, according to Wall Street veteran Louis Navellier.

REUTERS

Longtime fund manager offers bullish forecast for US economy

Navellier isn’t shy about sharing his opinion on the economy and markets, writing in July that Fed Chairman Powell was “delusional” for refusing to cut rates in the face of labor market risks.

He was proven correct, given the Fed finally acquiesced, reducing its Fed Funds Rate, or FFR, by a quarter percentage point at each of the past three meetings (September, October, and December) to shore up the jobs market.

Now, those cuts, and potentially, more cuts in 2026, are putting the U.S. economy in a position to accelerate rapidly next year.

Navellier believes three things will drive U.S. GDP to mid-single-digit growth in 2026:

  • Continued onshoring.
  • A shrinking trade deficit.
  • The fact that the Fed is expected to cut key interest rates further.

President Trump’s trade policies include securing commitments from companies to increase investments in U.S. supply chains, including manufacturing. The One Big Beautiful Bill Act (OBBBA), which was signed into law in July, includes generous incentives for capital spending, such as accelerated depreciation.

Bonus depreciation allows businesses to deduct 100% of the full cost of assets, such as machinery, equipment, and software, rather than spreading the deductions over time, thereby boosting tax savings and corporate profits. It also includes specific properties used for manufacturing.

Those moves should encourage more domestic than overseas production coming online next year.

“As we bring these trillions of dollars of investment into the U.S., they’re all starting to break ground now,” said Treasury Secretary Scott Bessent in a Fox interview in November. “We got the tax bill passed on July 4, which gives huge incentives to come to the U.S., build your factory, expense it immediately, and create new jobs.”

Navellier also points to the likelihood that a shrinking trade deficit will support GDP growth.

Imports are a drag on GDP, which is why we had a negative GDP in the first quarter of 2025 as companies rushed to import goods ahead of tariffs going into effect. As more production is brought in to avoid tariffs, it should provide a GDP tailwind in 2026.

In September, the trade deficit improved to -$52.8 billion, its lowest monthly level since early 2020, according to Trading Economics.

Finally, Navellier expects the Fed to continue to lower interest rates in 2026. In December, Fed Chair Powell struck a cautious tone regarding additional cuts next year. However, it’s widely expected that Powell will be replaced when his term ends on May 26 with a new Fed Chairman who is more dovish, willing to lower rates to support growth.

While the Fed doesn’t set bank lending rates, changes to the FFR, which is the rate at which banks lend money overnight to each other, do influence them. It also influences Treasury yields that banks use to set rates. As rates fall, so do borrowing rates, freeing up more money in household budgets for discretionary purchases and boosting corporate profits, which are critical to driving stock prices higher.

AI spending flurry underpins US economic growth in 2026

U.S. GDP grew 3.8% in the second quarter, and the Atlanta Fed’s GDPNow pegs third-quarter growth at 3.5%. The New York Federal Reserve’s NowCast estimates that GDP in the fourth quarter is tracking at a still healthy 1.7%, despite the impact of the government shutdown.

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One big reason behind the strength has been surging AI spending. According to J.P. Morgan, AI spending accounted for approximately 1.1% of GDP in the first half of 2025.

AI spending isn’t expected to slow in 2026. In a research note shared with TheStreet, Goldman Sachs predicted that hyperscalers, the largest cloud data providers, including Amazon, Google, and Microsoft, will spend $533 billion in 2026, up 34% from 2025.

Bank of America agrees. Its analysts sent me their research note for 2026, showing that they expect spending specifically on AI data centers to rise to $415 billion from $243 billion in 2025.

I’ve been professionally tracking markets since 1997, and the massive spending is unlike anything I’ve seen since the dawn of the Internet.

“There is anxiety about an AI bubble, but I am doing my best to assure investors that the unscrupulous short sellers were merely trying to ruin the party,” said Navellier earlier this month.

Inflation worries overblown in 2026

A significant economic concern is that inflation driven by tariffs will put a lid on economic growth next year, causing lackluster GDP growth.

That argument seems somewhat exaggerated given the November CPI inflation data. According to the Bureau of Labor Statistics, inflation was 2.7% year-over-year in November, down from 3% in September. Granted, a lot of data was missing from the November calculation, notably rent and shelter. However, most economists agree that the shelter components in CPI have been lagging and may have been overstating inflation until now.

“Had rent and OER simply grown in line with the recent trend, a reasonable assumption in our view, headline and core CPI would have printed at 2.8% y/y. That’s still below consensus but likely a little closer to the truth,” wrote Bank of America economists this week.

Bank of America core PCE inflation forecast for 2026:

  • Q1 2026: 3.1%
  • Q2 2026: 3.1%
  • Q3 2026: 3.1%
  • Q4 2026: 2.8%
    Source: Bank of America “U.S. Economic and Equity Strategy Outlook, Dec. 2025”

The lower-than-expected inflation rate (Wall Street had been betting on 3.1% inflation) makes the Fed more likely to accelerate rate cuts if unemployment remains near or exceeds its current 4.6% level.

Earlier this month, Bank of America stated that the chances of a rate cut in January would improve if unemployment were 4.6% or higher in November. This week, the economists updated their thinking, saying a December unemployment rate of “4.6% would be a close call and 4.7% or higher will likely precipitate another cut” in January.

The December data will be reported on Friday, January 9, according to the BLS.

Overall, Navellier believes the backdrop is very good news for economic growth in 2026, supporting his 5% GDP prediction.

“Most of the economic growth is currently tied to onshoring and data center growth, but it will spread as lower interest rates stimulate interest rate-sensitive parts of the U.S. economy, like the automotive and housing sectors,” concluded Navellier.

Related: CPI inflation report sparks data backlash