2 Reasons Why We're Definitely Getting a Recession in 2026, and 2 Reasons Why That's Impossible

"What I find most fascinating about the markets in general (mostly the headlines in the financial media) is the amount of certainty that can go into bullish or bearish calls. Whichever side of the fence a particular analyst or talking head finds themselves on, I feel as though a given position can become more entrenched over time. For the better part of the past two decades, bulls have been correct in digging their heels in and calling recession calls "insane," or at least unlikely."

"And while there are plenty of folks in the real economy who claim to be feeling recession-like symptoms (particularly those among the hundreds of thousands of layoffs we've seen proliferate of late) are already here, the more bullish take on equities overall has played out. The question moving forward, of course, is whether 2026 will be a repeat of what we've seen the past three years (2022 was kind of an outlier), or if a 2020/2022 type situation is at hand."

"Why? Well, because I'm probably more of a pessimistic person than the average reader. Of course, the problem with being more conservative in my approach to looking at specific companies is that I've missed out on some of the biggest growth stocks this market has put forward for those who have been more risk-tolerant. Indeed, surging valuation multiples (and rising earnings) have driven moves that have been partly fundamentals-oriented, but mainly reflect the euphoria of investors more broadly."

Markets show high certainty in bullish and bearish calls, and positions can become entrenched. Bulls have largely been correct over the past two decades in dismissing recession calls as unlikely. Many workers report recession-like symptoms, including widespread layoffs, yet equities have generally risen. The outlook for 2026 is uncertain: it could mirror recent steady gains or resemble prior downturns like 2020 and 2022. Two reasons support continued equity gains, and two reasons support a much weaker economy. A pessimistic perspective emphasizes missed growth opportunities from conservative stock selection, valuation expansion, investor euphoria, and risks from inflation, tariffs, and shifts in the bond market.

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