Favorite Fifteen – January 2026

By Vigilant Wealth Management on January 27, 2026

The Investment Policy Committee has finalized the Favorite Fifteen chart pack. Below please find the link to the slides for January 2026.

To start the year, we want to reiterate our outlook from the end of 2025. Our base case anticipates a “Goldilocks-like” environment extending into the first half of 2026, characterized by decelerating but still positive growth, gradually easing monetary conditions, and a modest fiscal tailwind. That said, uncertainty is unlikely to fade. Rising geopolitical risk, changes in Federal Reserve leadership, the lagged effects of tariffs, and persistent inflation pressures are expected to shape the macro narrative. Offsetting these headwinds, businesses appear poised to continue investing heavily in AI and related infrastructure, while household balance sheets enter the year in relatively healthy condition, supporting continued, though moderating, consumer spending.

The charts that follow are designed to provide context around these cross-currents and help frame the evolving global economic backdrop.

Global Economic Activity: Global economic activity (Chart #2) remained in expansion in December, led by sustained strength in services and slightly positive activity in manufacturing. The Economic Surprise Index (Chart #1) remains positive, signaling that data continue to come in better than expected. Regionally, the U.S. continues to deliver stronger activity than developed peers, supported in part by investment tied to artificial intelligence.

U.S. Growth: The Weekly Economic Index (Chart #3) and the GDP NowCast (Chart #4) point to continued solid growth in the U.S. The bonus chart highlights the scale of AI-related spending helping to support activity. Notably, the more than $530 billion of spending expected in 2026 reflects just five major hyperscalers and does not capture the full scope of AI-related investment across the economy.

Consumer Spending: Consumer spending (Chart #6) remains resilient. The U.S. consumer enters 2026 with a relatively healthy balance sheet and manageable debt service levels, which has supported continued spending. That said, the pace may moderate as lower-income cohorts continue to feel pressure from higher prices.

Labor Market: The labor market (Chart #8) has softened in recent months, with job growth slowing and pockets of outright declines. Even so, the unemployment rate remains low at 4.4% in December, consistent with a labor market that is moving toward a better balance: fewer jobs are being added, but fewer people are actively seeking work as well. Said differently, cooling demand for labor is being partially offset by a cooling in labor supply, which has helped keep the unemployment rate relatively stable. Importantly, the government shutdown materially disrupted data collection and release timing, which adds noise to the recent readings and makes month-to-month comparisons less reliable.

Inflation: CPI (Chart #9) has been affected by the prolonged federal government shutdown, which disrupted the usual publication cadence. At face value, the data suggest easing inflation, with headline CPI slowing to 2.7% year over year in December from 3.0% in September. Looking ahead, inflation could re-accelerate modestly as tariff pass-through and still-firm demand work through the system. Higher tax refunds could also provide an incremental boost to household cash flow and near-term spending, which may give businesses additional pricing power.

Bond Market: The Treasury yield curve (Chart #10) continues to normalize as short-term yields decline alongside Federal Reserve rate cuts, while longer-term yields remain more anchored amid ongoing inflation and deficit concerns. The result has been a gradual steepening of the curve. Credit spreads (Chart #11) remain historically tight, reflecting solid corporate fundamentals, healthy balance sheets, and limited near-term default risk.

Corporate Profits: Corporate earnings expectations (Chart #13) remain constructive. Consensus forecasts for 2026 earnings growth have been revised higher to above 14%, reflecting continued confidence in profit expansion even as the broader macro environment moderates.

Stock Market: Equities reached new highs earlier this month (Chart #12), supported by strong earnings momentum. The forward price-to-earnings ratio (Chart #14) remains well above its 20-year average, suggesting that additional upside will likely depend on continued earnings follow-through and sustained momentum in AI-driven growth.