To Inform:

I had a conversation with an industry colleague this week and I told him one of the things I enjoy most about my role is that I get to lead a team tasked with going a mile wide across the investment landscape. This span of coverage, however, requires the Investment Strategy Team at The Joseph Group to go a little deeper than just the standard “inch deep.” I want to highlight three key themes that we’re watching and hopefully give you more insight into what is happening.

Let’s start with the job market. For months, we’ve talked about how the job market has been in sort of a “muddle through” mode. While job creation statistics have been weak, other indicators of the health of the jobs market have been less concerning. With this week’s most recent monthly payroll update, we can’t help but wonder if the jobs market is turning a corner. In the graph shared below, note that January was the third straight month of positive jobs growth, the first such stretch since last spring. A healthy jobs market is key for all sorts of things. A stronger jobs market likely increases consumer confidence, sustains saving and spending goals of workers, and is measure of confidence on behalf of US employers of the demand for their goods and services.

Source: Strategas

A second area of interest to us is the coming deluge of government stimulus through a mix of deregulation, monetary policy, and tax cuts. The table below shows just how much the deck was stacked against the economy last year. The Fed was shrinking their balance sheet, tariffs were being implemented, and a higher level of taxes for both consumers and businesses were all working as brakes on the economy. The calculus has largely flipped in 2026, which could have a significant impact on economic growth.

Source: Strategas

Lest you think a lot of this gets lost in the shuffle of corporate tax filings, the impact for consumers is going to be meaningful. JPMorgan recently shared the chart below that shows the average tax refund going back nearly 20 years. Expected refunds in 2026 are around 25% higher than the previous record year in 2022. This will likely have a major impact on those in this country who’ve been hit hardest by the post-COVID inflation regime that has not quite worked its way through the system.

Source: JPMorgan Asset Management

Finally, we remain focused on the outlook for inflation. Today’s Consumer Price Index report showed prices rose 2.4% year-over-year, which is as close as we’ve been in some time to the Fed’s target of 2%. Managing inflation will be a top priority in 2026 for policymakers and Fed officials as the effects of economic stimulus begin to surface. If managed successfully, this will allow interest rates to remain at levels that encourage economic growth.

Source: The Wall Street Journal

Whether it is the outlook for the jobs market or the relief coming for consumers through disinflation in housing and the expansion in tax cuts, we think the economy is playing with a solid hand of cards. We often caution that the economy is not the market and have flagged mid-term election years as ones that often roil markets. That said, if the themes highlighted here are durable, we are optimistic about how 2026 could unfold for investors in diversified portfolios.

Writen by Alex Durbin, CFA, Chief Investment Officer