Marketplace Morning Report – "Uncertainty" Marked This Year's Economy. What About 2026?

Date: December 29, 2025
Host: Nova Safo (in for David Brancaccio)
Notable Guests: Stephen Juneau (Sr. Economist, Bank of America); Nancy Marshall Genser; Justin Ho

Episode Overview

This special year-end episode reflects on the economic volatility of 2025—dominated by tariffs and policy uncertainty—and looks forward to 2026. Nova Safo interviews Bank of America’s Stephen Juneau to unpack what might lie ahead for inflation, the labor market, and U.S. growth. The episode also reports on a legal shift in the Trump administration’s approach to corporate DEI programs, and explores the heating market for adjustable-rate mortgages as Americans respond to fluctuating interest rates.

Key Discussion Points & Insights

Reflecting on 2025's Economic Turbulence

• Theme: 2025 was defined by uncertainty, particularly surrounding President Trump’s tariff hikes (the highest in nearly a century).
• Main Question: As the year ends, what economic themes and challenges might define 2026?

Economic Prognosis: Stephen Juneau, Bank of America

Timestamps: [01:19]–[04:04]

Anticipating 2026’s Buzzword: Outperformance

• Stephen Juneau:
  • “Continued outperformance, maybe? That’s two words, obviously.” ([01:27])
  • Predicts the U.S. economy will keep outperforming global peers and growing above trend.
• Reasons for Optimism:
  • Expansionary fiscal policy
  • Potentially reduced tariff-induced uncertainty
  • A likely easing Federal Reserve and lowered interest rates
  • Ongoing capital expenditures fueled by AI investment
  • “There’s a lot of tailwinds for next year… expansionary fiscal bill… easing Fed… and then you have the AI-related CapEx that should continue next year.” ([01:34])

Inflation and Labor Market Outlook

• Inflation:
  • Juneau believes inflation will ease somewhat as tariff effects diminish in late 2026, but it will remain above the Fed’s target.
  • “Inflation… is going to continue to be a problem for the Fed, maybe coming down a little bit… But largely speaking, you’re still going to have inflation above targets.” ([02:17])
• Labor Market:
  • Job growth slowed in 2025 due to policy uncertainty and lower immigration reducing labor supply.
  • Outlook for 2026 suggests a rebound if uncertainty subsides, encouraging broader business hiring and investment.
  • “Another reason for the slowdown in job growth is… labor supply. We've had less immigration this year. That leads to a negative labor supply shock that pulls down job growth.” ([02:56])

Supreme Court Tariffs Decision

• Ongoing Uncertainty:
  • Possibility that the Supreme Court overturns Trump’s tariffs.
• Predicted Response:
  • Administration would likely pivot to different legal authorities to maintain tariffs.
  • Businesses could receive tariff refunds, injecting temporary economic stimulus.
  • “If you got even more growth above potential, what that could mean is that inflation is actually going to be even more stubborn.” ([03:50])

Policy Watch: False Claims Act Targeting DEI

Reporter: Nancy Marshall Genser
Timestamp: [04:20]–[05:49]

• New Use of False Claims Act:
  • The Trump administration is using Civil War–era fraud statutes to investigate diversity, equity, and inclusion (DEI) policies at firms receiving federal funds.
  • “The Justice Department has started False Claims Act investigations into US Companies use of diversity initiatives in hiring and promotions.” ([04:56])
• Implications:
  • DOJ argues that companies with DEI programs could be committing fraud if they receive federal funding.
  • This could lead to lawsuits and potential financial penalties against companies promoting DEI under federal contracts.

Housing Market Update: Adjustable Rate Mortgages on the Rise

Reporter: Justin Ho
Timestamps: [06:19]–[07:54]

• Increasing Popularity:
  • Demand for adjustable-rate mortgages (ARMs) has more than doubled in the past year (Mortgage Bankers Association).
  • Borrowers are attracted by lower initial rates―up to a full percent lower than fixed-rate mortgages.
  • Mike Fratantoni: “If a borrower takes an adjustable rate loan… they can save almost a full percentage point in rate.” ([06:52])
• Risks & Protections:
  • The danger of rate shock (seen in 2008) is minimized by stricter post-crisis lending standards.
  • Mark Fleming: “As a result, while there is adjustment of payment, it’s not nearly as shocking… as recession old Plus.” ([07:25])
• Borrower Calculus:
  • Many borrowers plan to move or refinance within five or seven years, accepting the risk in exchange for lower rates now.
  • “I think the calculus that people make is, well, I’m likely to move within five or seven years anyway.” ([07:39])

Notable Quotes & Memorable Moments

• Nova Safo to Stephen Juneau: “When it comes to the economy, what do you expect will be the most spoken word that you will utter in 2026?” ([01:21])
• Stephen Juneau: “There’s good reason to expect that we can continue to see the US Economy just outperform its peers.” ([01:34])
• Stephen Juneau on persistent inflation: “If you got even more growth above potential, what that could mean is that inflation is actually going to be even more stubborn.” ([03:50])
• Nancy Marshall Genser: “The Justice Department has started False Claims act investigations into US Companies use of diversity initiatives in hiring and promotions.” ([04:56])
• Mike Fratantoni (Mortgage Bankers Association): “They can save almost a full percentage point in rate.” ([06:52])
• Mark Fleming (First American): “It’s not nearly as shocking of the arms of recession old Plus.” ([07:25])

Timestamps for Key Segments

• 2026 Economic Outlook Interview: [01:19]–[04:04]
• False Claims Act Shift & DEI: [04:20]–[05:49]
• Housing Market & Adjustable Rate Mortgages: [06:19]–[07:54]

Summary Tone

The episode maintains Marketplace’s trademark: brisk, accessible, and analytically sharp reporting, focusing on what real economic uncertainty means for policy, business, and American households. Nova Safo’s interviewing style is direct and curious, while expert guests offer cautious optimism, stressing both risks and opportunities in the coming year.

For Listeners Who Missed It

This episode is a round-up of the crucial economic developments from 2025, with analysis pointing toward persistent—but possibly shifting—uncertainty in 2026. It’s valuable for business-minded listeners who want a concise but thorough perspective on policy, markets, and the practical concerns shaping the next year.