Odd Lots Podcast Summary: "Goldman's Hatzius and Snyder on the Outlook for 2026"

Date: December 29, 2025
Hosts: Joe Weisenthal, Tracy Alloway
Guests: Jan Hatzius (Chief Economist & Head of Research, Goldman Sachs), Ben Snyder (Chief US Equity Strategist, Goldman Sachs)

Overview

In this episode, Tracy Alloway and Joe Weisenthal bring together Jan Hatzius and Ben Snyder from Goldman Sachs to explore the economic and market outlook for 2026. The conversation dives into the current state of the US economy, the drivers of recent stock market performance, the impact and reality of AI investments, persistent myths around productivity and job loss, the rising importance (and limitations) of productivity gains, and what could make the next year surprising. There's also discussion of tariffs, the underwhelming housing market, shifts in consumer sentiment, China’s resilience, and how investors are (or aren’t) overexuberant about AI.

Key Discussion Points & Insights

The State of Forecasting and 2026 Economic Themes

• Annual Forecast Season: Every major bank publishes outlooks and predictions; this is a tradition during a quieter news cycle (03:38).
• Notable for 2026:
  • Recently softer-than-expected CPI
  • Anticipated new Fed chair mid-year
  • Rising unemployment despite strong GDP
  • Market concentration in a handful of tech/AI companies (04:14–04:48)
• Coordination at Goldman: Economic, equity, and other teams share insights but maintain independent perspectives (05:43–06:27).

Economic Growth, Productivity, and Unemployment

• Strong GDP, Higher Unemployment:
  • Jan Hatzius projects flat unemployment (~4.5%) with robust GDP growth (2.6%) in 2026.
  • This decoupling is largely due to accelerated productivity, not yet fully realized from AI (07:14–08:21).
  • “We expect more of a boost from AI going forward in the next five years than in the last five.” — Jan Hatzius [07:53]

Drivers of Stock Market Performance

• 2025 Review:
  • Strong earnings growth: S&P 500 companies reported 12% earnings growth, with non-megacap stocks at ~10% (08:53–09:15).
• Not Just AI or Big Tech:
  • S&P 493 (excluding largest 7–10 stocks) have delivered ~15% annual returns over three years (09:24–09:51).
  • Recent weakness in AI/tech stocks due to the expectation of slower capex growth and greater debt needs in 2026 (09:58–10:39).
  • "The broad US equity market has performed quite well." — Ben Snyder [09:24]

AI: Myths versus Measured Reality

• AI’s GDP Contribution Overstated:
  • Hatzius strongly disputes the narrative that AI investment has been a major GDP driver to date, attributing the impact to near zero, due to imports and accounting conventions for semiconductors (10:58–12:01).
  • “When we look at the impact of AI investment on measured GDP growth…we’re getting only about 20 basis points… and pretty close to zero over the last year.” — Jan Hatzius [11:45]
• Market Not Running Wild on AI Hype:
  • Unlike the dot-com bubble, investors are focusing on near-term earnings over speculative future potentials (23:22–24:37).
  • “What the market has been doing, given that uncertainty… is really focusing on near term earnings.” — Ben Snyder [22:32]

Productivity: Who Wins?

• Productivity Acceleration Has Begun, Broadly Shared Gains Likely Coming:
  • Most AI-related equity gains so far have gone to hardware and infrastructure (semis, hyperscalers); speculation about longer-term productivity beneficiaries is still subdued (22:32–24:37).
  • “About 60% of S&P companies say AI every quarter… you can probably count on one hand how many are actually quantifying it.” — Ben Snyder [36:04]
  • “We are modeling an AI productivity boost in our S&P 500 earnings forecast for next year. …under half a percent.” — Ben Snyder [36:27]

Tariffs and Inflation

• Tariff Pass-through Lower Than Expected:
  • Expected ~100bps pass-through to inflation, but only about 50bps seen, possibly due to delayed effects or business absorption (19:39–20:41).
  • Tariffs are treated like VAT in Europe: a one-time boost to inflation which fades, not a sustained driver (19:39–20:41).
  • Companies offset tariffs via price hikes, cost-cutting, and supply-chain adjustments (21:07–22:12).

Key Risks and Signs of Overexuberance

• Valuations as "Potential Energy":
  • High P/E multiples are not an actionable sell signal, but heighten risk if a catalyst emerges (31:12–32:48).
  • Signs of speculative excess (e.g., indiscriminate AI stock buying) remain well below prior bubbles (24:47–25:18).
  • “I think this has been one of the least enthusiastic markets that is often described as a bubble in recent history.” — Ben Snyder [39:59]

The Labor Market and AI’s Long-term Impact

• Technological Change and Employment:
  • Historical evidence doesn’t support lasting negative effects from productivity booms on aggregate employment, but frictional unemployment could rise during transitional adoption periods (26:08–27:52).
  • “History certainly doesn’t support it from the perspective of the long term outcomes… You cannot find an adverse relationship…between productivity growth… and aggregate unemployment.” — Jan Hatzius [26:08]

Consumer Spending and Sentiment

• Divergence Between Sentiment and Hard Data:
  • Sentiment surveys have become less reliable for predicting consumer behavior; hard data remain solid, though some slowing at the lower end (27:52–29:43).

Housing Market: No Longer a Centerpiece

• Muted Role in Current Cycle:
  • Weak housing metrics but no broader economic drag (40:06–42:03).
  • “It is not a major feature of our outlook for 2026. We have housing go more or less sideways from here.” — Jan Hatzius [41:35]

China’s Resilience

• Exports Holding Up Despite Tariffs:
  • China’s export sector is robust, compensating for weak domestic property; rare earth control limits West’s options (42:03–44:44).
  • “China keeps getting better and better at producing better and better goods at cheaper and cheaper prices.” — Jan Hatzius [43:06]

Fed Policy & Expectations

• Rate Cuts Into 2026:
  • Expect two more cuts to ~3–3.25% in 2026, but data dependence is high, especially regarding unemployment (48:05–49:24).

Notable Quotes & Memorable Moments

• On AI's Impact on GDP:
  • “Actually, pretty close to zero.” — Jan Hatzius [10:58]
  • “That's not a popular answer!” — Joe Weisenthal [11:00]
• On market optimism and speculation:
  • “If you look historically… speculative activity… is still well below levels that we saw 25 years ago.” — Ben Snyder [24:47]
• On labor market disruption fears:
  • “History certainly doesn't support it… if you look at intervals of 10, 20 years, you cannot find an adverse relationship between more productivity growth…and aggregate unemployment.” — Jan Hatzius [26:08]
• On market concentration and big tech:
  • “Five years ago…the top 10 stocks in the market accounted for a third of market cap…they are a third of earnings.” — Ben Snyder [36:54]

Timestamps for Important Segments

• 2026 Preview & Market Context – 02:30–04:43
• Team Coordination at Goldman – 05:18–06:27
• GDP, Unemployment, Productivity – 07:03–08:21
• What Drove 2025’s Market Gains? – 08:21–09:51
• Recent Weakness in AI/Tech Names – 09:51–10:39
• Debunking AI as GDP Driver – 10:39–12:33
• Valuations, Bubbles, and Market Risks – 24:37–25:18, 31:12–32:48
• AI, Productivity, and S&P Earnings – 35:45–37:34
• Fears of Tech-driven Job Loss – 25:18–27:52
• China’s Resilience Despite Tariffs – 42:03–44:44
• Fed Outlook for 2026 – 48:05–49:24

Summary Table: Jan Hatzius & Ben Snyder’s 2026 Outlook

| Indicator/Theme | 2026 Outlook Summary | |-------------------------|--------------------------------------------------------| | US GDP Growth | Robust (2.6%) | | Unemployment Rate | Flat at ~4.5% | | S&P 500 Target | 7,600 (Goldman Sachs forecast) | | AI Impact on GDP | Minimal-to-zero in direct contribution | | Productivity Growth | Accelerating, major boost from AI still to come | | Consumer Spending | Solid but not spectacular, sentiment surveys noisy | | Housing | Sideways, little broader economic impact | | Tariffs/Inflation | ~50bps pass-through, one-time rather than persistent | | Fed Policy | Two more cuts in 2026, to neutral (~3–3.25%) | | China | Strong exports, weak domestic; growth >4% |

Closing Insight

The hosts note that while concerns about an AI bubble and tech concentration are valid, the data suggest a story of real, broad-based earnings growth and measured optimism. Both Hatzius and Snyder urge focusing on hard data—earnings, unemployment, productivity—rather than speculative hype or sentiment swings.

“If you step back and look at the inflation news more big picture, it’s pretty encouraging… underlying rate that’s no longer that far away from 2%. And that’s pretty good.”
— Jan Hatzius [15:29]

“An investor should always be a little nervous. That’s a reflection of equity risk premium, which is how the market generates return over time.”
— Ben Snyder [38:36]

This episode delivers a nuanced take on where Wall Street’s most influential voices see risk and opportunity next year. The narrative warns against overhyping AI’s direct economic contribution while underscoring a healthy, if uneven, tide of productivity and corporate profit growth.