Wall Street giants debate fiercely in 2026: Goldman Sachs bets on a "rapid advance" in the first half of the year, while Citigroup warns of a "hidden danger" in the job market.

In the annual outlook report released before the Christmas holiday, the Economic teams of Goldman Sachs and Citigroup formed a sharp contrast in their judgments on the future prospects of the US economy. Discussing this difference may help in contemplating the economic trends of 2026. Led by its chief economist Jan Hatzius, the Goldman Sachs team considers themselves "more optimistic" compared to the consensus view in a report to clients last week. The bank predicts the US calendar year average growth rate for 2026 to be 2.6%. Among 77 institutions forecasting, Goldman Sachs' prediction ranks fourth in optimism - placing first among Wall Street investment banks. Citigroup's forecast is half a percentage point lower at 2.1%, roughly in line with the market's latest survey median of 2.0%. The contrast in views between the two institutions is particularly notable at the beginning of 2026. Citigroup's US economic team, led by Andrew Hollenhorst, acknowledges that many forecasters have agreed with the view of an economic acceleration in the first half of the year, but in a report last week, they expressed skepticism towards the arguments presented. Goldman Sachs forecasts "particularly strong GDP growth in the first half of next year", citing factors such as the waning drag effect of US President Donald Trump's tariffs, his flagship fiscal plan bringing in around $100 billion in additional rebates, and the accommodative financial environment amid the Fed's rate-cut cycle. Citigroup is less certain about this. They estimate the scale of additional rebates to be more moderate, between $300 billion and $500 billion. The bank also believes that the support from the accommodative financial environment is limited and emphasizes that these conditions have not prevented the rise in the unemployment rate this year. Regarding the issue of reduced uncertainty, Citigroup economists wrote: "There is little evidence to suggest that the slowdown in hiring in the second half of 2025 was due to trade or other policy uncertainties." The weak job market is a key factor in their economic outlook, as they emphasize the sluggish recruitment and wage growth data. Citigroup writes: "Our base case is that hiring will remain weak, leading to slowed income growth and continued deceleration in consumer spending." Both banks believe that the Fed policymakers will further cut interest rates in 2026, with Goldman Sachs predicting a 50 basis point cut and Citigroup expecting a 75 basis point cut, both seeing the possibility of further rate cuts. As Goldman Sachs puts it, the risks are "clearly skewed dovishly", reflecting both banks' broader emphasis on the downside risks to their economic outlook. While Citigroup emphasizes that "stock market pullbacks and a reevaluation of AI investment prospects pose serious downside risks to our outlook", the biggest risk is still the surge in the unemployment rate. "There has never been a case in history where the unemployment rate has risen for such a long period of time (even if by a small margin) without rising by at least 2 percentage points from trough to peak." The Goldman Sachs team expresses it as: "The main vulnerability remains the cracks in the US labor market, where soft employment could potentially re-enter the range that sparks serious recession concerns."