Abacoa & Alton Neighbors - January 2026

J A N U A R Y 2 0 2 6 | A B A C O A & A LT O N N E I G H B O R S 5 A s of December 2025, the U.S. economy continues to show pockets of resilience, though significant headwinds are emerging. In Q2 2025, real GDP growth was revised up to an annualized 3.8%. However, forecasts for the remainder of 2025 point toward a much slower pace. A consensus of professional forecasters now expects average GDP growth of roughly 1.9% in 2026. On monetary policy: At its October 2025 meeting, the Federal Open Market Committee (FOMC) lowered the target range for the federal funds rate to 3.75 %–4.00%. Several Fed officials remain open to further cuts, but as of now the path forward is uncertain, additional easing is not pre-set and will depend on upcoming data. On inflation and the labor market: The annual rate of inflation, as measured by the Consumer Price Index (CPI-U), stood at 3.0 % as of September 2025. Meanwhile, labor conditions remain mixed: the official September employment report showed a gain of 119,000 nonfarm payroll jobs, and unemployment ticked up to 4.4 %. But hiring has slowed compared with earlier in the year, and survey commentary suggests employment was weaker in about half of the Fed’s 12 districts in recent weeks. Looking ahead into 2026, central-bank policy remains finely balanced. While the Fed has already cut rates, further moves depend on whether inflation continues cooling and whether employment deteriorates enough to justify additional easing. Recent comments - By Jeremy L. Wilmes MBA, CFP,®ChFC®CLU,®CASL, RICP® - from Fed leadership underscore that a decision either way will be data driven. From a strategic, client- focused vantage, the key considerations for the near term are: • Elevated private-sector investment, especially in technology, artificial intelligence, and intellectual property may support growth but also pose an upside risk to inflation. • With Q2 growth still robust but forward-looking forecasts pointing toward deceleration, there is a material risk of growth slipping into the low-2 % range in 2025 or even closer to ~1 % if demand softens. • Policy uncertainty, both on the monetary side and fiscal side, remains elevated; this is a structural drag and a source of risk, especially for rate-sensitive sectors. In short: the U.S. economy remains in tolerable shape today, but investors and clients should stay alert to weakening momentum, tighter financing conditions, and global risks. Our recommended focus remains exposure to high-quality assets, liquidity cushions, and companies with strong cash flows and pricing power. Securities and investment advisory services offered through Osaic Wealth, Inc. Member FINRA/SIPC. Osaic Wealth is separately owned, and other entities and/or marketing names, products, or services referenced here are independent of Osaic Wealth. Economic Update FOR JANUARY EXPERT CONTRIBUTOR