UBS analysts warn U.S. economic growth is concentrated in a few areas for 2026, while large parts of the country face weakness. Their outlook through 2028 is heavily dependent on AI investment by mega-cap tech firms now under pressure to deliver returns.

The broader market relies on upper-income household spending, creating a K-shaped recovery where wealthier Americans drive growth while lower-wage workers grapple with high costs. President Trump’s tariffs have further pressured real incomes, though the economy remains resilient with a stable job market.

UBS expects the Federal Reserve to cut interest rates twice in 2026, lowering the federal funds rate to 3%-3.25%. Trump’s budget bill is seen providing a floor for expansion via tax refunds. The Fed is expected to hold rates steady at its upcoming meeting.