The Forecast Report - Q1 2026
Growth, Inflation, Policy, Liquidity — and Where Opportunity May Be Emerging
A Quick Word Before We Begin
Markets can feel noisy—headlines change daily, opinions swing wildly, and short-term volatility often steals the spotlight. But markets don’t move randomly. Over time, they are driven by a small set of powerful forces:
Economic growth
Inflation
Monetary policy
Fiscal policy
Liquidity (the amount of money moving through the system)
This quarter, those forces are lining up in a way that is unusual, important, and worth understanding. What follows is our plain-English view of what’s happening beneath the surface—and why we believe disciplined, risk-managed investors should stay focused on the bigger picture.
The Big Picture: Where We Are Right Now
Looking out over the next 12 months, the overall market backdrop remains structurally supportive, even if the path forward isn’t perfectly smooth.
Policymakers have made a clear choice: rather than aggressively tightening the economy to deal with debt, they are opting to outgrow it. That means policies that lean toward supporting growth, employment, and financial stability—even if inflation doesn’t fall neatly back to old targets.
At the same time, investor positioning has become crowded in certain areas, which increases the risk of short-term pullbacks. That’s important to acknowledge. But historically, when growth, policy, and liquidity are aligned, markets tend to reward patience—not panic.
To understand why, let’s walk through each of the five drivers shaping the environment today.
1. Growth Outlook: The Economy Is Bending, Not Breaking
It’s easy to feel like the economy has been “slowing forever.” In reality, the data tells a more nuanced—and more constructive—story.
Over the past year, the U.S. economy experienced what we would describe as a soft, U-shaped slowdown. Growth decelerated, but it never collapsed. Importantly, many of the classic warning signs that precede deep recessions simply never appeared.
Why?
Because the private sector entered this slowdown in unusually strong shape.
Households, for example, are not overleveraged the way they were before prior downturns. Many homeowners locked in low mortgage rates years ago, which has dramatically reduced interest-rate stress. On the corporate side, many companies refinanced debt before rates rose, leaving balance sheets far healthier than most headlines would suggest.
In plain terms: there are very few excesses that need to be “washed out.”
As a result, the probability of a deep, traditional recession has remained low. Instead, economic growth appears to have bottomed in late 2025, with conditions improving as we move through 2026 and beyond.
The Productivity Factor (and Why AI Matters)
One of the most important—and misunderstood—forces at work today is productivity.
Technology, and artificial intelligence in particular, is allowing companies to produce more without proportionally increasing labor costs. That’s good for margins, profits, and long-term growth—even if hiring doesn’t surge.
We’ve seen this before. In the early 2000s, the spread of internet technology led to what economists call a “jobless recovery”—growth and profits rebounded well before employment fully caught up.
That may feel uncomfortable, but it’s not necessarily bad for markets.
If productivity remains elevated, economic growth could surprise to the upside, especially relative to today’s fairly pessimistic forecasts for 2026–2027.
2. Inflation Outlook: Sticky, but Slowly Cooling
Inflation remains one of the most talked-about—and misunderstood—topics in the market.
The reality is this: inflation is not collapsing back to 2% overnight, but it is also not spiraling out of control. Think of it as “warm,” not hot.
Inflation tends to be one of the most lagging indicators in the economy. It usually doesn’t fall meaningfully unless there is a recession—and that’s not the environment we’re in.
That’s why inflation has hovered in the high-2% to low-3% range for an extended period.
Why Inflation Pressures Are Likely to Ease Gradually
Several forces are now working in favor of moderation:
Housing costs are easing, which filters into inflation with a delay.
Wage growth is slowing, as fewer workers are switching jobs.
Productivity gains from technology and AI are helping businesses control costs.
Put simply: when companies can produce more without raising wages aggressively, inflation pressure naturally cools.
This dynamic may eventually lead policymakers to accept that a slightly higher inflation rate is tolerable—especially if growth and productivity remain strong.
3. Monetary Policy: Quietly Pro-Growth
Listening to the Federal Reserve can be confusing. The language often sounds cautious or restrictive. The actions, however, tell a different story.
The Fed is walking a tightrope.
On one side, high interest rates hurt:
Small businesses
Housing
Consumers who rely on credit
On the other side, massive government borrowing creates ongoing stress in funding markets.
Faced with this trade-off, the Fed has increasingly acted to support growth and financial stability, even if it avoids saying so explicitly. Liquidity tools have quietly re-entered the picture, and policy decisions suggest a growing willingness to lean pro-growth if conditions deteriorate.
This matters because markets tend to perform best when monetary policy shifts from restraint to support—even subtly.
4. Fiscal Policy: Spending, Debt, and Growth
Fiscal policy remains a powerful force in today’s economy.
Government spending is not shrinking in any meaningful way, and deficits remain large. Historically, tax cuts and fiscal stimulus tend to support growth in the short term, even if they expand debt over the long term.
At the same time, deregulation—particularly in parts of the financial sector—can help credit flow more freely through the economy, supporting business investment and activity.
The trade-off, of course, is rising debt issuance. And that brings us to an important global shift that investors are increasingly paying attention to.
5. Liquidity and the Role of Precious Metals
Liquidity is the fuel that powers markets. When liquidity expands, asset prices tend to rise. When it contracts, volatility increases.
Right now, liquidity conditions are improving, both domestically and globally. That has meaningful implications—not just for stocks, but for precious metals as well.
Why Gold and Silver Matter in This Environment
Precious metals performed exceptionally well in 2025, delivering outsized returns relative to equities. Importantly, the drivers behind that move have not gone away.
We believe gold and silver should continue to experience upside pressure through 2026, for several reasons:
Silver:
Silver is increasingly constrained on the supply side, while demand continues to rise. It is not only a monetary metal, but also a critical industrial input—used in electronics, renewable energy, and advanced manufacturing. As industrial applications expand and investor interest grows, available supply is shrinking. This dynamic should create a strong floor under silver prices, even during periods of market volatility.
Gold:
Gold’s role is shifting in a more structural way. Around the world, investors and governments are rethinking the idea that U.S. Treasury bonds are the ultimate “safe asset.” With rising debt levels and geopolitical tensions mounting, gold has re-emerged as a neutral, globally accepted store of value.
Today, every major economy in the world is accumulating gold in meaningful quantities. Central banks, institutions, and private investors are increasingly using gold as a hedge against geopolitical risk, currency debasement, and financial instability.
This trend is not speculative—it reflects a broad, global reassessment of risk.
Given these forces, we believe the conditions that supported gold and silver in 2025 are likely to remain in place through 2026.
What This Means for Our Clients
At Forecast Capital Management, our goal is not to predict every short-term move or chase headlines. Our focus is on managing risk across cycles, staying aligned with long-term forces, and positioning portfolios so they can adapt as conditions change.
Today’s environment is not without risks. Volatility is likely to remain part of the landscape. But growth, policy, and liquidity are still providing meaningful support—and selective opportunities are emerging in areas many investors overlook.
As always, we remain disciplined, diversified, and focused on protecting and growing your capital through full market cycles.
If you have questions about how these themes apply to your portfolio—or would like to review your positioning in light of today’s environment—we’re always here to talk.
Jason C. Hilliard, J.D.
CEO/ Managing Director
Forecast Capital Management LLC
www.forecastcapitalmanagement.com
Important Disclosure
This commentary is provided for informational and educational purposes only and reflects the views of Forecast Capital Management as of the date published. It is not intended as individualized investment advice, nor should it be construed as a recommendation to buy or sell any security or investment strategy.
All investing involves risk, including the potential loss of principal. Market conditions, economic data, and forward-looking statements are subject to change without notice. Past performance is not indicative of future results.
Forecast Capital Management is a Colorado registered investment adviser. Advisory services are offered only to clients pursuant to an executed investment advisory agreement. Please consult your advisor before making any investment decisions.
This material does not constitute an offer or solicitation to engage advisory services in any jurisdiction where such offer or solicitation is not permitted.