Americans are entering 2026 with an unusual mix of confidence and anxiety. They think stocks will climb and the economy will grow, but they're also bracing for pricier groceries and a tougher job market. Welcome to the paradox of modern economic sentiment.
According to Gallup's latest poll conducted January 2-17, half of U.S. adults expect stock market gains over the next six months, and 49% forecast economic growth. That's the good news. The flip side? A hefty 62% still expect inflation to keep climbing, and 50% see unemployment heading higher. It's optimism with a nervous edge.
Bouncing Back From the Tariff Hangover
The current mood marks a significant recovery from where things stood in April 2025. Back then, President Donald Trump's sweeping tariffs on trading partners sent public confidence into a tailspin. Only 29% of Americans expected stock gains at that point, down sharply from 61% earlier in the year.
Now, with markets finding their footing again, stock optimism has rebounded by 21 percentage points. Just 25% expect equities to decline over the next half year. Similarly, belief in economic expansion has climbed from 38% to 49% since April, with only 36% now predicting contraction.
There's an interesting twist here: Gallup's survey actually foreshadowed the recent software-driven selloff that hammered tech stocks. The market rotation is playing out exactly as sentiment suggested it might. The SPDR S&P 500 ETF Trust (SPY) has gained just 1% year to date, while the tech-light SPDR Dow Jones Industrial Average ETF (DIA) has pushed to fresh record highs. Old economy stocks are having their moment.
Rate Expectations Flip While Inflation Worries Stick Around
On interest rates, Americans are genuinely split. Some 41% expect rates to fall, while 36% think they'll rise. That's a complete reversal from last year when most people were bracing for continued Federal Reserve tightening.
"These readings are far more positive than the January 2022 reading, when a near-record-high 78% thought rates would increase," Gallup noted.
But inflation anxiety hasn't budged. That 62% expecting higher prices matches April's elevated reading and remains stubbornly high. Job market fears are climbing too, with 50% anticipating higher unemployment—up 12 points from a year ago. Only 32% believe unemployment will decline, and a mere 16% expect it to stay flat.
These concerns aren't baseless. Recent labor data shows slower job creation, particularly in service sectors affected by tighter immigration policies and increased automation. "Americans' expectations for unemployment are worse today than last January and April," Gallup observed.
The Political Divide Runs Deep
Perhaps unsurprisingly, how you view the economy depends heavily on your political affiliation. The survey found sharp partisan splits across all five economic measures Gallup tracked.
Republicans are overwhelmingly bullish. A full 82% expect growth, 77% anticipate stock market gains, and only 24% foresee higher unemployment. "Republicans' views of all five economic aspects are similar to what they were one year ago at the start of Trump's second presidential term but better than in April," Gallup states.
Democrats, meanwhile, take a considerably more cautious stance. A majority expect rising unemployment, inflation, and interest rates. Their views on stocks are evenly split between gains and losses.
Independents lean closer to the Democratic outlook, with more expecting negative economic trends than positive ones. It's a reminder that in today's America, even something as seemingly objective as economic expectations gets filtered through a partisan lens.
