RSM US Flags 4 Economic Imbalances as 1.7% Growth Outlook Holds
Updated
Updated · Real Economy Blog · May 29
RSM US Flags 4 Economic Imbalances as 1.7% Growth Outlook Holds
2 articles · Updated · Real Economy Blog · May 29
RSM US said four economic and financial imbalances could derail the current expansion even as its financial conditions index remains modestly supportive at 0.5 standard deviations above neutral.
The risks are widening fiscal deficits, a potentially unsustainable surge in nonresidential investment, heavy tech concentration in equities, and spending concentrated among upper-income households in a K-shaped economy.
Treasury markets are already signaling more caution: 2-year yields have risen as much as 75 basis points since the Iran war began, with real yields up 82 basis points, lifting borrowing costs and inflation risk.
Even so, RSM still expects near-trend 1.7% growth this year and puts recession odds at 30% over the next 12 months, helped by strong profits, equity gains and cash flowing into the tech sector.
The firm said easing tensions between Washington and Tehran could improve the outlook further, while an energy shock remains a key threat to inflation and household spending.
As an AI boom fuels market highs, is the rest of the economy secretly heading for a downturn?
With Iran profiting from high oil prices, will the current US economic campaign actually worsen global inflation?
Will today's 'K-shaped' recovery create a permanent three-tiered economy of rich, struggling, and indebted classes?
2026 Economic Outlook: Navigating Stagflation, Geopolitical Shocks, and the AI-Driven Future
Overview
In May 2026, the global economy faces a challenging period shaped by geopolitical shocks, especially the Iran war. These events have triggered energy disruptions and manufacturing shocks, leading to a 'stagflation trap' where both inflation and slow growth persist. As a result, the prospect of a soft economic landing is undermined, leaving families and investors in a difficult position with no clear exit. Volatility in energy markets, particularly rising oil prices, threatens to accelerate demand destruction and create significant economic problems, highlighting the need for careful monitoring of key indicators and adaptable strategies.