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2026 reflation hopes meet consumer caution

January 14, 2026

As 2026 kicks off, optimism about a reflationary impulse is building, driven by expectations of a bumper tax refund year under the One Big, Beautiful Bill. However, the outlook remains nuanced, as consumer confidence appears fragile, potentially diverting refunds toward savings or debt repayment rather than spending. “Tax cuts certainly won’t hurt, but the growth impulse may very well prove smaller than expected,” said Garrett Melson, Portfolio Strategist, Natixis Investment Managers Solutions.

  • Retroactive tax policy under the One Big Beautiful Bill will deliver after-tax income gains even larger than those from the Tax Cuts and Jobs Act (TJCA), believes Melson.
  • TCJA cuts in 2018 showed little evidence of boosting consumption, with saving rates increasing instead.
  • Lower-income households are expected to prioritize saving or debt reduction due to shaky confidence in labor market conditions.
  • The regressive nature of the cuts means upper-income earners, who have a lower marginal propensity to consume, will benefit disproportionately, notes Melson. 

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, is a significant piece of legislation that extends and updates many provisions of the Tax Cuts and Jobs Act.

This material is provided for informational purposes only and should not be construed as investment advice. The views and opinions contained herein reflect the subjective judgments and assumptions of the authors only and do not necessarily reflect the views of Natixis Investment Managers, or any of its affiliates. The views and opinions expressed may change based on market and other conditions. There can be no assurance that developments will transpire as forecasted, and actual results may vary.

All investing involves risk, including the risk of loss. Investment risk exists with equity, fixed income, and alternative investments. There is no assurance that any investment will meet its performance objectives or that losses will be avoided. Investors should fully understand the risks associated with any investment prior to investing.

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