Episode 75 | The Hinman Economic Report: GDP Growth, Inflation, and Housing Market Heading into 2026

In Episode 75 of “Market News with Rodney Lake,” Professor Lake, director of the GW Investment Institute (GWII), welcomes GWII Chief Economist and Program Associate Kathleen Hinman for the first Hinman Economic Report, a macro-focused discussion on key U.S. economic and market themes shaping the outlook for 2026. The episode examines the rebound in GDP to 3.8% in Q2, the continued resilience in consumer spending, and a modest rise in unemployment to 4.6%. Hinman and Lake also explore inflation dynamics, including falling oil prices, rising electricity prices driven by data centers, and the housing market’s sensitivity to mortgage rates. The conversation extends to equity market strength led by AI leaders such as Nvidia and AI-driven productivity gains, offering investors a forward-looking perspective on risks and opportunities heading into 2026.

Chapters

• 0:00 Introduction
• 1:58 GDP
• 3:35 Consumer Spending
• 4:48 Unemployment
• 7:19 Inflation
• 8:48 Electricity Prices
• 9:51 Treasury Yield
• 11:19 Housing Market
• 15:13 Equity Markets & AI
• 20:33 Conclusion

Transcript

Thank you for joining Market News with Rodney Lake. This is a regular program for the GW Investment Institute where we talk about timely market topics. I'm Rodney Lake, the director of the GW Investment Institute. Let's get started.
Welcome back to Market News with Rodney Lake. I'm your host, Rodney Lake. Today,
Very, very super special guest on this episode. Kathleen Hinman who is the chief economist and program associate at the GW Investment Institute. Reminder this is a podcast by the GW Investment Institute. Educational entertainment purposes only here at the GW School of Business. Welcome, Kathleen, to this episode of Market News with Rodney Lake. Great to have you here.
Thank you.
It's great to be here. Yeah I am...
So yes, as you said, I'm Kathleen Hinman. I'm the program associate and chief economist at the GW Investment Institute.
Excellent. Well, Kathleen, it's it's a thrill for me to have you on the episode, on the podcast and your first episode doing this. So thank you. For everybody that's watching and listening.
Number one, thanks for people coming back. This will continue to be I hope we'll have to see, I guess, how this episode goes. But the goal is to make this a reoccurring episode. And the title of this report that you're going to provide an overall report, is the Hinman Economic Report, also known as the HER.
And so we're super excited to hear, a lot of this stuff. And as investors and business people, analysts, I think it's important for us to be always thinking about, you know, this type of data, what's happening in the market. And we really appreciate this opportunity to connect with you and really get your expertise, on this as a reminder to everybody, Kathleen is a an alum.
Maybe you can tell everybody which degree you have from GW.
Yes, I received my M.S. in Applied Economics this past May. So yeah,
Excellent. Shout out to the economics department. School of Business still number one. But we do love the economics department and the Columbian College. So, thanks again for being on here.
So let's maybe start diving into some of these things that to talk about in the Hinman Economic Report. So I think top of the list that people think about, is GDP. Could you maybe talk about like where the numbers are and your outlook for growth?
Yeah. So second quarter, GDP was 3.8% growth. This was quite a difference considering quarter one was negative point 6%.
So it grew a lot. And the finance and insurance group was actually the biggest performer, with the most gains. And I you know, I think, 
yeah. I mean, what do you think it's going from here, like, I mean for 2026. So we're we're, to close out 2025, you know, we're recording this in mid December 2025. For 2026,


What do you think the outlook is? Do you think, you know, this type of growth we're going to have again this 3.8 as an example. Or do you think, we're going to retreat back or some, some other version of that again for 2026 and let's say beyond what's the outlook for the Hinman Economic Report?
Well, I think third quarter and fourth quarter will probably continue to increase, this year, however, 2026, I think it will probably be more of like a stagnant growth. Okay, 2% or something like that. 
And what's the what what drives the thesis for the slowdown?
Well, I'm I'm not really sure. I think, yeah.
Yeah. No, no, I think it's fair.
A lot of people have been predicting a recession for quite a long time. And I don't know if that's recession territory, but certainly a slowdown in the economy. And so we'll have to see how that plays out. So let's move on to some other categories here. And so consumer spending, PCE as a lot of people use, and obviously right now people are super focused on inflation.
Any thoughts around consumer spending and what's happening? With respect to that, many people talk about? Well, the consumer has held up super well, and has been doing way better than people expected. What are your views there?
I think people are going to continue spending. Honestly, I, in the US, yes, in the U.S. So in September it increased 65.1 billion, was a 0.3% increase from month to month.
Unfortunately, with the government shutdown, the October release date was is being rescheduled. But I honestly think people are still spending, I think it's going to continue to grow. So yeah.
Yeah. I mean, it's been difficult to bet against the American consumer people. People like spending, people want to spend. And we're going into the holiday shopping season and, and it seems like people will continue to spend here.
People keep talking about this bifurcated economy. I think we'll have to keep an eye on that. You know, that the luxury spenders are continue to spend. But you know, maybe not as much, on the middle and lower income side. Let's move on though. So one of the things that came out today actually is unemployment. So you got you got data again today is it's mid December here.
But we can give the day 12/16/2025. And you had unemployment data come out today and it ticked up slightly. It was 4.4. Now it's 4.6. What is your view there? Do you think that this is a really meaningful difference? Do you think unemployment is a concern at all?
Well I think it's interesting because the unemployment rate change .2%, however, the
like total non-farm payrolls employment actually stayed pretty similar.
Okay.
And so that's like the employer report whereas the household survey is the unemployment report okay. And 
That's an important distinction.
Yeah. And they did actually say that like more people reported this year okay. This time than than previously. So that could also be affecting the unemployment rate. So yeah, we'll see. Hopefully, things continue to be going well.
I mean, I think definitely like a lot of times the Federal Reserve will look at the unemployment rate for their rate decisions. And I think the, like we'll just continue to wait. I don't think this was like, so drastic or anything that it's going to be a big deal. 
So you don't think this would drive any difference in the outcomes for us as far as, when the fed and how much they'll change interest rate target.
Right, exactly. I think they'll probably wait.
Yeah. So I think, though, it sounds like what you're saying, it just. And you can, let me know if I've heard it correctly, that that given that, you know, this is a modest uptick in unemployment, it's probably not likely to impact the rate of change or the change at all, from the target rate.
And really, you know, this is seems kind of maybe mildly supportive of lower interest rates, but certainly not something where they're going to make a make or break decision on.
Would that be a accurate description of what you're mentioned?
Yeah, that's exactly what I was thinking. So yeah, I do know the people are saying it's the highest level in four years.
So people are concerned about that, but yeah, it's still below like 5%. Yeah. Yeah.
Right. Historically, it's a good point. Historically, it's still a low number. You know, relative to other times in history and so I think this, a lot of people want to read into this data, and are looking for insights, but it's very challenging when you're at less than 5% to really say much about it, other than, well, for at or near for unemployment.
And obviously the rate of change is super important. So it's ticked up a little bit. And so we got it. We got to keep an eye on that. Next up here, I think, you know inflation. So that's been an ongoing topic. You know lots of people are concerned about higher prices. You know, certainly at the pump they're they're they're going lower and so you see oil has has moved down significantly, you know, almost 15% year over year.
Whereas but other goods, you know, if you're going to the grocery store is always the common example that people use on the news, everybody's paying more, any, any views on, on CPI. And then, you know, how should we think be thinking about inflation?
Well, I think you're correct. The oil is going down.
I think it's going to continue going down. They said today it even went down more because of, the hopes that like things are going to settle down with the Ukraine and Russia war. Right. So so there is that and oil is actually like, quite a large number on the CPI report. So, but I do think that. Yeah, probably, I mean, like food and everything like that will continue to increase. So yeah.
Right. So I think it's, I think it's super challenging, to really, you know, when you're thinking about sort of the overall markets, obviously oil is a primary input on the energy side. And so if you get, you know, energy prices lower that, you know, I think lots of people think okay, well consequently later down the line that that actually turns into lower prices.
You know, for other things. But that that will take some time. Yeah. All right. So let's move on. Maybe electricity prices. You know, I think that is, you know, and we'll come back to that part of this discussion, I think is, is AI, but any views on electricity prices, do you think, you know, lots of people that you hear like, oh, my utility bill is going up.
Do you think AI is a real driver there? Do you think it's just, you know, that, like everything else, input prices have gone up, including electricity. Well, any specific views on this?
I think it's going to continue to increase because of data centers. Like, they use so much electricity. It's insane. So, it it is, driving the price up by quite a bit.
Yeah. I think of course AI is going to continue growing. So. Yeah. So I think yeah. Continue.
The marginal is going to be these data centers as you mentioned or you know, I think that's a big part of, of what's happening now. And so, if you're competing for electricity against them, typically not good, but overall prices seem to be going up.
I want to touch on, the, you know, the Nasdaq and the S&P. But before we get there, let's stick with some economic data. So, lots of people are also super focused on the Treasury yield curve. Could you maybe talk about that? So we heard the numbers that come out today, and it, it sounded like you know, from the data that I got again, this is 12/16, that the curve steepened a little bit.
And any views on the twos and the tens right now?
So, I mean, it's it's interesting because the, like, the two years closely related to, like, the federal policy, fed policy expectations. So, I mean, with the rate cut recently, it did go down. However yeah, the ten year the problem with that is when you're looking in the long run, so you may be thinking oh inflation's going up.
Therefore the ten year has actually gone up a little bit right. Yeah.
And I think as you mentioned here, it's been stubbornly high. And so the ten year like for 18 or for 17 depending on, on where it is right now as we talk about on this episode, but even with the fed cutting rates, it it's managed to keep, you know, the rate up.
And I think, as you mentioned, a lot of that has to do with the deficits. It has to do with the inflation expectations, those things, you know, the deficit remains a concern for many people. The amount of debt that the US has and also those inflation expectations, obviously, those things are interrelated. But it's kept the ten year around that 4.17 4.18 right now.
And it's been very difficult. So and then maybe while we're here, maybe talk a little bit about housing and so, you know, housing is obviously a huge driver on the economy. And something that people think about and certainly, you know, the cheaper that you can get a 30 year mortgage that probably brings more buyers into the market.
And maybe it also increases turnover. How have you been thinking about the housing market from an economic standpoint?
Well, first off, I couldn't help, I think, in the 50 year mortgage that the question. But, yeah, hopefully. Yeah. What are your thoughts on the 50 year mortgage. I mean, hopefully, that's not a thing. I feel like that's a large portion of someone's life to be in debt and just paying an entry like the mortgage.
And that's right. Like, no, that's to give it to their kid, I guess. Yeah, exactly. But, so it, there is like, kind of slowing growth and slight declines due to high mortgage rates. And of course, the Fed is lowering the interest rates. However, the 30 year fixed mortgage is, remaining around 6.2 to 6.3%.
And I think as long as I mean in the future, we'll see what happens. I mean, yeah.
Well, let me ask a question on that. So it said 6.3%. Now, let's say, you know, roughly, as you mentioned, for the 30 year fixed, if that goes down to, let's say five and a half or five, even like something even more dramatic, do you think that that's going to get enough people that have, you know, a 4% mortgage rate and a lot of these we hear a lot in the news that, okay, well, a reason one of the reasons that you don't have a lot of increase in existing inventory for housing
is because if you have a 4% mortgage or a 3.5% mortgage, you have to have a really compelling reason to move. If you're getting a 6.3% mortgage. But if you get down to 5.5, do you think that inspired some people to move to say, well, maybe if I'm at four, I know I'm going to pay more at 5.5, but I'm actually looking to trade up, to a bigger house or actually want to live in a different neighborhood now, you know, do you think that that's actually going to increase inventory?
And if so, what are the consequences for that?
Yeah, I think, there will be more people putting their house on the market and looking to move, whenever it does decrease more. So I think the only issue with that is that there will then be a lot of supply in the housing market at that time. And so for the short run, I think there will be kind of decreasing prices because there, I mean, with a large supply and probably less demand, because personally, I still think prices are too high, right, for me to buy a house, but that's my personal opinion.
Yeah.
No, but I think look, that's a that's an important point that, maybe it's counterintuitive. Rates actually will come down and, and actually we'll have maybe, even if it's not lower prices will have downward pressure on the prices. So maybe they don't, increase. But, you know, even with lower rates, because of that.
And so I think that's a, that's very disinflationary actually. And so that would be a, I think a positive move, for the overall economy if let's say that it is put a downward pressure on those prices, which have been tough. And I think that's you mentioned that, the 50 year mortgage is an example. And one of the things, has been that, okay, well, it's not it's not affordable for first time homebuyers, and for young people to get involved in these things.
And so they're launching these new products. We're not endorsing any of these, just to be super clear, including a 50 year mortgage. But if there are ways to get people involved in the market and get people in the houses, I think that's the idea there. But how that gets executed, I think is very challenging, as you mentioned, that's that's a large portion of, of someone's life.
To have to have that mortgage. All right. Now maybe moving on. Let's go to, let's go to the equity markets. So if you think about the the run that the Nasdaq has had, the run that the S&P has had, and obviously for the Investment Institute we think about this all the time because we're we're you know, all of our portfolios are equity based right now.
How do you think about the markets this year? So we've had certainly you know we started off strong and then you had Liberation Day and then but since then you've had kind of had a big run back, you know, where do you think we are now? And where do you think we're we're going into 2026?
I mean, overall we've had great gains.
The S&P and Nasdaq have grown quite a bit this year. And then also, I mean, just our portfolios, we've gone from like 10.3 million to 11.3 million like over a year ago. Yeah. It's been a great year for us. But yeah. So, we'll see what happens. I think it's going to continue to grow, and keep going up, to be honest.
And I know a lot of people are worried about the AI bubble. Right. Personally, I think a lot of the big drivers like Nvidia and ones like that aren't going to falter. However, I think, yeah, some of the smaller ones might end up, you know, having trouble at one point. So yeah.
Yeah, I think that's an important distinction.
And and as you mentioned, it's something that the Investment Institute. We think about a lot, which is look, Nvidia is our largest position at the moment and remain so it's come under some pressure recently. But I would also agree that, you know, look, there's going to be winners and losers in this race. And I think, you know, Nvidia I think you know, is is a winner not investment advice everybody.
Educational entertainment purposes only. But I, I do think when you start to see how the markets pick these winners and losers. And as these companies perform I shouldn't say the market's going to pick them. You know, they're going to demonstrate their performance on the fundamental side. And the market will follow any, you know, specific parts of AI that are there most exciting for you or the things that you think about the most that will drive the market in 2026?
Well, I think with AI it's interesting because, I mean, I don't know about you, but my job has become more efficient already. And so. Mine too. Yeah, I mean, ChatGPT is great, you know, which models do you use the most? I use ChatGPT still the most, which I know. I've heard Gemini has gotten very good.
I think Gemini three is very good. I think it's a massive upgrade from 2.5. Okay, so yeah, I, I think it's just, you know, kind of they were the first to enter the market. I've been using it and haven't changed. Yeah. Yeah. But yeah. So I think though I mean it will be interesting to watch like employment and things like that because like I said, my job's already become more efficient.
So, I mean, we don't need to hire anyone else, you know what I mean? Because I'm actually being able to do quite a few things at once. 
Well, it's like having an assistant now.
Yeah. It's like all these things I need to do, it's like, well, actually, I can kind of farm out some of these things and maybe a follow up question to that is, you know, you and getting back to some of the economics, and the way that people think about this, is that, okay?
Well, people are talking about productivity gains from AI. And you mentioned it right there that look, maybe, people are not getting rid of people, but they're not maybe hiring at the same rate. And certainly the organization is saying, well, you know, it's because of AI. What's your view? There are these productivity gains, coming through now, it sounds like for the Investment Institute they are great news, for the and agreed.
But you know, for the broad market, do you think people are actually getting these productivity gains? And do you think that they'll accelerate into 2026?
I do, I think, yeah, we'll continue to accelerate for sure. I, I think, you know, AI is just going to get bigger and better. So, yeah. 
And on the productivity side, you know, any specific areas that you're most optimistic, do you think it's, you know, it will continue to be like, redundant tasks or helping, like put together basically, you know, for example, presentations and things like that.
Or do you think this agentic AI is going to be a bigger part of 2026, meaning that, you know, whole, you know, types of activities that you don't even really have to monitor day to day, are going to be a bigger part of that.
I mean, I think kind of all of that. So all of the above.
Yeah, exactly. I hopefully yeah, I mean, it will eventually be to where it can like help you do things before, like without having to input certain things. At all, you know,
 Right. So you can give it a bigger job and say, look, these are the things that we need to get done. Over the next six months, you go out and figure out where you need to get the data from, you go out and figure, you know, how it needs to be put together.
This is the end product that I'm looking for. And and it will do that, without having to check in and ask each time. Or do I need to take this data? Should I take that data? It does its own reasoning. It makes its own decisions. And again, really becomes more like having another team member, that's super efficient.
And I do think Gemini 3.0 is, is, an important upgrade there.
Yeah definitely.
All right so we're closing in on the on the end of the episode here. And so 2026 is obviously right around the corner. Are there any other things? AI is obviously a big one. Are there other parts of the market that you're super excited about, that you think as business people, investor analysts that we should be paying attention to or are there specific things that we've already covered that as, again, as an analyst, business person, investor that you think, the Hinman Economic Report we should be paying attention to,
I mean, personally,
I think still AI okay, it is interesting too. I saw like SpaceX is doing and I like doing an IPO. Yes, things like that. But yeah. And then I also I didn't I am thinking about how like India, is an emerging market actually is probably going to surpass like Germany and Japan as the third largest economy.
Behind of course, the US and China, so. Right. Yeah.
Well, I think it's important to follow all those things. I'll say one thing on, you mentioned SpaceX and mentioned this on a few episodes, but I do think that it's important. And I think one of the reasons Musk at least, was posting on X and talking about going public, for SpaceX, is that putting data centers in space.
And so we've been talking about that on the podcast. I think initially people thought it might have been a little bit crazier than I normally am. But now you're hearing lots of people talking about this and for all the reasons, because, you know, the, you know, the energy demand that we talked about. So if you're competing, you know, for domestic electricity prices, you know, it can be challenging just on the price of it even getting things cited and getting things built.
Well, you have, you know, full time solar. There's a giant fusion reactor in the sky. It's called the sun. If you put a satellite up, you know, you don't have an atmosphere to be concerned with and you have to radiate heat away. Which we talked about on another episode. But, you know, these things are solvable physics problems.
And you put that data center in space and it's, you know, probably likely even accelerates AI even faster and further. And thanks for mentioning that. I do think, I would add on and we can finish out the episode on that I do think paying attention to it SpaceX and data centers in space for 2026 is going to be super important, for everybody to pay attention to.
All right. Well, I want to say thank you to Kathleen Hinman, our chief economist and program associate at the GW Investment Institute. Thank you for providing this first installment of the Hinman Economic Report. We’ll hope you'll be back for the next installment. Thank you very much.
Thank you. Thank you for having me.
And that's a wrap for this episode of Market News with Rodney Lake.
We'll see you back on the next episode. Thank you.