By Louis Navellier

Commentary

My 5% GDP growth prediction raised some eyebrows during a recent appearance on Fox Business News. However, my forecast gained more credibility after the Commerce Department announced last Tuesday that third-quarter GDP rose to a 4.3% annual pace, which was the strongest pace in two years and substantially higher than the economists’ consensus estimate of just 3%.

The primary reason why the third-quarter GDP was revised higher was due to favorable trade data as well as consumer spending. Specifically, net exports added 1.6% to the third-quarter GDP calculation, due to strong export growth and slowing imports. Also notable is the fact that consumer spending grew at a 3.5% annual pace in the third quarter, while business investment improved at a 2.8% pace. While fourth-quarter GDP may be lower, 2026 is looking stronger than ever.

Here are the most important developments recently and what they mean:

– President Trump welcomed Ukrainian President Volodymyr Zelenskyy to his Mar-a-Lago residence in Palm Beach, Florida, on Sunday to discuss a plan to end the war with Russia. The big development is that the U.S. offered up to a 15-year security guarantee at the end of the war. President Trump also said both Zelenskyy and Putin are willing to end the war. Obviously, if Ukraine and Russia agree to a ceasefire, the stock market should have a relief rally, since some uncertainty is being removed.

– Russia has extended its ban on gasoline exports through February to conserve fuel for domestic supplies. This ban also includes diesel, marine fuel, and other refined products that have been disrupted by the fighting with Ukraine. If there is an incentive for Russia to end the fighting with Ukraine, its domestic energy infrastructure is likely a big one. In the end, both sides lose in wars, so hopefully that is now becoming increasingly obvious to both Russia and Ukraine.

– Europe remains furious that it has been largely excluded from the peace negotiations, even though both Trump and Zelenskyy called European leaders after their meeting at Mar-a-Lago. Further adding to tensions, U.S. Secretary of State Marco Rubio banned five European Union (EU) officials from traveling to the U.S. for their censorship efforts. As an example, Thierry Breton, the former EU commissioner for digital policy, has been banned. Breton was one of the architects of the notorious Digital Service Act that has infuriated many technology companies. Rubio and the Trump Administration are striving to stop censorship, especially as it pertains to U.S. technology companies.

– There is no doubt that the Trump Administration is striving to separate somewhat from the EU, since the shared Western values that used to make the U.S. and Europe allies have been fractured as many European countries, including Britain, promote censorship. The fact that many large European cities are now dominated by immigrants who do not share “Western values” is also being used by the Trump Administration to dismiss the EU policies that are changing many major European cities.

– The Trump Administration has instead decided to pivot and exert its influence in Latin America, where it has a Naval blockade on Venezuela. If the U.S. can oust Venezuelan President Maduro, it may ensure low crude oil prices for decades if major U.S. energy companies join Chevron and help significantly boost Venezuelan crude oil production. President Trump recently announced that the U.S. military knocked out a “big facility” in Venezuela, which is apparently the first attack on land in connection with the ongoing drug war.

– The other big international development is that there are large protests in Iran over its deteriorating currency and oppression of its citizens. The word “azadi”, which is the Farsi word for freedom, is being chanted during demonstrations. Iran’s rial has dropped 60% in value since June, when it launched missiles into Israel. Tehran is also struggling with a drought that is so severe that people may have to move as water taps run dry. These large protests may result in a leadership change, which would be a welcome development, since Iran’s president recently said that the country was at war with Europe, Israel, and the U.S., which is not the sentiment of many Iranian citizens.

– Back in the U.S., the National Association of Homebuilders announced that existing home sales rose 3.3% in November, which is providing hope that the weakness in the housing market may be finding firmer footing. Fixed mortgage rates have dropped to 6.3% to 6.4%, which may be stimulating home sales. If housing can find firmer footing, it will definitely help shore up GDP growth.

– The Federal Open Market Committee (FOMC) minutes from its December meeting were revealed on Tuesday and signaled that at least one additional key interest rate cut is anticipated if inflation cools in the upcoming months. Although there are divisions on the FOMC regarding Fed policy, a new Fed Chairman will be nominated, and a push for more key interest rate cuts is anticipated. Furthermore, deflation is a real possibility in the upcoming months, due to lower shelter costs (owners’ equivalent rent), crude oil prices, and the fact that the U.S. is importing deflation from China and other troubled economies. In the event that deflation materializes, the FOMC will have to act quickly and slash key interest rates in the next several months.

– The Labor Department reported that new weekly jobless claims declined 199,000 in the latest week. This is the third straight weekly decline in weekly jobless claims. Additionally, weekly jobless claims have declined for seven of the past eight weeks. Continuing unemployment claims declined by 47,000 to 1.87 million in the latest week. Clearly, unemployment concerns are likely fading, so Fed policy will likely be based more on inflation/deflation moving forward.

– Tesla (TSLA) provided guidance that its fourth quarter sales will decelerate in the fourth quarter to approximately 422,850 vehicles, down from 497,099 in the third quarter and below the analyst consensus estimate of 440,907. Tesla’s stock has been relatively strong in anticipation of its Robotaxi business expanding in more American cities. The safety monitors (i.e., a human) in the Robotaxis are expected to be removed soon, so fully autonomous driving is soon expected to become a reality. Waymo currently has more robotaxis running around, and human safety monitors were removed some time ago. Although Waymo seems to be ahead of Tesla at the present time, many investors expect Elon Musk to launch more Robotaxis in many more American cities. I expect that 2026 will be a pivotal year for Tesla.

Overall, the stock market is in the midst of an impressive year-end rally, one in which quality stocks with positive analyst revisions are under persistent institutional accumulation. This sets the stage for an impressive start to the new year, beginning with another round of record earnings and then a surge to 5% growth rates.

*Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.