by Louis Navellier
December 30, 2025
Despite my overall optimism for the future, I constantly get questions about what “could” go wrong. The primary disruptions to this economic prosperity will be external events, such as: (1) more Ukraine/Russia fighting, (2) the Venezuela naval blockade, (3) an implosion in the European Union (EU), and (4) crypto-currency.
The longest-running threat is a fear that the Ukrainian War will enter its fifth-year. Ukrainian President Volodymyr Zelenskyy met with President Trump last Sunday to discuss ending the war with Russia. Zelenskyy has said he is open to a troop withdrawal and creating a demilitarized zone in the Donbas. Russia has already captured about 70% of Donbas and has not yet commented on the Zelenskyy proposal.
European aid to Ukraine is starting to dry up, so that is also an incentive for Zelenskyy to accept loss of some land to end the fighting. If the fighting stops, it should improve global economic growth, since it will help to remove uncertainty, especially if sanctions on Russia energy and fertilizer are then removed.
The Wall Street Journal reported that Exxon/Mobil has held talks with Russian energy executives about returning to the Sakhalin oil and gas project, where it took a $4.6-billion write-down after Russia invaded Ukraine in February of 2022. If there is also a regime change in Venezuela, U.S. energy firms are likely to join Chevron (which operates in Venezuela) and help boost crude oil production. If new crude oil supplies hit the market in the upcoming months, that should help keep inflation low in the long-term.
Also, the Wall Street Journal reported that the U.S. naval blockade on Venezuela is harming Cuba, which has an acute electricity shortage and many hungry people. Cuba is dependent on Venezuela’s crude oil to generate electricity, so blackouts are going to be more common. An acute shortage of goods and food are now increasingly common in Cuba, so it will be interesting to see who Cuba will reach out to for help. So far, the U.S. has conducted 29-strikes on drug-running boats as well as a third sanctioned crude oil tanker.
Speaking of crude oil, California will soon have to import up to 20% of its gasoline due to refinery shutdowns. However, the shutdown of the San Pablo Bay Pipeline to transport crude oil from Kern County to Northern California refineries may now cause more refineries to close or import more crude oil on tankers. As a result, gasoline prices in California are expected to remain high, despite the lowest crude oil prices in five-years. Also, California has its own unique fuel blends, so California cannot import gasoline from Canada or Mexico. Right now, South Korea is exporting specialty blended gasoline to California, but as more refineries shut down, Singapore and India may have to export specialty gasoline to California.
Despite California’s energy woes, the bottom line is the U.S. remains an oasis compared to the rest of the world. Investment capital continues to flow into America. The U.S. dollar is expected to appreciate significantly in 2026, since the alternatives are weak, and currency devaluations are possible, especially in China due to a deflation which is destroying purchasing power, while we could see 5% growth in the U.S.
Europe is in revolt. In the EU, the Net Zero (emission) mandates that caused farmers to cull their herds of animals to reduce methane emissions have caused French farmers to spray manure on government buildings in Brussels and Paris. In the meantime, Germany wants the EU to sign a free-trade agreement with Latin America to reduce food prices, and Italy and other EU nations want to defend their struggling farmers from non-Net Zero countries in Latin America that do not have oppressive EU regulations.
The latest farm protests in London, Brussels and Paris are demonstrating how Europe’s ruling elites are systematically destroying their economies. In Britain, the farm protests are largely over estate taxes, as well as oppressive regulations, so Prime Minister Keir Starmer may do a “U-turn” on his higher taxes.
The EU was designed to be a monetary and trade union, but Brussels has turned the EU into an oppressive political machine that meddles in micro-regulations that are hindering economic prosperity. An eventual breakup of the EU remains very possible. In fact, I have predicted that Italy may become our 51st state if President Trump convinces Italy’s Prime Minister Giorgia Meloni to switch to the U.S. dollar and the U.S. assumes Italy’s debt. Meloni remains furious that her proposal to give the gold in the Bank of Italy to Italian citizens is being opposed by the EU, which views their gold as EU monetary reserves. When you put all these revolutions together, I’ll be on the lookout for the EU to implode, perhaps during 2026.
A fourth possible implosion would be in cryptocurrencies, which have had a horrible 2025. Even worse, as I discussed in last week’s Navellier Market Buzz, major cryptocurrency ETFs are having huge pricing problems. With gold now up over 70% in 2025 – from $2,630 to $4,520 – and most cryptocurrencies now in negative territory, the time has come for the crypto-currency crowd to switch to our best, oldest currency – gold.
Why the U.S. GDP is Likely to Reach 5% in 2026
Despite my list of what could go wrong in the outside world in 2026, the combination of explosive GDP growth from trillions in on-shoring, the data-center boom, low crude oil prices, a shrinking trade deficit from strong exports, AI productivity gains and lower interest rates, we are entering “economic nirvana.”
We’ve seen 4% annual growth rates over the last two quarters (2nd and 3rd quarters) combined, on an annual basis. The fourth-quarter’s growth rate may be lower, due to the government shutdown, but that will only make the early 2026 recovery more robust. Furthermore, next year’s explosive GDP growth is not expected to be inflationary, due to several factors: (1) crude oil prices remain near a five-year low, (2) we are importing deflation from China (you can buy a 98-inch TCL TV for only $1,600), and (3) a wave of demographic declines (shrinking households) in most industrial nations. After the Great Depression of the 1930s, all economists are trained to fight deflation as the worst possible threat, so we should see at least 1% more in key interest rates cuts – as influential Fed Governor Christopher Waller is calling for.
One of the keys to improving GDP growth is to shore up residential real estate markets, which remain weak due to high mortgage rates, higher insurance costs as well as a supply glut in many key markets. Residential investment declined at a 5.1% annual pace in the second and third quarters, according to the Commerce Department GDP calculations. Obviously, multiple Fed rate cuts can help shore up home prices, but for now, weak home prices are raising deflation concerns that the Fed needs to address.
One reason why my 5% GDP forecast is so controversial is that we hear about negative sentiment, which is often a byproduct of negative press reports. Last Tuesday, the Conference Board announced its consumer confidence index declined to 89.1 in December, down from a revised 92.9 in November, in the fifth straight monthly decline. The “present situation” component plunged to 116.8 in December, down from 126.5 in November. The best news is the “expectations” component held steady in December at 70.7, but it has now been under 80 for 11 straight months, which is typically the sign of an impending recession. This low sentiment may be due to the federal government shutdown. Consumer confidence must pick up to stimulate more growth, but holiday season sales indicate consumers are still spending.
Navellier & Associates; own Exxon Mobil Corporation (XOM), in some managed accounts. We do not own Chevron Corp (CVX). Louis Navellier and his family own Exxon Mobil Corporation (XOM), via a Navellier managed account, He does not personally own Chevron Corp (CVX).
All content above represents the opinion of Louis Navellier of Navellier & Associates, Inc.
Also In This Issue
A Look Ahead by Louis Navellier
What Could Go Wrong in 2026?
Income Mail by Bryan Perry
A Year-End Look Under the Market’s AI Hood
Growth Mail by Gary Alexander
U.S. GDP is Now Flirting With 5% Growth Rates in 2026
Global Mail by Ivan Martchev
Knocking on the Door of S&P 7000
Sector Spotlight by Jason Bodner
Santa Claus Arrives – Better Late Than Never
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