June 19, 2026
1. Then vs. Now: How the Economy Has Changed Since 2020
The U.S. economy has made a strong recovery since the pandemic, Dr. Rossell said. Unemployment has fallen from 13% in 2020 to 4.3% today, and GDP has rebounded to more than $24 trillion. Inflation, however, remains elevated—rising from near zero, peaking around 10% in 2022, and settling at 4.2%, still above the U.S. Federal Reserve’s 2% target. Interest rates have risen alongside efforts to control inflation, with the federal funds rate at 3.5%–3.75%. Housing activity in the US has stabilized near 4
million existing home sales, constrained by higher mortgage rates and limited inventory.
In The Bahamas, these global shifts are reflected in rising costs of goods, materials, and financing, all of which influence development and pricing. While borrowing conditions remain tight, demand has stayed resilient, supported by international buyers and lifestyle-driven investment.
2. The Fed Navigates a Strong but Uneven Economy
At his first meeting, Federal Reserve Chairman Kevin Warsh held rates steady as inflation remains near 4%, partly driven by gas prices. This puts the Fed in a difficult position, Dr. Rossell said. High interest rates are stifling housing market activity and other rate-sensitive sectors like agriculture and manufacturing, while the broader economy remains strong, with the stock market at record highs and growth driven by AI.
As a result, the economy has effectively split into two sectors: an AI-driven segment that continues to boom, and another more exposed to borrowing costs, creating a complex policy environment.
In The Bahamas, a similar divide can be seen, where sectors tied to tourism and luxury real estate remain strong, while cost-sensitive areas such as construction and local housing feel more pressure from higher expenses.
3. Fed Policy Balances Sticky Inflation and Market Stability
Inflation has declined but remains above the Fed’s 2% target. While that target is somewhat arbitrary, Dr. Rossell said changing it now would risk damaging the Fed’s credibility, an essential factor in keeping inflation expectations under control. To reduce inflation, the Fed will likely maintain tighter policy, including higher rates if needed.
At the same time, the Fed’s large bond holdings add complexity. Past attempts to reduce them have led to market volatility and spikes in interest rates. For now, maintaining holdings supports stability, but reducing them will require a gradual approach to avoid pushing long-term rates higher.
In The Bahamas, local market activity continues to be driven more by supply constraints, lifestyle appeal, and long-term investment outlook.
4. Energy Shocks Drive Diverging Global Economic Outcomes
Dr. Rossell said most major economies have followed a similar trajectory: a pandemic downturn followed by inflation from supply disruptions. More recently, global conflicts—including Ukraine and the Middle East—have created energy shocks affecting countries differently. Europe and China, which rely heavily on imported energy, have experienced higher costs and weaker growth, while the U.S., now a net energy exporter, has been less directly impacted. China is also managing a housing downturn that has largely remained contained within its own economy. These differences have driven varying policy responses, with Europe keeping lower interest rates than the U.S., contributing to a stronger U.S. dollar and weaker foreign currencies.
In The Bahamas, energy costs remain a key factor, directly impacting electricity, transportation, and construction expenses. As a result, fluctuations in global oil prices can influence everything from development budgets to the overall cost of living.
5. AI’s Next Phase: High Expectations, Uncertain Timing
Financial markets reflect strong optimism about AI. While adoption and productivity gains are real, much of the anticipated value may already be priced in, particularly as private equity captures early growth before companies go public, Dr. Rossell said.
The key issue is timing, Dr. Rossell said. If AI’s benefits take longer to materialize than markets expect, a correction could occur, similar to the early 2000s internet cycle. Despite this, AI remains transformative, likely dividing those who effectively use it from those who don’t. Dr. Rossell noted a critical window to shape AI regulation to maximize benefits while minimizing risks.
In The Bahamas, while AI adoption is still emerging, the real estate market remains highly relationship-driven. Local expertise, trust, and personalized service continue to play a central role, reinforcing the value of human insight in an increasingly digital world.
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