2026 Economic & Market Outlook: What We're Watching in the Year Ahead
As we begin 2026, many investors are reflecting on a year that looked very different than what many expected. At the start of 2025, concerns surrounding tariffs, inflation, interest rates, and economic growth dominated financial headlines. While those issues certainly influenced markets throughout the year, the U.S. economy proved more resilient than many anticipated, corporate earnings remained strong, and financial markets finished the year near record highs.
Looking Back Before Looking Forward
One of the most important lessons from 2025 was the market's ability to adapt to uncertainty.
The introduction of tariffs early in the year created a period of heightened volatility and raised concerns about inflation, corporate profitability, and economic growth. While markets initially reacted negatively, much of that uncertainty gradually subsided as businesses adjusted and economic conditions remained relatively stable.
Corporate earnings continued to grow, economic activity remained positive, and the economy ultimately demonstrated a level of resilience that surprised many observers.
Inflation and Interest Rates Remain Central Themes
Although inflation has moderated significantly compared to the elevated levels experienced in previous years, it remains one of the most important variables influencing both the economy and financial markets.
During 2025, the Federal Reserve responded to improving inflation trends by lowering interest rates several times. Those decisions helped reduce borrowing costs and support economic activity while continuing the effort to bring inflation closer to long-term targets.
As we move into 2026, the relationship between inflation, interest rates, and economic growth remains one of the most important areas investors should be watching.
The Labor Market and Economic Growth
Employment remains one of the strongest indicators of economic health.
While unemployment has gradually increased from historically low levels, labor market conditions remain relatively healthy by long-term standards. Combined with moderate inflation and ongoing consumer spending, these conditions have helped support continued economic expansion.
At this point, our view remains that the economy continues to move forward at a measured pace rather than showing signs of a significant contraction.
Why We Continue to Describe the Economy as a "Plow Horse"
Over the past year, we've often described the economy as a plow horse. Not because it is growing rapidly, but because it continues moving steadily forward despite various challenges. Economic growth has been neither exceptionally strong nor particularly weak. Instead, it has remained durable, consistent, and capable of supporting business activity and corporate earnings.
While the headlines often focus on extremes, the reality has been a much steadier economic environment than many predicted.
Staying Focused on What Matters
As always, there are factors that could change the outlook. Labor market conditions, inflation trends, geopolitical developments, and Federal Reserve policy decisions will continue to influence both economic activity and investor sentiment.
However, one of the recurring lessons from recent years is that markets often navigate uncertainty more effectively than headlines suggest.
Rather than focusing on short-term predictions, we continue to believe that maintaining a disciplined financial plan, staying diversified, and keeping a long-term perspective remain among the most effective ways to navigate changing market environments.
Watch the video to hear our latest thoughts on inflation, interest rates, economic growth, Federal Reserve policy, and the key themes we believe investors should be watching throughout 2026.
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