2026 Economic and Business Outlook

 

2026 Economic and Business Outlook

CEO Perspective

As 2025 comes to a close and we look ahead to 2026, the economic picture presents a mix of caution and opportunity.

Labor Markets and Growth

One of the more notable developments has been the slowdown in job growth. Hiring momentum has clearly softened, with recent data—released later than usual due to government shutdowns—showing job losses in October and November. Manufacturing employment continues to trend downward, and temporary employment, a key leading indicator, has declined in 41 of the past 44 months.

While headline employment figures may overstate actual job creation, according to warnings from the Federal Reserve, the broader trend suggests reduced spending and a more cautious business environment. Much will depend on how financial markets perform as we move through 2026.

That said, small business optimism has been rising, even as concerns about inflation persist. Core inflation remains above the Fed’s 2% target, and cost pressures continue to challenge smaller companies. Despite these headwinds, 2025 ultimately proved to be a reasonably good year for both the U.S. and global economies, with positive developments offsetting the negatives.

Global Economy and Trade

There has been significant misinformation surrounding China’s economy. In my view, China is not in serious trouble. Its service sector continues to expand, and exports have remained resilient.

On tariffs, there are valid arguments on both sides. From Epcon’s firsthand experience, tariffs have largely been passed through to buyers, resulting in higher import prices from China, while Chinese suppliers themselves have absorbed little to none of the cost. The on-again, off-again approach to tariffs created significant uncertainty, leading many companies to delay investment decisions. CEO surveys consistently showed “uncertainty” as the top concern.

Overall, tariffs appear to have weighed on the global economy—particularly exporters—more through negative sentiment than direct economic damage. While they did not significantly harm the U.S. domestic economy, the trade relationship between the U.S. and China remains an uneasy stalemate that may begin to resolve or evolve in 2026. In the meantime, countries such as Vietnam, India, Thailand, and other parts of Asia may continue gaining U.S. market share at China’s expense.

Inflation, Energy, and Commodities

Inflation is expected to gradually decline in 2026 and 2027 from current levels near 3%. Energy prices are also likely to ease. Lower oil demand, combined with additional supply—potentially including increased output from Venezuela—could keep oil prices in the $50–$60 per barrel range. Gasoline prices may decline as well, which would benefit the broader economy, though not necessarily the oil and gas sector.

Technology and AI

2025 marked the year artificial intelligence truly went mainstream, with rapid adoption across nearly every industry. AI is likely to remain a dominant force over the next several years, reshaping how businesses operate. Automation will play a growing role and may reduce some entry-level positions, but the overall benefits are expected to outweigh the drawbacks. Over time, AI will become deeply embedded in both hardware and software across organizations.

Financial Markets

Equity markets have performed well, and current momentum suggests continued strength. While market outcomes are never guaranteed, it is possible that major indices could reach new highs in the coming years, reflecting optimism around productivity, technology adoption, and easing inflation. My predictions is that the Dow Jones Industrial Average could approach 55,000, the NASDAQ could exceed 25,000 and S&P 500 could reach 7,500.

Geopolitics and Policy

On the geopolitical front, several significant developments bear watching. The war between Russia and Ukraine could move toward some form of resolution, potentially reshaping regional relationships. Unrest in Iran may intensify, with the possibility—though not certainty—of political change. Taiwan’s long-term status remains a critical issue, and U.S. influence in regions such as Venezuela could increase.

In the U.S., Federal Reserve Chair Jerome Powell’s term ends in May, and a new Chair will be appointed. Interest rates are expected to remain relatively favorable for businesses and the broader economy, particularly for real estate, which could see improved performance in 2026 and 2027, barring unexpected disruptions.

Politically, 2026 is a midterm election year, and races are likely to be closely contested. Control of Congress may shift, though outcomes remain uncertain. Looking further ahead, there are currently no clear front-runners for the 2028 presidential election in either party.

Looking Ahead at Epcon

At Epcon, we continue to see a robust project pipeline, with particularly strong demand from the solar and battery industries. As we enter our 49th year of business, we remain optimistic and excited about the year ahead, supported by long-term customer relationships, technical expertise, and continued investment across emerging energy markets. Thank you for your continued support and interest in Epcon.