The barrage of news continues in the first quarter of 2026. From fast-moving geopolitical events to a volatile tariff situation, there is no shortage of data for investors to digest. As we look ahead, here is a recap of the expected outlook for the remainder of the year:
Inflation: The immediate short-term impact of the tariffs has not fully materialized. While inflation has remained low, the war with Iran can put pressure on oil prices, interest rates and inflation. We are uncertain how long the war will last and if the oil price impact will be short-lived. Some companies may also be bracing for higher prices due to labor and health insurance cost increases. Electronics, appliances, durable goods, blue jeans, housewares, and industrial products may see increases as well.
Tariffs: The result of the increased tariffs was not as severe as originally forecast, and markets and companies have adapted well to the environment. The average tariff rate is about 14.1% as of late September. The Supreme Court has finally ruled on the legality of the tariffs under the Emergency Economic Powers Act of 1977 and found that Trump could not use the act to invoke tariffs on imports unilaterally. The administration will pursue other alternatives and relief to businesses may be implemented.
Artificial Intelligence: AI growth continues and should add momentum to growth. We may see a broadening of productivity impact on a wider group of companies. The longer-term outlook is still uncertain.
Employment: So far, job weakness has not materialized, which many believed could prompt the Fed to lower rates. The healthcare sector has shown strong job growth. The Fed has lowered rates by 75 basis points over the last three months, and additional cuts will likely be dependent upon upcoming job market and inflation data. Another pause may be indicated.
Profitability and GDP: Growth and market estimates across economists are very favorable for the year, but be prepared for volatility to increase. Markets typically pick up volatility in mid-term election cycles. The tariff situation will also contribute its share of volatility until uncertainty is reduced. Diversification will be a key element.
Foreign Markets: International markets are also positioned for continued growth. Overseas companies have shown strong earnings and momentum. The impact of the Iranian war is uncertain.
While most indications are favorable, we all know as investors that uncertainty can create volatility in the short run. The war with Iran only contributes to this uncertainty and volatility. Stay focused on your goals and objectives rather than daily market movements. We are entering the 4th year of this bull market and are keeping our portfolios fully diversified and positioned for the longer term.
Client Resources & Planning: There is an article in this newsletter, What Should I Do to Prepare Financially When My Spouse Dies or Becomes Incapacitated?, to assist clients in planning for the disability or death of a spouse or partner. The article offers some simple steps that can help you prepare financially when in potentially emotional and stressful situations.
Be sure to review our article 2025 Tax Filing Meets 2026 Planning: What OBBBA Means for You Now. You may find information that could impact how you handle your federal and state withholding in 2026. Please consult with your accountant on your withholding and expected changes that would affect your income tax situation this year. Your 1099s should have been received by now; let us know if you need any assistance.
