Commercial Insights
Mid-Q1 economic outlook: What may lie ahead in 2026

Article 12 min read Published March 11, 2026

Regions panelists offered insight into what may be on the horizon for businesses and investors at a February economic summit.

In the aftermath of a turbulent 2025, questions abound when it comes to the economic road ahead for 2026 and beyond.

With so many variables affecting the future decisions of business owners, clients, and other key stakeholders, Regions Wealth Management and Commercial Banking leaders were on hand at the 2026 Nashville Economic Summit to provide insights to help navigate what’s next.

Regions Chief Economist Richard Moody, Regions Chief Investment Officer Alan McKnight and Head of Government Affairs and Economic Development Elizabeth Taylor shared commentary around what to expect in a highly unpredictable environment.

Expectations for economic growth

Uncertainty in 2025 gave pause to many businesses mapping out strategy for future growth. According to Moody, however, those clouds began to lift toward the end of the year.

“The economy had a lot thrown at it but proved to be very resilient. By the end of the year, the economy had clearly regained momentum, which has carried into 2026.”

“Some of the expectations for real GDP growth, from 2% in 2025 to closer to 3% in 2026, will stem from fiscal policy and last year’s fiscal stimulus bill. With improved corporate cash flows as a result of the tax bill, capital spending is likely to be a driver of growth, while the housing market may be a soft spot in the economy.”

Policy and legislative considerations

According to Moody, 2025 legislation is having a tangible impact in 2026.

“The regulatory climate is now much more conducive to deal making activity in terms of mergers and acquisitions. We expect a meaningful boost from fiscal stimulus this year.”

Even while the imposition of tariffs led to fluctuations in volume, Moody pointed out how the overall yearly trade numbers remained close to those of previous years.

“We actually saw last year that trade volumes didn't really move all that much. They were very erratic over the course of the year but, on the whole, total numbers didn't look that different. Hopefully, we'll have a more stable trade policy this year.”

Taylor discussed how tensions remain high in the Washington political climate, particularly concerning tariffs, the Department of Homeland Security and other high stakes issues for both political parties. However, there is potential for some bipartisan support and cooperation around the issue of housing affordability.

“There are two similar bills working their way through Congress to address housing in some way. They're both bipartisan and aim to increase housing production by lowering some of the standards for manufactured housing and by encouraging states and localities to develop better zoning laws in order to construct housing more quickly and at a lower cost.”

The labor market

Moody highlighted concerns around the state of the labor market, citing that job growth slowed in 2025, adding only 81,000 jobs that year. Some of the slower growth may have to do with demand-side factors, including uncertainty around trade policy. But supply-side factors could also have played a role, including slow overall growth in the labor force due to the constrained immigration environment. Moody cited that the foreign-born labor force at the end of 2025 consisted of about 900,000 fewer people compared with the start of that year.

“The dramatic decline in the foreign-born labor force hit industry groups such as agriculture, transportation services, leisure and hospitality services, construction, and even parts of healthcare. There just weren't as many workers, and this has contributed to the low 4.3% unemployment rate.”

The equity markets

When asked what the drivers of return are likely to be in 2026, McKnight cited continued growth.

“The last three years have been banner years for the stock market, with almost every part of the stock market performing well. For that to continue, we need earnings to continue to grow. And as it relates to the economic outlook from the perspective of GDP, broader capex and policy perspective, we think there are solid fundamental underpinnings that will benefit U.S. investors.”

McKnight also cited the need for cautious optimism. “We don’t think we will continue to see the same stellar returns that we've seen of late, or that anyone should envision the same double digit returns that we've seen in recent years. There may be some noise and volatility, but from a fundamental perspective we think the equity markets are in pretty good shape.”

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The bond markets

From the point of view of fixed income, McKnight also offered some thoughts on what investors should expect in 2026 and if there were areas for caution.

“Bonds are such an important part of any portfolio, and it’s important to look at balance in the portfolio. Last year, high yield bonds were up, and investment grade bonds were up. We think it will be a little more challenging this year. The bond market appears to be in good shape, but we believe its unlikely rates will come down dramatically, as we don’t envision the Fed feeling compelled to cut rates significantly. In that environment, yield curve rates will likely stay relatively close to where they are.”

McKnight added, “As an investor, it doesn't really pay right now to take on a lot of risk, whether that be in credit or in taking on long duration bonds. In our view, you may be better served to stay with shorter duration and higher quality. This year, if you can clip your coupon in the 4% to 5% range, particularly in light of where inflation is, we think that's pretty healthy. And you get the added benefit, particularly if you are in quality bonds, of having balance in a portfolio, ensuring you don't experience all the volatility of the other asset classes.”

AI implications

While predictions about AI are wide-ranging, Moody and McKnight offered some broad viewpoints to help guide thinking on the subject, including from a demographic perspective.

According to McKnight, “If you look at 1974, 5.5% of the world's population was older than 65. Fast forward to 2074, this could be over 22% of the world's population. So, we're going to need to find a way to supplement the workforce in terms of augmenting it, which is how we talk about AI.”

Moody concurred, stating, “Our demographic trends are what are giving us this dramatic slowdown in labor force growth, and if you have such anemic growth in labor supply, you either have to find ways to make labor more productive or you live in a world with very low growth and very high inflation.”

Overall, according to the panelists, the future of AI remains somewhat unclear, although investment in it continues. “What we hear from corporate America is that it’s very much in the test phase. We’re probably overinvesting, and certainly the results are not clear right now. It won’t be known for a number of years whether, and to what degree AI assets may be productive.”

The outlook for businesses

Even as questions remain, there are also opportunities ahead for businesses in 2026, according to Regions Head of Commercial Banking Nikki Stephenson. “If I were to share one economic principle for the year ahead, it’s this: discipline enables opportunity. If businesses stay disciplined with liquidity, cost structure and prioritization of investment, they put themselves in a position to move quickly when conditions improve – and early signs indicate improvement may be on the horizon. Discipline today is what creates room for opportunity tomorrow.”

More investor resources and commentary

Access the most recent Regions Weekly Market Update call for Regions Wealth Management. You can find additional economic commentary and resources on Regions.com.

The next Weekly Market Update will be presented live on [Need Date/Time here] as part of an ongoing weekly series hosted by Regions to share our latest insights on the markets. Participants may send questions in advance of the call to RegionsAssetManagement@regions.com so the panelists can address these questions during the live call. Participants are encouraged to dial in or join via WebEx 10-15 minutes in advance of the start time.

In addition, McKnight regularly speaks with national media to share his views on market activity, the economic impact and Regions’ outlook moving forward. McKnight’s next interview can be heard on:

Sirius XM's The Business Briefing April 13 at 9:45/8:45 a.m. CT