Wealth Insights

Economic snapshot: A changing global landscape

Regions leaders convened with local thought leaders in Knoxville, Tennessee to provide insight into the U.S. and regional economy amid geopolitical disruption and structural economic shifts.

What factors are influencing the economic outlook in 2026?

The main takeaway: The panel emphasized that while the U.S. economy remains resilient, future growth may depend less on traditional labor expansion and more on productivity, technology adoption, and regional adaptability. Also, geopolitical conflict may contribute to inflationary pressure.

How are geopolitical events affecting the 2026 economic outlook?

Participants broadly agreed that the U.S. economy entered 2026 with a strong foundation, even as global risks intensified.

“The U.S. economy has been very resilient, and so has the stock market and corporate profits,” Regions Asset Management Chief Market Strategist Brandon Thurber observed, adding that corporations have “done an amazing job managing through the tumultuous last six years.”

However, the conflict in Iran may create additional pressures on supply chains, energy markets, and labor availability, meaning growth could hinge on energy normalization and inflation expectations.

The conflict has led to a global energy shock with uneven economic consequences. While oil prices have risen sharply, the U.S.’ position as a net energy exporter provides relative insulation.

“The U.S. is in an enviable position as a net energy exporter,” Thurber said. “That advantage, however, does not fully shield the economy from inflationary pressure. Inflation expectations are going to start to rise, and that’s going to continue to put pressure on treasury yields.”

How are demographic shifts and AI affecting the labor market?

Dr. Marianne Wanamaker, dean of the Baker School of Public Policy and Public Affairs at the University of Tennessee, provided insights into the status of the labor market, citing that it is currently constrained by demographics, not demand weakness.

Wanamaker emphasized how population growth is no longer sufficient to sustain economic momentum, and that recent policy shifts on immigration are having an effect on the available labor force. “The reason you don’t see the unemployment rate rising is that there aren’t new people entering the labor market,” Wanamaker explained.

Against this backdrop, AI has emerged as a central productivity lever and policy consideration. “We are trying to figure out, can we maintain 2.5% growth without new workers,” she said. “That means we kind of have all our eggs in the technology basket.”

According to Wanamaker, AI should be framed as a critical productivity tool rather than an imminent labor threat.

What is the outlook for financial markets and investors?

Financial markets in 2026 are being shaped by a combination of strong fundamentals and geopolitical uncertainty. Entering the year, investor positioning was described as cautiously constructive, though high valuations left markets exposed.

Despite equity volatility, Thurber noted that credit markets have remained relatively stable, signaling continued—though selective—risk appetite.

“Investor sentiment has weakened amid market pullbacks, but signs of stabilization are emerging as volatility appears to be peaking and credit markets stay resilient, suggesting risk appetite now demands higher compensation.

“Fixed income strength and tightening credit spreads indicate investors are selectively re-engaging. Tactically, positioning favors U.S. mid-cap equities for their attractive valuations and cyclical exposure, while remaining underweight international developed markets given their vulnerability to higher energy costs, rising inflation, and tighter monetary policy.”

Policy and legislative considerations at the regional level

Federal fiscal dysfunction remains a tangible risk to regional economies. Jason Isbell, head of State Government Affairs and Economic Development at Regions, highlighted the direct economic effects of federal shutdowns, in particular the one affecting the Department of Homeland Security (DHS).

“If they were going to pick one budget, this is not the one that the average American would have said, ‘That’s the one I want you to pick.’” Isbell said.

Dr. Wanamaker reinforced the real impact of these policy issues on local communities, especially those that are still recovering from the effects of Hurricane Helene.

“A lot of the infrastructure damage in their counties, roads, bridges, and schools is reimbursable by the federal government. But those communities must pay it out of pocket first and then run it through DHS. As a result, they are paying interest until they can get reimbursement from FEMA. And it is all at a total standstill while DHS is closed--possibly for months.”

Implications for regional economic strategy

Because comparatively inexpensive labor is no longer an incentive for economic development in East Tennessee, Wanamaker offered that the region’s long-term resilience could depend on education, adaptability, and critical thinking. Incentives alone may prove insufficient.

Regions Market President Rob Stivers noted that Regions is working to help East Tennessee build a stronger and optimistic future.

“We’re not trying to solve a problem—we’re trying to be a problem-solving community,” Stivers concluded.

Key takeaways

• The U.S. economy entered 2026 on relatively strong footing, but future growth may rely more on productivity gains, technology adoption, and regional adaptability than on labor force expansion.
• Geopolitical disruptions—especially energy-related shocks—may increase inflationary pressures, even as the U.S. benefits from its position as a net energy exporter.
• Demographic constraints, not weak demand, may tighten the labor market, making AI and technology critical tools for sustaining long-term economic growth.
• For regions like East Tennessee, long-term resilience may hinge on education, workforce adaptability, and problem-solving capacity rather than low-cost labor or incentives alone.

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.

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