For the last five years I have sent some version of an economic outlook to my CEOs alongside their strategic planning documents. This year I went deeper, which took me back to why I started doing this at all: to create unfair advantages for the people I work with.
Here is the thought I could not shake while I was writing it.
This business cycle will favor the readers, the thinkers, and the discerners who act. Leaders looking for a hack or a TL;DR are going to make poor decisions. The average numbers will not work. You have to do the work to figure out what is actually happening in your own market.
Showing up, working hard, serving a market and projecting growth off last year is not going to be good enough in 2026. The world is more complex than it has ever been and it is diverging faster than it ever has.
A note on how this was built
I worked with Perplexity, ChatGPT and Gemini to pull economic data and trends, domestic and international, and then ran all of it against my own context and what I am seeing first-hand inside companies. Yes, I used AI. You should too. When I built the CEO Summit decks in past years, this level of research took me a month. This took days.
Is AI imperfect? Completely. That imperfection is exactly why I use what I call the 20-60-20 mindset:
- 20 percent you. Your context, your understanding, your curiosity. This is what sets the question.
- 60 percent the model. Vast knowledge, assembled into connections and insights you could never reasonably pull together yourself.
- 20 percent you again. Editing and synthesizing it into a strategy someone can actually act on.
- 90-day delinquency near 5 percent, close to 14-year highs.
- Subprime 60-day delinquency at a record 6.65 percent, with subprime defaults running near 10 percent.
- Roughly 3 million repossessions projected for 2025, the highest since the 2008 crisis.
- The mechanics behind it: average new vehicle price crossed $50,000, average new car loan near 9 percent and subprime at 18 to 20 percent, about a quarter of trade-ins carrying more than $10,000 of negative equity, and loan terms stretching to seven and eight years.
- Audit your top 20 customers by their end-market, not yours. Sector averages will lie to you. If a customer sells primarily into the subprime consumer or commercial office, downgrade them internally, tighten terms, and watch the aging report like it matters. This is a two-hour exercise that will change your year.
- Get your margin from internal deflation, not price. In a disinflationary goods environment you cannot simply pass costs through. Margin has to come from permanently lowering your cost to serve, which in 2026 means automation and AI applied to real workflows rather than pilots.
- Raise your hurdle rate and hoard cash. At a 6 to 7 percent cost of capital, vanity projects die. The maturity wall is going to force good companies with bad balance sheets to sell assets. Be the buyer, not the seller.
- Buy optionality in the supply chain. Diversified sourcing costs you a few points of efficiency and insulates you from the next tariff announcement or blocked canal. That trade is worth making now.
- Raise talent density while the window is open. The market is loosening for general roles and still tight for high-skill technical ones. Tech layoffs have put real talent in play. This is the cheapest year in a while to upgrade a team, and most CEOs will be too distracted to do it.
Skip either bookend and you get a competent-sounding document that means nothing. I am seeing the same pattern first-hand in the B2B Revenue Machine work, where the most common sentence I hear is some version of “this is causing me to rethink my whole approach.”
The headline: a soft landing that is not landing evenly
The aggregate picture for 2026 is stability. The IMF has global growth stabilizing near 3.1 percent, a hair above 2025. Recession probability for the US has come down hard from where it sat in early 2025, from north of 60 percent to somewhere in the high twenties, though J.P. Morgan is still carrying a 40 percent probability and calling the downside considerable. On paper, this is fine.
The problem is that the headline is an average, and the averages are hiding the story. The era of synchronized global growth is over. What replaced it is a great separation, where aggregate stability sits on top of deep structural fractures between regions, industries, and income cohorts. Two businesses in the same city, the same size, in adjacent industries, will have completely different years.
Worth naming honestly: the forecasters do not agree on the US number. The OECD has US growth decelerating to 1.5 percent in 2026. The Blue Chip consensus says 1.8 percent, with a range from 0.9 to 2.5. Morgan Stanley has a weak first half and a reacceleration in the second. That spread, roughly 1.5 to 2.2 percent, is itself the message. Nobody has conviction, which means you should not build a plan that requires them to be right.
| Metric | United States | Eurozone | China | Global |
|---|---|---|---|---|
| GDP growth, 2026 | 1.5% to 2.2% | ~1.3% | ~4.4% | ~3.1% |
| Inflation | Above target, sticky | Disinflationary | Deflation risk | Moderating |
| Monetary stance | Restrictive, slow cuts | Gradual easing | Accommodative | Divergent |
| Primary risk | Credit and the maturity wall | Competitiveness and energy | Property sector and tariffs | Geopolitics |
The K, drawn properly
If you take one thing out of this report, take this one. The economy is shaped like a K, and where your customer’s customer sits on that K is the single biggest determinant of your 2026 revenue risk. It is a better predictor than your industry, your region, or your sales effort.
The upper arm is asset owners. Higher-income households and older cohorts have ridden the wealth effect of rising home values and equity markets. They are insulated from high rates because they are net savers earning yield on cash, or they locked in cheap fixed mortgages years ago. They are still spending on travel, luxury, wealth management and high-end healthcare.
The lower arm is everyone whose income is their only asset. Younger and lower-income households have burned through pandemic-era savings, absorbed years of compounding costs on food, rent and insurance, and taken student loan payments back onto the books. They are trading down and borrowing to hold their standard of living in place.
That divide transmits straight up the B2B supply chain, which is why this is your problem even if you never sell to a consumer.
| Zone | Who is in it | What 2026 looks like |
|---|---|---|
| Upper K | Suppliers to the experience economy, luxury retail, advanced technology, healthcare, data center construction, grid and power infrastructure | Backlog growth. Clients willing to fund personalization and capacity. |
| Lower K | Suppliers to mass-market retail, subprime auto finance, entry-level housing, legacy commercial office, Tier 2/3 combustion-engine auto parts | Contracting addressable market, price war, insolvency risk in the customer base. |
Two examples that make it concrete. A packaging manufacturer serving generic consumer goods is about to get squeezed hard, because its retail customers are fighting a price war over cash-strapped shoppers. A construction firm doing data centers and healthcare facilities has a backlog problem in the good direction, at the same moment office construction is effectively dead. Same economy. Same year.
The consumer credit numbers that got my attention
This is the section I would read twice. Aggregate household finances look survivable. The debt service ratio is around 11.25 percent of disposable income, still below the long-run average near 12.5 percent. Total household debt is at a record $18.59 trillion, but the servicing burden is not, which is the argument the optimists make and it is a fair one.
Then you disaggregate, and the average stops being useful. In the lowest-income ZIP codes, credit card delinquency has reached roughly 20 percent, against 8 percent in the highest-income ones. That is not one economy with a wide distribution. That is two economies.
Auto is the flashing red light
VantageScore’s chief economist called this the most fragile state of consumer credit health since the last financial crisis. That is a strong sentence from a careful source.
Student loans created a new class of subprime borrower
This one is underrated and it is going to keep echoing through 2026. When delinquency reporting resumed in early 2025, roughly 31 percent of federal borrowers with payments due went 90-plus days past due, the highest rate ever recorded. Over 2.2 million borrowers watched their credit scores fall by more than 100 points.
Think about what that does downstream. Millions of people who were prime borrowers in 2024 are subprime borrowers now, which raises their cost on every auto loan, credit card and mortgage they touch. That is a permanent tax on the spending power of exactly the cohort already on the lower arm of the K.
Housing is bending, not breaking
Foreclosure filings are up around 20 percent year over year, with Florida and South Carolina worst, and Tampa the worst major metro. Insurance premiums and HOA costs are doing as much of that damage as mortgage rates. But the level is still below pre-pandemic norms, and roughly $36 trillion of homeowner equity means most distressed owners can sell rather than default. Watch the trend, not the panic.
On rentals, the supply wave that flooded the Sun Belt is receding. Completions in 2026 could be down 30 to 50 percent from 2025, possibly the lowest since 2013. Rent growth forecasts run from 2.6 to 4.8 percent, with some estimates as high as 7. If you employ hourly workers, that is a wage conversation coming at you in the back half of the year.
The risk that is financial, not operational
Here is the thing most operators are not planning for, because it does not show up in their own P&L until it shows up in someone else’s.
Roughly $3 trillion of rated corporate debt matures between 2026 and 2028. Most of it was issued in the zero-rate era and has to be refinanced at 5 to 7 percent or worse. A company that was marginally profitable at 3 percent debt is insolvent at 8. Commercial Chapter 11 filings were already up 78 percent year over year in mid-2025, and the extend-and-pretend strategies lenders have been running are out of road.
Meanwhile private credit, now well over $1.5 trillion and the main liquidity source for mid-market companies, has never been tested through a long high-rate cycle. Cracks are showing. UBS projects private credit defaults could climb as much as 3 percentage points in 2026, faster than leveraged loans or high yield.
The operator translation: your accounts receivable is a credit portfolio and you are not managing it like one. If your customers are private-equity-owned or leveraged, some of them are going to cut capital spending to service debt, and a few are going to stop paying you. Both of those happen before any of it makes the news.
Tariffs, chokepoints, and the end of pure efficiency
Geopolitics is not a risk factor sitting outside your model anymore. It is a line in your cost structure.
Effective tariff rates approaching 20 percent on a broad basket of imports work as a tax on consumption and a brake on efficiency. A lot of companies front-loaded imports through 2025 to get ahead of them, which left inventories bloated and is going to show up as a slowdown in new orders early in 2026. China Plus One has become China Plus Two or Three, because trans-shipping through Vietnam or Mexico is now getting scrutinized under new rules of origin. Foreign Entity of Concern rules make it harder to source critical minerals or battery components from Chinese-linked suppliers without losing US tax credit eligibility.
Add the maritime chokepoints. Red Sea rerouting around the Cape adds 10 to 14 days and fuel surcharges, and Panama Canal capacity is still drought-constrained. The response is more safety stock, which ties up working capital at precisely the moment capital is most expensive.
And underneath all of it, China is exporting deflation. Facing weak domestic demand, Chinese manufacturers are dumping excess capacity at prices that have producer prices on consumer durables falling at the fastest rate since 2009. If you import, that is a gift. If you manufacture, that is a knife fight on price in steel, solar and EVs, which is what keeps triggering the next tariff wall.
The strategic shift is simple to say and hard to do: stop optimizing your supply chain for the last cent of efficiency and start optimizing it for optionality.
Your customer’s customer, sector by sector
Automotive: the transition trap
EV adoption slowed on affordability and charging, which left OEMs and suppliers holding enormous underutilized EV capacity. OEMs will manage mix to protect profit. Tier 2 and Tier 3 suppliers eat the volume loss and the working capital cost. German suppliers are seeing roughly a 30 percent rise in insolvencies on energy costs and Chinese competition. Meanwhile subprime auto finance is tightening, which depresses demand further. That is a feedback loop, and it runs downhill onto suppliers.
Construction: data centers versus empty offices
The cleanest picture of the K anywhere. Data centers and manufacturing facilities are booming on AI demand and domestic-manufacturing incentives, which is creating a genuine gold rush in power infrastructure, cooling and specialized engineering. Commercial office is dead. Warehouse is cooling on oversupply. If you sell building materials, your entire sales motion needs to point at mission-critical infrastructure and away from general commercial real estate, this year, not next.
Energy: pragmatism wins
Grid modernization is the single biggest opportunity in the report. AI data centers and EVs are straining the grid, and utilities are pouring money into storage, virtual power plants and grid analytics. Solar and wind stay cost-competitive despite policy headwinds, with the market favoring projects that safe-harbored their credits. Oil and gas is disciplined, prioritizing returns over growth, with real money moving into carbon capture and hydrogen.
Technology and B2B services: the ROI reckoning
The narrative shifts from experimentation to return. In 2026 enterprises start demanding provable productivity from what they spent on generative AI, and attention moves to agentic systems that execute workflows rather than produce text. On the commercial side, B2B buying is now digital by default, on a path to roughly 80 percent of interactions. Build self-service for transactional business and reserve expensive field sales for genuinely complex, consultative deals. Paying a salesperson to do what a portal does is a 2019 cost structure.
What I would do about it
Five moves. In this order.
If you want help turning this into an actual plan with owners and dates on it, that is what strategic planning is for, and it is the reason this report goes out alongside the planning questions every year.
The dashboard: what to watch and when to worry
Pick these up quarterly. They are free, they are authoritative, and they will tell you the direction before your own numbers do.
| Indicator | Source | Frequency | The threshold that matters |
|---|---|---|---|
| GDP growth | BEA (Atlanta Fed GDPNow between releases) | Quarterly | Under 1.5% signals recession risk |
| Unemployment | BLS | Monthly | Over 4.8% indicates labor market stress |
| Core PCE inflation | BEA | Monthly | Over 3% stalls Fed cuts |
| Auto loan delinquency | NY Fed Household Debt and Credit Report | Quarterly | Over 6% signals consumer distress |
| Household debt service ratio | Federal Reserve Board | Quarterly | Over 13% indicates real burden |
| Consumer confidence | Conference Board | Monthly | Leading indicator of spending |
| Leading Economic Index | Conference Board | Monthly | 6+ months of decline signals recession |
For context on the policy side: the Fed funds rate sits at 3.75 to 4.00 percent, the Fed’s own projection has it near 3.4 percent by the end of 2026, and the market expects 3.0 to 3.5. Goldman has two cuts, in March and June. Nobody is expecting cheap money to come back.
The close
The honest summary of 2026 is moderate growth, sticky inflation, and real credit stress underneath a calm surface. Recession is not the base case, but the margin for error is thin and the aggregate statistics are actively concealing where the strain is.
Which brings me back to where I started. The average is the most dangerous input in your plan. The CEOs who win this cycle are the ones who go find out which arm of the K their customers are actually standing on, and then act on the answer while everyone else is still reading the headline.
Trajectory and velocity in business have changed permanently. Do not miss the rocket ship.
Jerry
Use this to your own peril, or your own advantage. If you want to pressure-test your 2026 plan against it, book a conversation.