The Economy: Still Growing, but More Uneven
The U.S. economy is still growing, and most of the numbers we watch tell an encouraging story. Factories are busier than they’ve been in a while, and the much larger services side of the economy—everything from restaurants to healthcare to finance—is expanding at a strong clip. Retail spending remains healthy, and car sales are running at a solid pace of about 16 million vehicles per year.
The jobs picture, though, has cooled off. The economy actually lost 92,000 jobs in February, and the unemployment rate ticked up to 4.4%. For the first time since the pandemic recovery, there are now more people looking for work (7.6 million) than there are job openings (6.5 million). Wages are still growing at about 3.8% per year—enough to stay ahead of inflation—but the red-hot hiring market of 2022–2023 is behind us. Fewer Americans are participating in the workforce overall, a long-running trend driven largely by an aging population and declining birth rates.
Household Finances: Strong on Paper, but Not for Everyone
American households, overall, are in good financial shape. Total household wealth has hit record highs, and when people feel wealthier they tend to spend more—a big reason the economy has held up so well. Debt payments remain manageable relative to income, well below the danger levels we saw before 2008. But the picture isn’t the same for everyone. Higher earners and retirees—especially those who locked in low mortgage rates and have healthy investment accounts—are doing very well. Americans 65 and older now account for 22% of all consumer spending, up from 15% in 2010. On the other hand, many lower-income workers have seen their pandemic-era wage gains fade, and the personal savings rate has dropped to 3.6%, suggesting some households are stretching to maintain their lifestyles.
Iran, Oil Prices, and the Recession Question
The situation with Iran sent oil prices sharply higher, which understandably makes people nervous. In the past, oil price spikes helped push the economy into recession in 1973, 1980, 1990, and 2008. But the good news is that we’re much less vulnerable to oil shocks than we used to be. Americans used 4% less gasoline in 2025 than in 2007, while the economy grew 42% over that same period. Energy costs have fallen from 5.7% to just 3.7% of household budgets. Inflation is running at about 2.4% on the most commonly cited measure—elevated but not alarming—and the bond market is signaling that investors expect inflation to stay manageable over the next decade. The consensus among economists is that growth will continue: most forecasts call for roughly 2% GDP growth in 2026, not a recession.
Beyond the immediate hit to oil prices, a prolonged blockage of the Strait of Hormuz is a serious concern. Roughly 20% of the world’s oil supply flows through that narrow chokepoint every day — but so do massive quantities of liquefied natural gas, petrochemicals, and industrial raw materials that global manufacturing depends on. If that corridor is disrupted for any meaningful length of time, the consequences go well beyond higher gas prices. Supply chains seize up. Input costs spike for everything from plastics to fertilizers to semiconductors. Goods sit in ports waiting for materials that aren’t coming. That’s the kind of shock that doesn’t just rattle markets for a day or two — it can drive sustained volatility and force investors to reprice risk across entire sectors of the economy.
The Stock Market: Record Highs, Normal Volatility
Stocks hit record highs earlier this year after recovering from last April’s tariff-driven sell-off, though the Iran news brought a fresh round of volatility. It’s worth remembering that sell-offs are a normal part of investing. The S&P 500 has delivered roughly 10% per year on average (including reinvested dividends) going back to the 1920s, weathering world wars, oil crises, financial panics, and pandemics along the way. Corporate profits continue to grow—analysts expect healthy double-digit earnings growth in both 2026 and 2027. Stock prices relative to those earnings are above their long-term average, meaning the market isn’t cheap, but rising profits provide support. The Federal Reserve has paused its rate cuts for now, and bond yields have returned to levels that are actually quite normal by historical standards.
Artificial Intelligence: Moving from Hype to Real Impact
One of the biggest stories in the economy right now is artificial intelligence, and it’s starting to show up in real ways. Companies are finding they can grow revenue without hiring proportionally more people—Walmart plans to hold headcount flat over the next three years even as sales grow. AI is already helping discover new treatments for diseases like Parkinson’s, improving customer service at companies like Airbnb, and helping visually impaired people navigate daily life through smart glasses. Legendary investor Howard Marks recently described AI’s latest capabilities as a shift from “helping people do their jobs” to “doing the work itself.” History tells us that major technological shifts—from automobiles to the internet—ultimately create more jobs and growth than they displace, even if the transition can be bumpy.
Looking Further Out: The National Debt and Social Security
Two longer-term issues are worth watching. Federal debt continues to grow, with interest payments becoming one of the largest line items in the budget. And Social Security’s trust fund is now projected to run out in early 2033—if Congress doesn’t act, benefits would be cut by about 26%. These aren’t immediate crises, but they’re important context for long-term financial planning.
The bottom line: the economy is growing, corporate earnings are rising, and while real risks exist—geopolitical uncertainty, a cooling job market, and stock prices that aren’t cheap—the overall picture remains positive. We continue to focus on building diversified portfolios designed to grow through the inevitable ups and downs. As always, please reach out if you’d like to talk about how any of this applies to your personal situation.
Sources: Fritz Meyer “Point of View” (March 2026), John Mauldin “Thoughts from the Frontline,” Howard Marks/Oaktree Capital, Bureau of Labor Statistics, Federal Reserve, Congressional Budget Office, Yardeni Research, Wall Street Journal. Past performance is no guarantee of future results. This commentary is for informational purposes only and should not be relied upon as the sole factor in an investment decision.
