- U.S. Economy: The outlook for 2026 reflects an economy that is expanding (albeit more slowly), but also increasingly exposed to policy uncertainty, market volatility, and widening consumer disparities. These dynamics point to an economy that can still generate moderate growth, with equipment demand and AI-driven capex remaining important sources of growth. That said, the expansion is increasingly vulnerable to policy missteps and market shocks, leaving the balance of risk tilted modestly to the downside.
- Trade Policy: Trade policy will continue to drive the macroeconomic narrative during the first half of 2026. Tariffs, which have been a central component of the administration’s economic strategy, have increased roughly eightfold over the last 12 months, yet due to a variety of factors, including pass-through delays and limited retaliation from foreign governments, the overall impact on the economy has been less severe than many economists expected. The Supreme Court’s upcoming decision on the administration’s use of the International Emergency Economic Powers Act will determine whether the current tariff regime continues or is replaced by a more procedurally constrained framework. Either outcome carries significant economic implications, but if the tariffs are struck down, a messy transition period may ensue.
- AI-Driven Investment and Equity Market Performance: The AI investment boom remains the primary engine of economic and industry growth. AI-related firms continue to drive a disproportionate share of S&P 500 gains and corporate earnings, and 2025 saw a record $350 billion in AI infrastructure spending. This surge has fueled exceptional strength in technology equipment and software investment. Yet the rapid run-up has brought clearer signs of strain: valuations look increasingly stretched, financing structures have become more complex and debt-dependent, and investors are increasingly wary that an AI-driven correction could disrupt both markets and capital spending.
- Equipment and Software Investment: Real equipment and software investment posted its strongest two-quarter performance in at least 20 years during the first half of 2025 (excluding the pandemic rebound). These gains have been highly concentrated, with technology equipment and software accounting for most of the expansion. Investment growth has been more muted outside these verticals.
- Equipment Finance Industry: The AI-related investment boom was a major bright spot in an otherwise cooling economy in 2025, and this level of investment has provided a major tailwind for the equipment finance industry. The AI buildout will continue to provide a significant boost to the economy and the industry in 2026. The Foundation’s Monthly Confidence Index and ELFA’s CapEx Finance Index agree, indicating resilient new business volume, healthy financial conditions, and industry confidence above the historical average. Three Fed rate cuts across the fourth quarter of 2025 should also provide a boost to the industry as borrowing costs fall and credit conditions potentially ease.
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