2026 Mid-Year Outlook: U.S. Stocks and Economy

Charles Schwab

Liz Ann Sonders, Kevin Gordon

Research

22 Pages

Schwab Asset Management says the 2026 market backdrop looks unstable rather than merely uncertain. Sticky inflation, tariff pressure, labor market softness, and AI capex questions could keep markets rotating even if earnings support keeps stocks moving higher.

Key Takeaways

Inflation Stays Sticky: PCE has stayed above the Fed’s 2% target for four and a half years, with inflation expected closer to 3% than 2%.
Tariffs Lift Prices: Tariffs have lifted overall retail prices by nearly five percentage points relative to pre tariff trends, reinforcing Schwab’s sticky inflation view for 2026.
Labor Softness Builds: ADP data showed nearly 5,000 private sector jobs lost on average over three months, while payroll stock approached 160 million.
Source: Charles Schwab, The Leuthold Group, as of 4/30/2026.
Source: Charles Schwab, London Stock Exchange Group Institutional Brokers' Estimate System (LSEG I/B/E/S), as of 5/29/2026.
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