The 2026 economic outlook points to continued expansion in the U.S. and global economies, though at a slower and more uneven pace than in recent years. Economic forecasts generally anticipate moderate US GDP growth (approximately 2.2%), driven by sustained investment in artificial intelligence, data infrastructure, and technology-enabled productivity gains. At the same time, the economy faces ongoing challenges, including policy uncertainty, trade disruptions, and persistent cost-of-living pressures that continue to affect households and organizations alike.
While recession fears have eased, volatility remains a defining feature of the economic environment heading into 2026. Growth is expected to soften early in the year before stabilizing, reflecting a careful balancing act between innovation-driven momentum and structural economic headwinds.
Key Drivers of the 2026 Economy
Technology and AI Investment
Investment in artificial intelligence, automation, and data centers remains a significant driver of economic activity. Organizations across industries are continuing to deploy capital toward technologies that improve efficiency, scalability, and long-term competitiveness. These investments are expected to support productivity growth, even as other sectors experience slower expansion.
Monetary and Fiscal Policy
Inflation, which has dropped during 2025 from highs of 3.0% to 2.6% at year-end (its lowest since March of 2021) is expected to rise again early in 2026, before settling down at about 2.4% by the 4th quarter of 2026. Unemployment, which is hovering around 4.6% (a healthy level), is expected to remain flat during 2026, with some minor declines by the end of the year. The flatting labor market is attributable to a slowing labor supply (aging population and tighter immigration policies) offset by the impact of AI (potential job displacement with more expected with Tesla robots to be released during 2026) and continued economic slowdown as the Feds continue to look to curb inflation.
The current Fed interest rate is 3.5% to 3.75%. It is anticipated that the Feds will drop that rate by the end of 2026 to 3.25% to 3.5%. Any decline in interest rates could stimulate borrowing and investment, but the pace and timing remain uncertain and closely tied to labor market conditions and inflation trends. Fiscal policy decisions will also play a role, particularly in areas related to infrastructure, healthcare, and social services.
The Stock Market
The Stock Market was strong in 2025, with the S&P growing by approximately 18% for the year. For 2026, you should expect another year of gains, but most likely more modest at between 5 and 10%. Growth will rely more heavily on corporate earnings rather than inflated price earnings ratios, meaning growth will follow economic results, favoring growth industries. Anticipated drops in interest rates should spur corporate spending and push more dollars into the market, driving up stock prices.
Consumer Spending Pressures
Despite steady employment levels, many households continue to face rising costs in essential areas such as housing, healthcare, and food. These pressures are expected to limit discretionary spending and contribute to uneven consumer demand, which may slow growth in certain sectors of the economy. Healthcare costs are leading the charge, with anticipated increases in healthcare spending in excess of 20%. Certain ACA enhanced credits brought about by the American Rescue Plan and Inflation Reduction Act expired at the end of 2025. If Congress does not renew these many lower income individuals will see significant increases in their healthcare premiums.
Policy and Trade Uncertainty
Geopolitical dynamics and trade policy continue to introduce uncertainty into the market. Shifts in tariffs, regulatory changes, and global supply chain adjustments could impact pricing, investment decisions, and long-term planning for organizations operating across borders. We do anticipate a reduction in tariff impact during 2026, which should boost growth in both the United States and China.
What the 2026 Economy Means for Nonprofits
Funding and Philanthropy
We are expecting continued growth in donations in 2026. Growth is expected to be driven by factors such as the strong stock market (which impacts foundation assets), the transfer of generational wealth, and new tax incentives brought about by the “One Big Beautiful Bill” (increased number of itemizers and tax deductions for contributions made by non-itemizers). The wealthy, with higher levels of discretionary income, will continue to drive charitable giving, with foundation giving expected to increase by 5 to 7% during 2026.
Rising Demand for Services
Economic moderation often leads to increased demand for nonprofit services, particularly in areas such as food insecurity, housing assistance, healthcare access, and workforce development. As household budgets tighten, more individuals and families turn to nonprofit organizations for support, stretching resources further.
Operating Costs and Financial Management
Even as inflation cools, nonprofits continue to face rising costs related to staffing/benefits, program delivery, technology, and facilities. In addition, nonprofits can anticipate declines in government funding, especially in environmental, social services, health, job training, disaster relief, arts, and those covering marginalized communities and immigration related issues. Managing these pressures will require careful budgeting, scenario planning, and, in some cases, rethinking program models to ensure sustainability.
Workforce and Talent Considerations
A slightly softer labor market may ease some hiring challenges, but competition for skilled talent remains strong. Nonprofits may need to continue investing in employee engagement, flexibility, communication, leadership, and professional development to retain staff.
Strategic Planning and Resilience
The 2026 economy underscores the importance of long-term planning and financial resilience. Nonprofits need to increasingly focus on building operating reserves, diversifying revenue streams, strengthening partnerships, and leveraging technology to improve efficiency.
Looking Ahead
The economic environment in 2026 is expected to be stable but cautious, marked by innovation-led growth alongside ongoing financial and policy challenges. For nonprofits, success will depend on the ability to remain agile, communicate impact clearly, and align resources with evolving community needs. Organizations that plan strategically and invest in resilience will be well positioned to continue advancing their missions in a changing economic landscape.
Kenneth R. Cerini, CPA, CFP, FABFA
Managing Partner
Cerini & Associates, LLP
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