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Published in the April-June 2026 Edition
By Woody Derricks, CFP®, Accredited Domestic Partnership Advisor
Risks appear to be mounting for the U.S. economy. Inflation, unemployment, and market exuberance leave concern for 2026’s outlook.
The Inflation Problem Isn't Solved
The economic outlook for the U.S. remains highly uncertain. Although estimates for 2026 had core inflation gradually easing toward 2% later in the year, the risks tilt in unfavorable directions — toward both a weaker labor market and greater persistence of above-target inflation.1 A major global organization called the OECD expects U.S. inflation to hit 4.2% for 2026, a sharp step up from its prior projection of 2.8% and well above the Fed's own estimate of 2.7%.2
The War with Iran Is a Wildcard
One of the biggest risks to inflation is the ongoing conflict with Iran. Vanguard has revised its year-end 2026 core inflation forecast upward, driven in part by higher energy prices amid escalating geopolitical tensions involving Iran.3 A prolonged conflict could keep oil prices elevated well into 2027, acting as a persistent tax on consumers and businesses alike. Energy shocks of this kind don't just raise gas prices — they ripple through the cost of food, transportation, manufacturing, and services across the entire economy.
A Lopsided Labor Market
The good news is that people are working. The bad news is that most new jobs are clustered in just a few areas, like healthcare. Job creation has been heavily concentrated in healthcare, reflecting structural demand rather than broad economic strength.4 Think of it like a table with only one strong leg — it can stand for a while, but it's not very stable. When job growth is this narrow, the economy becomes vulnerable — if even one or two strong sectors stumble, the headline numbers can deteriorate quickly.
Meanwhile, the share of Americans who are working or actively looking for work sits at just 61.9% — a number that has barely moved in a year.5 That means millions of working-age people have simply stopped looking for jobs altogether.
The Stagflation Risk
This brings me to the concern I find most troubling: stagflation. It's a combination of two problems happening at the same time — prices going up while the economy slows down and fewer jobs become available. It's the worst of both worlds.
Think of it this way: imagine your household expenses keep rising, but your paycheck stops growing — or disappears entirely. That's what stagflation feels like for a whole country. Economists warn that rising prices from tariffs, tighter labor supply, and big government spending could combine to push inflation above 4% by the end of this year.6 If the economy weakens at the same time, the Federal Reserve gets stuck. Raising rates fights inflation but slows the economy. Lowering rates helps the economy but lets prices keep climbing. There's no easy answer.
What This Could Mean for You
I am not suggesting panic — but I am recommending preparedness. Portfolios that are over-concentrated in long-duration bonds or interest-rate-sensitive assets deserve a fresh look. Diversification across asset classes with inflation-resistant characteristics — real assets, short-duration instruments, and sectors with pricing power — becomes more important in this environment. This is a great time to review your portfolio’s allocation, and to make adjustments, if appropriate.
This commentary is for informational purposes only and does not constitute investment advice. Diversification does not remove investment risk. All investments involve risk, including potential loss of principal.
Investment advisory services are offered by Partnership Wealth Management, a Securities and Exchange Commission Registered Investment Advisor. The commentary presented herein contains the opinions of the firm, and this information should not be relied upon for tax purposes and is based upon sources believed to be reliable. No guarantee is made to the completeness or accuracy of this information. Partnership Wealth Management shall not be responsible for any trading decisions, damages, or other losses resulting from, or related to, the information, data, analyses, or opinions contained herein or their use, which do not constitute investment advice, are provided as of the date written, are provided solely for informational purposes, and therefore are not an offer to buy or sell a security. Investments in securities are subject to investment risk, including possible loss of principal. Prices of securities may fluctuate from time to time and may even become valueless. This information has not been tailored to suit any individual.
Financial planning is an important part of preparing for the future; contact us today to get started: partnershipwm.com.
1 stlouisfed.org/from-the-president/remarks/2026/economic-outlook-monetary-policy-aei
3&4 corporate.vanguard.com/content/corporatesite/us/en/corp/vemo/vemo-united-states.html
5 bls.gov/news.release/empsit.nr0.htm
6 piie.com/blogs/realtime-economics/2026/risk-higher-us-inflation-2026