It was labeled “the year of uncertainty.” 2025 started out on a hopeful note, but shifting tariffs and uneven economic policies from the new administration soon disrupted the status quo and made uncertainty the byword for the rest of the year.
As we begin 2026, there are things to like and things to dislike about our economy. Interest rates are falling, but inflation shows no sign of retreating. Consumer confidence is low, but holiday sales were still brisk. The stock market has reached record highs, mostly propelled by a handful of big tech companies and the promise of artificial intelligence. As for tariffs and trade policy, the Supreme Court is due to rule on the legality of many of the tariffs, but that issue remained unsettled at press time.
So what lies in store for us in the year ahead? As we have often done in the past, we turned to economist Jason Schenker for some insights. Schenker, who is president of Prestige Economics and chairman of The Futurist Institute, is considered one of the nation’s leading economists. Bloomberg News has ranked him the #1 forecaster in the world in 35 different categories since 2011, and he is a frequent guest on CNBC, Bloomberg TV, CNN, BNN, and the BBC.
Schenker is also an author and educator. He serves on the faculty of the Joint Special Operations University at USSOCOM (U.S. Special Operations Command), where he prepares leaders for the future. And more than 1.5 million learners have taken his LinkedIn Learning courses on topics like economics and finance. On top of that, he has written 16 bestselling books on supply chain, finance, energy, and the economy. Since we featured him last January, he has written two new books: Cold War Two, introduced in March, and The Future After AI, which was released in November.
Schenker spoke with DC Velocity Group Editorial Director David Maloney a few weeks ago about the events of the past year and the 2026 outlook for the economy in general and the supply chain and material handling sectors in particular.
Q: 2025 will go down as one of the oddest years economically in recent history. What for you were some of the highlights—or possibly lowlights—of the past year?
A: I think the most important thing is where we had expectations around the economy. There were lots of swings in the data. Many of those were engendered by trade distortions in Q1. That quarter had a weak GDP [gross domestic product] report because so much was being imported, which weighed on GDP growth. But then in Q2, we had a pullback in imports because so much volume had been front-loaded and pulled into the country in the first quarter. In Q2, you had a much stronger GDP report. And, of course, then we had delays in the data for the rest of the year due to the government shutdown. So, yeah, we ended the year trying to get to the end-of-Q3 data. And Q4 data is going to take quite a bit longer.
Q: After the 2024 elections, many businesspeople had hopes of a golden era for business under the new administration. But that really hasn’t come to pass yet. How much do you think tariffs, government policies, and uncertainty affected the business climate?
A: I think there are a few things as we look at the year 2025. I mean, we saw a number of record highs in the equity markets. So the notion that businesses didn’t fare well in 2025 doesn’t really square with the reality that equities and valuations hit new highs. I think there was sort of a misperception: Because we had so many swings in the data and so much concern and so much uncertainty, we may have buried the lead that equity markets hit record highs. We also saw real estate prices continue to rise and gold prices hit new highs.
Within the material handling industry, we had new-order expansions in every single month of 2025 through November. So it’s tough for me to say that the year was disappointing for businesses, because when we look around at some of the numbers, a lot of the data was pretty good for the macro economy. We had record high payrolls, a record high labor force, and lots of other things that were positive. Those things all tell us that the year actually was pretty good.
It might not feel good because there were so many fits and starts around uncertainty of tariffs and trade policy and, of course, these sort of lurking, growing risks of geopolitical conflict and the risk of kinetic conflict with China over Taiwan. I think those things make it not feel so good. Some of that is probably due to the fact that interest rates have been slow to come down and because inflation’s been a little bit sticky. But as we look ahead, there is some hope that we might see some further easing of interest rates, which could help boost growth in the year ahead.
Q: Why do you think there is a disconnect? You noted that the stock market, equities, and many other areas of the economy did quite well, yet people aren’t feeling it. Is it simply due to the uncertainty with tariffs and prices?
A: I think the biggest thing on the consumer sentiment side is the uncertainty around policy. People are used to having administrations that are process-focused and that are very predictable. The Trump administration, in my personal opinion, is focused on outcomes. And one of the most important outcomes is to strengthen the U.S. economically to provide conflict deterrence, to put pressure on China in order to prevent an outbreak of actual war over Taiwan in the next couple of years. I think that is the goal.
The process has been very staccato. We see that around the tariffs and trade. And I think that’s what people are probably feeling—the uncertainty of it.
I also think the ongoing, persistent inflationary pressures that have been building since Covid are wearing on consumers, who are looking at the sticker prices of things, and it’s just really shocking, right? No one wants to pay more for something they know used to be cheaper, and that is something that consumers are grappling with. Groceries are more expensive. Health care, health insurance, rent—all these things keep getting more expensive.
But if we look at the latest data from the CPI [Consumer Price Index] report, consumer prices for all goods, as of September, are up 3% year on year. Core goods (excluding food and energy), just the goods part, are up 1.5% year on year. That core goods increase of 1.5% is below the Fed’s 2.0% target. But core services are up 3.5% year on year. Those services include health care, which is up 4%, and housing, shelter, and rent, which together are up about 3.5% That’s what’s adding the pressure.
And so, while there may be more inflation ahead from the tariff side of things, we aren’t seeing that in the data yet. But the services side is certainly adding more pressure than the Fed would like to see. And I think it’s that combination of economic uncertainty and shifts in policy that seem quite rapid at times that is adding a ripple of uncertainty that is negatively affecting consumers.
Q: You mentioned the tariffs and how a lot of front-loading was done for the holiday merchandise that we’ve just burned through in the last couple of months. Will we see more of an impact from the tariffs once people begin to reorder those goods, or have the tariffs been absorbed by businesses for the most part?
A: Yeah, I think we could see some more inflationary pressure. On the goods side, we’re beginning to see a little bit more pressure in the PPI [Producer Price Index] report, which is a measure of wholesale inflation. The PPI was still relatively benign in September. Again, we’re missing months of data [because of the government shutdown] that we’d normally have by this time. But if we look at the data that we currently have available from September, that’s a number of months since we started seeing these tariffs roll out. Final PPI goods inflation is up 3.3% year on year, and 3.3% is still pretty benign.
You might remember that in the wake of the Russian war on Ukraine, at one point it was up 17.9% year on year. So 3.3% is not a catastrophic level of additional goods price inflation. I think a lot of this hasn’t fully shaken out, and there is a potential that we could see some more pressure. But how much feeds through to consumers? That’s the bigger question. In the end, it might not be all that much.
The thing is that there are certain categories that look scary, which add to the confidence issue. For instance, prices for major appliances that we import are going to go up. But pets and pet food are nine times more important than major appliances for the CPI, and we’re not importing a lot of pets and pet food. And we are also not buying major appliances all that often, right? So there are certain categories more at risk than others, but sometimes those aren’t the biggest categories. And more than 60% of the CPI is composed of services that are not even impacted by the tariffs.
Q: Jason, let’s turn a moment to supply chains. You put together the MHI Business Activity Index for the material handling industry. Your latest report shows some good, steady growth. But again, we have a bit of a disconnect here. Anecdotally, I hear of a lot of companies that want to make investments in equipment but are afraid to get off the fence because of all the uncertainty. What’s your take on where the supply chain industry—and the material handling sector in particular—stands as we enter the new year?
A: I think this is a really good question. I mean, first and foremost, the MHI BAI is an index that my firm, Prestige Economics, has been producing for over a decade. It’s a monthly index that gives us a read on what’s going on with new orders, shipments, unfilled orders, inventories, overall activity, and future new orders. With over a decade of data, it gives us a good idea of what’s going on over time. Probably the most important thing I see is that we’ve had over a year of monthly consecutive expansions in new orders. And 100% of respondents expect future new orders, 12 months from now, to be higher than they are currently. So that bodes really well for the second half of 2026. I think in general that 2026 looks like it’s going to be a good year, which is great, and I’d love to see that for the industry.
I also think there are other fundamental factors that maybe people have been on the fence about. On the one hand, you’ve got these policy uncertainties—whether it’s uncertainty around tariff or trade policy, immigration policy, and other policies. And then the other part is interest rate policy. People might be on the fence because they don’t like where interest rates are right now and they are predicting interest rates will go down. And so if you’re a business leader and you’re trying to plan your future and the Fed is telling you interest rates are going to be lower in the future, you might want to hold off for a few months and see how much lower those rates might go.
Q: Are there other factors that are influencing material handling’s future?
A: Yes, there are also the “Cold War Two” geopolitical pressures [the escalating tensions between the U.S.-led West and an emerging bloc of autocratic powers led by Russia and China] and the reindustrialization of the U.S. economy to move to a wartime footing, as well as a push to decouple U.S. and Chinese supply chains as a means of deterring China from engaging in active, kinetic conflict—from going to war to gain control of Taiwan. That means we’re going to be increasing our shipbuilding and other heavy industry activities.
And we’re building a lot more data centers, right? Heavy stuff is moving around. CapEx is being spent. So I see opportunities looking at the year ahead with supply chain and material handling. You’ve got a lot of companies looking at moving their manufacturing out of China. They don’t want to get caught on the wrong side of a falling technological Iron Curtain. You’ve got a lot of companies that are looking at the AI boom, and then you also have this reindustrialization of the U.S. economy for a wartime-ready footing, and that’s also driving demand for heavy industry and other sectors that are likely to be quite positive for material handling. With those kinds of dynamics in concert with falling interest rates, an AI boom, and all this other stuff going on, I see tremendous potential for the year ahead.
Q: You mentioned “Cold War Two,” and, of course, that’s the title of a book you published last year. And you have another book out called The Future After AI. Can you share the messages you want to convey in those two new books?
A: Cold War Two is a book I’ve been working on for a number of years. I’ve talked extensively about this topic to MHI and other groups. In fact, I successfully trademarked the term “Cold War Two” in 2022 because of some research and speeches I was giving to MHI in 2021, so this is something I’ve been working on for a long time.
I contributed to a Pentagon report in 2020 on supply chain-related topics and looking at the geopolitical tensions with China. I also contributed to a book peer-reviewed for the National Intelligence University, the shorthand of which is grad school for spies, on topics like supply chains in the wake of Covid and the potential future decoupling from China.
The idea of Cold War Two is that the biggest challenge of this century will be the geopolitical tensions around the China question. And the China question is, How do you resolve China’s propensity toward economic, political, and military hegemony over Asia? And I postulate that perhaps we never really understood Cold War One, and that Cold War One and Cold War Two were two parts of the same conflict, with a 50-year armistice to answer the China question. And so now we see the potential for Chinese hegemony over Asia, and this is a conflict risk.
And, of course, the U.S. provides a nuclear umbrella to South Korea and Japan. The U.S. has its single biggest military base in South Korea and has its largest number of troops outside of the U.S. in Japan. There are other U.S. assets throughout Asia, China, and Taiwan as well.
Then there are the trade risks. Take chips, for example. The AI boom has caused a surge in demand for advanced chips, and we get all these chips from Taiwan. What happens if China attacks, seizes, blockades, or otherwise gains control of Taiwan? What will that mean? That’s really what that book’s about. What are these risks, as well as other conflicts we’ve seen in the past few years, such as the Russian war on Ukraine and Iranian proxies attacking Israel? These are three fronts of the same conflict. The bad guys are all the same. It’s China, Russia, Iran, and North Korea, and they’re working together.
Everything’s a moving piece, and I think that’s part of the reason we oftentimes see such rapid changes in communication and policy out of the White House. It is because this is an evolving, dynamic situation. The stakes are extremely high, and no one wants to end up in World War III.
Q: And what is The Future After AI about?
A: We know that AI is a massive productivity booster. And just like the internet and computers, the combustion engine, and electricity, we’re going to stop talking about this marvel, this wonder, because we’re just going to assume it’s everywhere. It will eventually become commonplace in the same way websites have. A few years ago, you were unique if you had a website. Now no one is going to say, “Wow, you have a website.” Of course, you have a website, right? I have a car and it has a combustion engine. My house has electricity. So that’s how we’re going to look at AI. Your company uses AI? Of course, right?
This is where we end up: The future after AI is one in which everything is sort of AI-invisible, and AI is assumed and taken for granted because it’s just so essential as the new global operating system.
Q: That makes a lot of sense. In closing, how would you sum up the economic outlook for 2026?
A: I am cautiously optimistic for 2026. I think we’re going to see interest rates go a little lower. I think we’re probably going to see the dollar weaken a bit further with those lower rates. But I also think we’re going to see some more business investment. I think there’s going to be continued investment in AI, defense and other areas of heavy industry, and shipbuilding, and I think you’re going to see reshoring as companies accelerate their move out of China back into the U.S. or friend-shoring to other countries. And I think you’re going to see a lot of activity that could asymmetrically benefit material handling and supply chain businesses.
So I’m cautiously optimistic for the year ahead. I know there are risks. Payroll gains have slowed, inflation rates remain elevated, and interest rates remain elevated. And there are other longer-term risks, and I see those, but I think the productivity benefits around AI and the push to continue to strengthen the U.S. economy as a form of conflict deterrence—I think those factors bode well for the year ahead, and I’m cautiously optimistic.
Q: I’ll be cautiously optimistic along with you. Always a pleasure. Thank you again for being with us.
A: Thank you and wishing all your readers the best year ever in 2026.
