The economy this year will be stronger for higher-income consumers than those with lower pay, said UMB Chief Investment Officer Eric Kelley..Kelley presented his 2026 economic forecast March 3 during a webinar that the Kansas City, Mo.-based bank hosted with BankNews. He expects unemployment to be between 4.6 percent and 4.8 percent, similar to last year, with the S&P 500 increasing 8-12 percent, down from 18 percent expansion in 2025. Real GDP is slated to grow 2.0-2.2 percent, up from 1.6-1.8 percent last year. Inflation is projected to be between 2.3 percent to 2.5 percent, down from 2.8 percent in 2025. The Federal Open Market Committee is expected to enact two quarter-point cuts, lowering the Fed Funds Ratio to 3.25 percent. An estimated $72 trillion in net worth — much of it in the stock market — has been created over the past five years, Kelley said. The top 10 percent of affluent consumers own 88 percent of equities. Meanwhile, the auto delinquency rate is at 9 percent, its highest mark since the Great Recession, signaling stress among lower-income consumers. Consumption has outpaced growth since late 2024, Kelley said. The savings rate is at 3-3 1/4 percent, under the 5 percent mark, which is generally considered a healthy rate. Payroll growth is limited, with monthly job creation numbers well under the 100,000 mark generally seen in a stable economy. Kelley said there has not been a significant increase in unemployment due to the increase in immigrants leaving the country and women over the age of 55 leaving the workforce. “Prosperity is not evenly distributed,” he added. Despite the job openings rate being under 4 1/2 percent, Kelley said the country is not in a recession and instead is trending toward a long-term environment with fewer job openings. Kelley said economic uncertainty remains after the war between the United States/Israel and Iran continues. He predicted a monthslong conflict could spike oil prices to above $100. The Strait of Hormuz has not been officially closed, but activity is essentially shut down amid major safety concerns. He predicted the energy independence of the United States will help the country get through the crisis easier than other countries with more dependence on global markets. Also, interest as a percentage of GDP is nearing a historical high of 3 percent. Consumer confidence numbers remain weak. University of Michigan’s Surveys of Consumers was at a six-month high in February, but still 11.4 percent lower than 64.7 on an annualized basis. “Sentiment remains very low from a historical perspective,” said Surveys of Consumers Director Joanne Hsu. Kelley said the lack of consumer optimism numbers is not favorable to the Republican Party as midterm elections loom in November. Republicans hold slim majorities in the House of Representatives (218-213) and Senate (53-47). Traditionally, the party of the incumbent president struggles in the ensuing midterm elections. A recording of the webinar is available by visiting: https://register.gotowebinar.com/recording/397319975586775467
