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Community Leaders Breakfast Economic Outlook & Leadership Forum

Community Leaders Breakfast: Economic Outlook and Leadership Forum, Sedona, Arizona

 

2026 Economic & Market Outlook

Kevin Wunker

  • The U.S. economy remains resilient, supported by consumer spending, improving business activity and renewed job growth.
  • Inflation remains the biggest risk, although lower energy prices, improving supply conditions and productivity gains may help it ease over time.
  • The Federal Reserve is expected to remain patient, while higher yields have restored the income and diversification value of bonds.
  • The equity outlook remains optimistic, with broader sector participation and a continued preference for U.S. markets.

Key Presentation Figures

2.4%2026 U.S. GDP forecast
4.3%Year-end unemployment forecast
4.25%–4.50%Base-case 10-year Treasury yield
8,200Base-case S&P 500 level

Economy

What the Economy Is Cooking

Growth remains above potential, the labor market has improved, and recession is not the expected outcome for 2026 or 2027.

The Economy Remains ‘ROCK’ SOLID

Two charts showing consumer spending and restaurant bookings, both supporting the presentation's resilient-economy view.

Source: FactSet. Data is as of 7/7/2026.

Bar chart titled Job growth reaccelerated in 2026, with 2026 year-to-date average job growth of 92,000 compared with a 2025 average of 10,000.
Source: FactSet. Presentation data through June 30, 2026.

What Matters Most

  • Consumer strength: spending remains healthy, supported by rising incomes and a solid labor market.
  • Business momentum: manufacturing and services were both in expansion territory for six consecutive months.
  • Investment: AI, infrastructure and S&P 500 capital spending continue to support activity and productivity.

Inflation, the Fed & Fixed Income

Keeping the Match on Track / Back to Life

Line chart showing PCE inflation remaining above the Federal Reserve's 2 percent target, with presentation forecasts of 3.6 percent and 2.2 percent.
PCE inflation and forecast markers as presented. Actual data through May 2026.

Why Inflation Is Still Difficult

  • Pressure remains from oil and energy, supply disruptions, sticky services inflation and the near-term demand created by the AI buildout.
  • Potential relief comes from lower oil prices, improving supply dynamics, anchored expectations and longer-term productivity gains.
  • The Fed Chair shapes the process, but interest-rate decisions remain committee decisions. The presentation expects patience rather than urgency.

12-Month 10-Year Treasury Yield Scenarios

Bull

20% probability<3.75%10-year yield

Base

60% probability4.25%–4.50%10-year yield

Bear

20% probability>5.0%10-year yield

Equities & Sectors

Endurance of a Champion / More Players Enter the Ring

The equity outlook remains positive because earnings and economic fundamentals are holding up. Valuations are the main restraint, so future returns may be more measured than the unusually strong gains of recent years.

12-Month S&P 500 Scenarios

Bear

15% probability7,300$325 EPS | 22.5× multiple

Base

60% probability8,200$356 EPS | 23× multiple

Bull

25% probability8,760$365 EPS | 24× multiple

Favored Sectors

Technology
Industrials
Consumer Discretionary
Health Care
Bar chart showing positive S and P 500 years have been the norm, with 78 percent of years positive and a 12.7 percent average annual total return.
S&P 500 annual total returns, 1940–2025. Source: presentation materials.

International & Asset Allocation

The Edge Is Home / Stick to the Game Plan

Twenty-year total return comparison showing the S and P 500 outperforming the Stoxx Europe 600 and MSCI Japan through May 2026.
Total-return comparison from the presentation, May 2006 through May 2026.

Why the Presentation Favors the U.S.

  • U.S. markets are supported by stronger long-term economic growth, more consistent corporate earnings and innovation leadership.
  • International markets remain part of the opportunity set, but the presentation favors selective exposure rather than a broad overweight.

The Closing Discipline

  • Separate short-term market drama from the economic and earnings fundamentals that drive long-term outcomes.
  • Use asset allocation to balance risk and return instead of trying to predict every market turn.
  • Rebalance when conditions or goals change, but avoid reacting emotionally to normal volatility.

 

Thank you message and sponsor logos for Pinnacle Bank, The Blazin’ M Experience and L’Auberge de Sedona

 

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