TruStage: What 2026 Economic Trends Mean for Credit Union Strategies
As 2025 winds down, credit unions are looking ahead to a year that promises both opportunities and challenges. Economic signals suggest 2026 will not be a repeat of the last decade’s boom times, but it won’t be a disaster either.
Inflation: Higher, but manageable
Inflation will likely climb above the Federal Reserve’s two percent target, reaching 3.2 to 3.3 percent in early 2026. Why? Tariffs. Many firms have absorbed tariff costs so far, but they’ll eventually start passing those costs along to consumers. For credit unions, this means members will feel the pinch in everyday expenses, and lending strategies will probably need to adapt.
Interest rates: Cuts are coming
The Fed cut rates by 25 basis points in December, and they may cut another 50 basis points in 2026. The Fed is pulling its foot off the brake and easing out of restrictive territory. For CUs, lower rates could stimulate demand for auto loans and other credit products. That’s good news for loan growth, but it also means tighter margins on deposits.
Economic growth: Slow, not stalled
Despite inflationary pressure, I am not forecasting a recession in 2026. Instead, expect below-trend growth. For credit unions, this translates into a stable but cautious environment. Members may not be spending aggressively, but to keep the car analogies going; they’re unlikely to slam the brakes entirely.
Stock market: Lofty highs and looming risks
The S&P 500 has soared 16 percent year-to-date, 49 percent over the last two years, and 84 percent over the last five years. That’s created a wealth effect for the top 10 percent of Americans who own most stocks. But there could be trouble looming. Margin debt has ballooned to $1.1 trillion, up 34 percent in a year. If markets correct sharply, consumer confidence could take a hit, and members might pull back on spending and borrowing.
Valuation concerns and the AI factor
The Shiller P/E ratio is 41, the second highest level ever. The Shiller Ratio (CAPE) measures stock market value by comparing current prices to the average of 10 years of inflation-adjusted earnings, with higher ratios signaling lower future returns.
Much of the market surge is tied to the “Magnificent Seven” tech stocks and AI optimism. If AI fails to deliver the productivity gains investors expect, a bubble could burst. While I don’t foresee a crash, there are parallels to past speculative periods. For credit unions, a market downturn could mean members shifting focus to savings and liquidity.
Nightmare scenarios: What could go wrong?
I’m not forecasting doom, but I am watching several risks: trade wars escalating beyond tariffs, geopolitical shocks such as the Russia-Ukraine conflict spreading, commercial real estate stress with office vacancies and refinancing challenges, and falling home prices in states like Texas, Florida and California, which could ripple into consumer confidence.
Any of these could trigger a recession or at least a sharp slowdown. For CUs, that means preparing for potential spikes in delinquencies and shifts in member behavior.
What it all means for credit unions
The big picture? 2026 looks like a year of moderate inflation, easing rates and cautious growth. Credit unions should expect members to feel cost pressures while benefiting from lower borrowing costs. Loan demand—especially autos—may rise, but margins will tighten. Market volatility could influence member sentiment, making liquidity and risk management critical.
I am not forecasting a recession—just a little bit below-trend economic growth. For credit unions, that’s a call to stay nimble, focus on member needs and prepare for a year that’s more about managing risk than chasing record growth.
By Steve Rick, Director and Chief Economist, TruStage
The views expressed here are those of the author and do not necessarily represent the views of TruStage.
TruStage is the marketing name for TruStage Financial Group, Inc. its subsidiaries and affiliates. Corporate headquarters are located in Madison, Wis.
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