CFOs See Tariffs, AI, and Sticky Prices Shaping a Slow-Growth 2026 — Evening Brief – 12.22.25
Corporate finance chiefs are heading into 2026 cautiously optimistic, expecting modest growth but little relief from tariffs, cost pressures, or the need to keep investing in artificial intelligence. The Richmond and Atlanta Feds’ and Duke University’s latest CFO Survey show average optimism about the U.S. economy at 60.2 on a 0–100 scale in Q4, down slightly from 62.9 in Q3, suggesting confidence has cooled but not cracked.
Tariffs and trade policy remain CFOs’ top concern for the fourth straight quarter, followed closely by demand, sales, and revenue, with labor quality and availability also high on the worry list. That backdrop feeds into a slow‑growth macro view: respondents still peg real GDP growth over the next year at roughly 1.9%, with a 13.6% probability of contraction—unchanged from Q3 and consistent with a “muddle‑through” rather than a recession or re‑acceleration.
At the firm level, executives expect 2026 revenue to grow 7.6% on average, up from a 7.0% expectation for 2025, but see only modest easing in cost pressures. CFOs forecast price increases of about 4.2% and unit cost growth of 4.5% next year, both comfortably above 3%, while average wages are expected to rise 4.1%. Employment growth is set to decelerate from 3.9% this year to 2.4% in 2026, hinting at slower hiring rather than outright job cuts.
Special questions on staffing underscore that nuance. Just over half of firms say they are hiring replacements and 40% are adding new positions, but 17% report either layoffs or leaving openings unfilled, indicating more selective, efficiency‑driven headcount decisions. On the demand side, nearly half of CFOs (47%) expect stronger demand for their goods and services over the next 12 months, while 37% see demand holding steady—another sign of steady but unspectacular growth.
The biggest structural shift is in technology and capex. More than half of all firms report AI‑related spending over the past year, including 77.7% of large firms and 48.3% of small firms, confirming that AI is no longer just a big‑tech story. For investors and lenders, that points to a broadening “AI capex” theme across sectors, with opportunities in software, data infrastructure, and productivity‑enhancing tools for mid‑market companies, not just hyperscalers.
Market expectations remain constructive but bounded. CFOs who closely follow markets peg the “most likely” S&P 500 return at 6.4% over the next 12 months and 9.9% annually over the next decade, with a 1‑in‑10 downside scenario of roughly ‑3.1% for the coming year and a 1‑in‑10 upside of 12.3%. That distribution reflects a world where tariffs, sticky services inflation, and higher wage floors keep nominal growth and earnings moving forward—but also keep risk premia alive, rewarding investors who can separate firms that use AI and pricing power to defend margins from those that simply face higher input costs.