The U.S. economy is expected to see continued growth, although at a lower level than in recent years at 1.8%. But it could be buoyed by continued investments in artificial intelligence and the corresponding energy infrastructure supplying it, according to an economic forecast from Indiana University Kelley School of Business.

“Investment in AI will likely be the dominant economic story of 2026,” said Kyle Anderson, clinical assistant professor of business economics, faculty chair of the Evening MBA Program and assistant dean for academic programs at Kelley Indianapolis. “While investment will continue, there are concerns about over-investment, reminiscent of the early 2000s dot-com bubble.

“Uncertainty will remain high around U.S. trade policy. Legal challenges and constantly changing tariff rates and policies from the administration make it difficult for businesses to make investment decisions.”

Nationally, job creation will not be strong enough to keep the unemployment rate from rising to 4.8% in 2026. Companies will hope to use AI to drive productivity gains and increase output without increasing labor.

Russell Rhoads, clinical associate professor of financial management at Kelley Indianapolis, said 2025 is shaping up to be the third consecutive year of double-digit performance for the S&P 500.

“With the Fed set to continue cutting rates in 2026, a positive year may be on tap for stocks once again,” he said. “But repeating the strong performance of the past three years could be difficult due to elevated valuations, along with slower economic activity expected in 2026.”

Other key points from the Futurecast:

• The world economy suffered less from ongoing trade conflicts than expected, but the level of uncertainty remains high. It is expected to grow by 3.2% in 2025, and slightly slow down to 3.1% in 2026.
• U.S. inflation will remain elevated around 3%, because tariff pricing pressures will offset the disinflationary benefits of weakening demand.