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CLA OUTLOOK

Key Insights for Sound Financial Strategies

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MARCH 16 WEEKLY INSIGHTS
Underlying inflation pressures continue to moderate as core inflation holds steady
  • Last week, the February CPI report reinforced the disinflation narrative and supporting the view underlying price pressures are easing.
  • Core inflation continued to trend lower, rising 0.2% month-over-month, with the year over year core rate holding at 2.5%, near its lowest level since 2021. 
  • The important shelter inflation continued to cool, with rents rising just 0.1% month-over-month, supporting expectations housing related inflation pressures may ease further in coming quarters. 
  • As oil moves back towards $100 per barrel, the Federal Reserve will monitor short-term inflationary effects in context of the longer-term trend.
  • Assuming energy related volatility doesn’t feed through into core prices, the recent data supports an easing policy at the Fed with the next cut anticipated this summer. (Source: BLS, Trading Economics)
The U.S. dollar faces a key test at a 16-year trend
  • The U.S. dollar remains structurally strong versus global currencies, with the dollar index trending higher since the aftermath of the 2008 financial crisis.
  • Above trend U.S. economic growth following the 2008 crisis sustained demand for dollars, reinforcing the currency and supporting import activity. 
  • More recently, signs of potential inflection have emerged as deglobalization pressures increase, tariffs resurface, and Europe deploys more aggressive fiscal stimulus. 
  • The dollar now sits near a long term trend level; a rebound would continue to favor U.S. equities, while a sustained break lower would support international and emerging market assets. 
  • CLA actively monitors these dynamics to appropriately position globally diversified portfolios, currently holding 24% international and 5% emerging markets in a core portfolio while also adding a European fund complement in 2024 to increase exposure.
A softening labor market shapes the Fed’s dual mandate trade-off
  • The U.S. unemployment rate rose to 4.4% in February alongside a 92,000 decline in nonfarm payrolls, signaling a cooling labor market. This increases downside risks to the Fed’s “maximum employment” mandate.
  • Recent job losses and a modest rise in unemployment have pushed markets to price in a higher probability of Fed rate cuts in 2026, as policymakers balance weakening employment conditions against still elevated inflation.
  • While employment data have weakened, Fed communications emphasize job gains are low but unemployment is stabilizing.
  • The Fed appears inclined toward measured, incremental cuts, aiming to support the labor market without prematurely easing financial conditions and reigniting inflation pressures. 
  • The dual mandate emphases inflation risks now with rate cuts being pared back to a 30% chance of no rate cut by December 2027 (from only 5% one month ago). (Source: Federal Reserve)

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Tune in to the CLA Outlook for 2026 as we discuss timely topics around policy, the economy, and market performance.
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Strategic Opportunities

The Big Picture for 2026

The CLA Outlook signals a turning point: stabilized inflation, growth above trend, and easing interest rates. Explore the key forces influencing portfolios in the year ahead.

  • Economic outlook

    Growth is back on the horizon after three years of higher interest rates and restrictive Federal Reserve policies, with AI helping to transform industries.

  • Fiscal policy

    The rising U.S. deficit remains a key concern as government spending continues to outpace revenues — watch for this to be a focal point heading into midterm elections.

  • Fixed income outlook

    Lower interest rates should be a tailwind to bonds in 2026, though consider credit quality and duration when building high-quality income portfolios.

  • Equity outlook

    Despite elevated stock valuations, led by tech-dominant Magnificent-7 stocks, equities remain compelling because of strong earnings growth and a robust economic backdrop.

  • Alternatives outlook

    Lower interest rates favor private equity and private real estate, while private credit can warrant caution. Manager selection and due diligence remain critical.

  • We can help

    No matter your financial position, incorporating sound tax and wealth advisory could help you achieve more.

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