Financial Resilience Planning: Strategies for the 2026 Economy

Looking ahead in 2026, recession risks appear relatively contained — particularly those related to restrictive monetary policy and broad, system wide asset bubbles. However, supply shocks remain the most unpredictable risk, given their external origins and sudden onset.

Thoughtful planning can’t prevent an economic downturn, but it can help reduce its impact and strengthen resilience. Discover how to improve financial visibility, manage liquidity, and stay disciplined through periods of market and economic volatility.

What is a recession?

The National Bureau of Economic Research (NBER) is the official authority determining when recessions begin and end in the United States. NBER defines a recession as “a significant decline in economic activity spread across the economy, lasting more than a few months.”

Not all recessions are equally severe. A recession reflects broad weakness in jobs, spending, and production, whereas a financial crisis is a more extreme recession where the financial system itself breaks down — banks fail, credit markets freeze, and confidence collapses — typically resulting in a deeper and longer lasting downturn (e.g., the Great Depression in the 1930s, the Great Recession of 2008 – 09).

The three most common causes of recessions

Most recessions in the United States can be explained by some combination of the following three recurring forces:

1. Restrictive monetary policy occurs when the Federal Reserve raises interest rates to cool an overheated economy or to curb inflation. Higher rates increase borrowing costs, while also slowing credit and money supply growth, weakening housing and business investment, and ultimately reducing overall demand.

2. Asset bubbles often lead to the most severe and disruptive recessions, as excessive leverage and speculative behavior build during economic expansions, frequently in housing, equity, or credit markets.

3. Supply shocks occur when sudden disruptions — such as energy price spikes or the COVID 19 pandemic — limit the availability of labor and goods. These disruptions can raise costs, fuel inflation, and reduce output and employment.

What can investors learn from past recessions?

This section links each recession over the past 50 years to one or more of the three most common causes shown above.

2020: Pandemic recession

The 2020 recession was driven primarily by a supply shock stemming from a public health crisis. Unlike prior downturns, banks entered the pandemic well capitalized, and credit markets remained functional, but lockdowns abruptly curtailed labor supply, travel, and consumer spending. The absence of financial system stress helps explain why the recession was severe but short-lived.

2008 – 2009: The Great Recession

The global financial crisis was the result of a massive asset bubble centered on housing and credit. Excess leverage across households, lenders, and financial institutions led to widespread bank failures and frozen credit markets. Economic recovery didn’t begin until financial stability was restored.

2001: Dot com recession

This recession followed the collapse of the late-1990s technology stock bubble after years of speculative excess. Falling equity values, reduced business investment, and corporate retrenchment slowed economic growth.

1990 – 1991: Early 1990s recession

This recession resulted from a combination of restrictive monetary policy, financial stress from the savings and loan crisis, and a temporary oil price shock related to the Gulf War. Business investment and consumer confidence weakened simultaneously.

1980 – 1982: Volcker disinflation recession

The Federal Reserve, under former chairman Paul Volcker, pursued aggressive monetary tightening to break deeply entrenched inflation — initially intensifying rate hikes amid energy price pressures and then tightening again as inflation proved persistent. Extremely high interest rates constrained borrowing, spending, and investment, culminating in a severe, extended downturn that ultimately helped restore price stability.

Keep on top of changing economic conditions by following the CLA Outlook.

What recession risks are most likely as we look ahead in 2026?

CLA views the overall odds of a recession in 2026 to be relatively low, with the caveat it’s difficult to predict if or when a supply shock will hit.

The risk of a recession driven by restrictive monetary policy currently appears very low.

Since September 2024, the Federal Reserve has lowered interest rates six times, with additional cuts anticipated later this year. Still, some risk remains that the economic fallout from the Fed’s aggressive tightening from 2022 through 2024 has not yet fully materialized.

In such a scenario, the current pace of easing could prove insufficient to fully counteract the lagged impact of the earlier rate hikes, leaving isolated areas of vulnerability within the broader economy.

Asset bubble risks also appear relatively contained heading into 2026.

Unlike the periods preceding the Great Depression or the Great Recession, there’s little evidence of widespread, system level leverage concentrated in a single asset class such as housing or bank balance sheets. But pockets of excess may exist.

Certain segments of the equity market — particularly U.S. large cap growth stocks — now trade at valuations appearing elevated relative to historical norms following the AI-driven rally, suggesting localized rather than systematic risk.

Supply shocks remain the most difficult risk to anticipate, given their inherently exogenous and abrupt nature.

The COVID-19 pandemic demonstrated how disruptions to labor supply, global logistics, and production capacity can reverberate through the economy even in the absence of financial imbalances.

Looking ahead in 2026, geopolitical tensions — including the recent hostilities involving Iran — alongside shifts in trade policy or renewed supply chain disruptions, could plausibly trigger an economic slowdown, particularly if they affect energy markets or critical shipping routes.

While no large scale supply shock has materialized, this category remains the most unpredictable — and therefore the most persistent — tail risk to our economic outlook.

Financial strategies to mitigate economic uncertainty

No strategy can eliminate the risks posed by an economic downturn, but thoughtful planning can help reduce the impact. Steps you can take to help mitigate economic uncertainty include:

Review your strategy and financial goals

• For individual investors, meet regularly with your wealth advisor — recommended annually and no less frequently than every two years — to update your financial plan, evaluate expected expenses, and help position your portfolio for long-term success through an integrated tax, estate, and financial planning approach.
• For business owners, help improve financial visibility for smarter decision-making by engaging in:
• Targeted tax planning, with particular focus on new tax incentives
• Evaluation of asset and capacity utilization, pricing strategies, budgeting decisions, and overall cost structure
• Financial modeling and scenario analysis to assess risks related to economic downturns, cost pressures, and supply shocks
• Enhanced reporting that distinguishes fixed versus variable costs and emphasizes controllable spending to enable rapid adjustments or scalable growth
• Review of revenue and supply chain concentrations, including consideration of acquisitions that may provide diversification or new capabilities
• Assessment of management teams, along with support for talent searches or outsourcing staff as needed

Managing liquidity is especially important as market conditions change. By staying nimble, tracking leading indicators, and following the CLA Outlook, investors can be better positioned to respond thoughtfully if an unexpected supply shock hits.

The goal is not to forecast the next crisis, but for your plan to be resilient enough to navigate uncertainty and keep you disciplined through periods of market and economic volatility.

How CLA can help with financial resilience planning

At CLA, we help businesses and investors turn uncertainty into informed action. By improving financial visibility, stress‑testing assumptions, and planning across multiple economic scenarios, we help you make confident decisions, even as conditions change.

Our CLA investment portfolios are constructed to remain resilient across the economic cycle through disciplined diversification and ongoing risk management.

Whether you’re preparing for volatility, managing liquidity, or evaluating strategic opportunities, our integrated advisory approach helps strengthen resilience today and position you for what’s next.

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