Chairman’s Letter – March 2026

“Forecasting the economy right now feels a bit like trying to carve a path through thick jungle undergrowth on a foggy day.” ¹ There are multiple layers of confusion, and a forecast should address these issues first before tracing out a possible path forward.

To be specific, at the start of 2026, there were, and are three broad areas of uncertainty. First, there is a divergence between dismal consumer confidence and euphoric stock market, neither of which appears to reflect actual underlying economic trends. Second, recent economic data are distorted and, in some cases, missing altogether, making it difficult to discern the starting point. Third, even as economists struggle to assess the reverberating effects of the Administration’s 2025 policy moves, new policy actions this year, along with Supreme Court decisions, could have a major bearing on the outlook.

Still, a forecast must start somewhere. What follows is a brief summary of how these issues are to be considered, what they may imply for the near-term economic outlook, and what they can mean for investors.

One of the publications I make a point to read prior to writing this letter is the Forbes Roundtable. One of my favorite contributors is Abby Joseph Cohen. She often seems to have a clearer picture than most, and I have followed her insights for many years. I have included several of her observations below.

“I want to talk about valuations. If stocks are inexpensive, investors can deal with unpleasant news. But if they are fully priced, or pricing in a wonderful scenario, that is a risky situation with little margin for error.

The S&P 500, which is market-cap weighted, is trading for about 23 times forward earnings. On an equal-weight basis, it is trading at 17 times earnings. The gap is extraordinary and speaks to the point others have raised: The opportunities from a valuation perspective are no longer primarily in large-cap names. They are increasingly in smaller-cap names.

If you take a more rigorous valuation approach based on discounted cash flow, the S&;P 500 is in challenging territory. Thus, I find myself looking not only at the consensus economic and earnings forecasts, but also at what could go wrong. There is a long list in 2026.” ²

AI-related capital spending has boosted not only S&P 500 earnings but also U.S. GDP in recent years. We should consider what may happen in the likely event that this spending slows.

Another area of concern is private credit. A great deal of money has flowed into this space, allowing companies to remain private longer. However, there is limited transparency regarding the quality and value of these investments.

I worry about crypto. Only a fraction of crypto-related transactions are tied to economic activity. As crypto usage has expanded in the U.S., often through stablecoins, margin debt has increased. While stablecoins can be backed by U.S. Treasuries, they may also be backed by uninsured deposits at issuing institutions. At the same time, regulatory oversight has weakened, and international coordination remains limited.

We haven’t talked about the U.S. debt situation. The federal debt has been rising, which is unusual when the economy is doing well. The Congressional Budget Office estimates that the 2025 omnibus spending bill will add $3.5 trillion to the debt over the next decade, and that estimate does not assume a recession. An increase of this magnitude is troubling.

David Kelly and Abby Cohen highlight key issues for our consideration as we face the economic market in 2026.

Clients always want to hear my thoughts and predictions for the coming year; however, as I frequently remind them, no one has the crystal ball and my predictions are like most others, are simply educated guesses. I have been reading economic forecasts and market projections for over 50 years. Each year from December through February, I read or listen to between 50 and 75 “guesses”. This includes money managers, economists, and business executives. I figured out early in my career that not everyone can be right. I have also learned that the census may not be right; in fact, many times the consensus is wrong. But, there will be somebody who will get it right and will have a profitable year, booking speaking engagements, and probably receiving a book offer. Another thing I have learned is that the person who got it right this year will probably not get it right the next 10 to 12 years.

To summarize this year’s research, most individuals and corporations are predicting positive GDP growth. At the low end, it is 1.5% to 2 %, on the high end, it’s 3% to 3.5%, and a few predict GDP growth will reach 5% by the end of the 4 th quarter. I would love to see 3% to 3.5% GDP growth, but we are probably be closer to 2.5%.

Most predict corporate earnings will remain strong and that conditions are such that earnings could outpace what most are predicting.

I do have concerns, and right at the top is inflation. Since the Supreme Court recently struck down the Trump tariffs, we will have to see what takes their place. I will provide our assessment in the next Chairman’s Letter.

Another area that is a concern is the housing market. I do not think the housing market will improve substantially, but it should be better than last year, as interest rates should decrease slightly.

The last area I will discuss is the labor market. That includes new jobs being created, unemployment numbers, participation rates, and the impact of artificial intelligence (AI); all of these numbers will be important as we move through the year. It is too early to have a clear picture of the labor market, but we will continue to pay close attention to unemployment and job creation.

Overall, 2026 should be positive for GDP growth, and the markets should continue their upward trajectory. Both will face challenges, and volatility will continue.

The world has changed, with the timing of this letter, Israel and the US have attacked Iran. Since this has just started, it is impossible to predict the outcome. I think, if it is a short war then there will be little impact. If the war is prolonged, then it will probably have a negative impact on the markets.

Finally, as I have said to you many times in this letter, it’s not what I can see that bothers me, it is what I can not see that I am always concerned about. That has not changed.

2026 marks a landmark year for Carter Financial Services. We are celebrating our 50 th year. There are few financial planning offices in the country that have been under the same ownership and leadership for 50 years. We are proud to hold that distinction. We owe that to you, our clients and our friends, who have supported us for the past 50 years. When I started financial planning in 1973, I had the desire to help people attain financial independence. I define financial independence as people having enough money that if they wanted to work, they could; if they did not want to, they did not have to. That is my same definition of financial independence today. We do many things in between, but our ultimate objective is to assist clients in reaching a point where they have a financially confident retirement.

For me, this profession has helped me achieve a personal goal of wanting my life to have significance and meaning. I believed that if I could help clients achieve their financial independence goals, that would ensure I would achieve my goals. Thank you to everyone. It has been a rewarding and fun 50 years!

¹ Podcast episode “A Baseline Forecast for 2026” from Notes on the Week Ahead
² Abby Joseph Cohen, speaking in the Barron’s Roundtable (Barron’s, 2026).

Any opinions are those of Bill E. Carter and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. The information contained here does not purport to be a complete description of the securities, markets, or developments referred to in this material. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Past performance may not be indicative of future results. Future investment performance cannot be guaranteed, investment yields will fluctuate with market conditions. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including asset allocation and diversification. Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment.

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