2025 was a year shaped by shifting interest rates, stubborn inflation, and turbulent tariffs. And in 2026, investors are asking what these factors will mean for US corporate earnings in the year ahead.
In this article, we’ll explore how these forces have caused 2026 earnings forecasts to evolve over the past year. We’ll also dive into which parts of the market are forecast to outperform, as well as key themes investors should watch as they prepare for what’s next.
This article isn’t personal advice. If you’re not sure an investment is right for you, ask for financial advice. Remember, all investments and any income from them can rise and fall in value, so you could get back less than you invest.
What are the macroeconomic drivers to watch?
1. Inflation
The inflation picture in the US is more favourable than on this side of the pond. While inflation rates have moderated from their post-pandemic highs, they're still sitting just above the Federal Reserve’s (Fed) long-term target. Wage growth, commodity prices (especially energy), and supply chain dynamics will all play their part in determining inflation. Lower inflation would likely help improve profitability among businesses.
Key watchpoints: Inflation trends and their impact on businesses’ costs and consumers’ spending power.
2. Interest rates
The path of interest rates will remain a key theme for 2026. President Trump was highly critical of the Federal Reserve last year, arguing that it was too slow to cut interest rates. Markets are currently pricing two rate cuts in 2026. If this happens, it would help lower borrowing costs, stimulate consumer and business spending and support earnings growth – especially for rate-sensitive sectors like tech and housing.
Key watchpoints: How far and fast the Fed lowers interest rates. More cuts than expected would likely be favourable for earnings and valuations, but could overheat the market, and cause a resurgence of inflation and even damage economic growth.
3. Geopolitical tensions
2026 has already seen a handful of major geopolitical events, including the US capturing Venezuelan President Nicolás Maduro. Tensions between the US and some of its historic allies, such as the UK and European countries, have also risen after Trump threatened them with tariffs if they didn’t back his attempt to take over Greenland. US/China relations remain frosty too, and any deterioration on this front would likely have a negative impact on demand for US exports, earnings and inflation.
Key watchpoints: Any shifts in trade policy and US/China relations.
How does this impact earnings expectations for 2026?
On the whole, US earnings expectations for 2026 have crept higher since the beginning of 2025 (see fourth group in the below chart – All Sectors).
The move higher has been driven by increased optimism in sectors such as Information Technology, Materials, and Real Estate. This comes as Artificial Intelligence (AI) continues to power strong growth expectations for Tech companies. Gold and silver have become safe havens for investors, and there’s potential for some other materials to rebound from their cyclical lows. Real estate is expected to benefit from favourable market dynamics, such as demand for prime office space surpassing pre-Covid levels of demand despite limited availability.
This growing optimism in these sectors has been tempered by a fall in earnings growth expectations across most of the other sectors, including a sharp decline in the Energy sector, as oversupply fears are putting downward pressure on oil prices. Given that oil prices are controlled by many factors outside of the oil companies’ control, the picture here can change quickly, for better or worse.
Key earnings themes for 2026
AI Everywhere
AI looks set to continue dominating the investment landscape. Cloud providers, chip makers, and software firms were the first to benefit as companies invested in building out their capabilities. While this movement has more to run, the earnings story is no longer confined to the tech giants.
AI adoption is broadening across industries, from healthcare and manufacturing to finance and retail. Companies are beginning to report measurable productivity gains, cost efficiencies, and new revenue streams tied directly to AI deployment. Software firms are monetising AI features through premium subscriptions, while industrial and service sectors are seeing margin expansion from automation and smarter analytics.
For investors, the conversation is moving from “who has AI exposure” to “who’s getting paid for it.” The winners in 2026 will be those translating data and automation into tangible business outcomes like shorter product cycles, leaner cost bases, pricing power and higher customer engagement.
Defence and cybersecurity
The US government is expected to increase its defence budget by 12% to record levels of $962bn for 2026. This comes amid rising geopolitical tensions and the need to modernise its military capabilities.
The higher threat environment is unlikely to disappear swiftly, so the elevated spending levels look set to be long-lasting in our view. This should not only benefit traditional large US defence contractors, but also fuel growth among the smaller names, which tend to be more focused on newer and less proven technologies. Hypersonics, space capabilities and AI-enabled command networks are the technologies key to future warfare, and companies that can deliver breakthroughs on these fronts are likely to do well.
Cybersecurity is now a core pillar of national defence strategy. Rising cyber threats targeting critical infrastructure, supply chains, and AI systems have pushed government agencies and corporations to increase their cybersecurity budgets. 2026 could be the year when the line between defence and digital security blurs, and investors should see defence and cybersecurity more broadly as a long-term opportunity.
Healthcare
Expectations for Healthcare earnings have crept slightly higher since the start of 2025, now expected to rise by 8.8% in 2026. This growth’s underpinned by long-term demographic trends and renewed investor confidence about innovation in the sector.
Ageing populations, rising chronic disease rates, and post-pandemic shifts in care delivery are creating sustained demand for pharmaceuticals, medical devices, and healthcare services. Biopharma firms are benefiting from a more favourable regulatory backdrop and a rebound in elective procedures, while investment in obesity and cardiovascular treatments continues to gather pace following the success of GLP-1 (obesity) drugs.
Meanwhile, digital health and AI-powered diagnostics are also emerging as key earnings drivers. Hospitals and insurers are turning to automation to manage costs and improve efficiency, helping offset persistent wage pressures across the sector. Healthcare spending is typically resilient during economic slowdowns, making it an attractive defensive play in a still-uncertain macro environment. However, policy risk on tariffs and drug pricing remains a key issue to monitor.
For investors, the winners in 2026 are likely to be those balancing strong pipelines and pricing power with disciplined cost control and operational efficiency.
What about valuations?
As always, valuations are key. Nothing is worth an infinite price, so getting value for your investment should remain at the forefront of your decision-making process.
The current AI-fuelled market is bringing comparisons to bubbles of bygone years – the dot-com crash perhaps the most common. The tech giants' meteoric rise, including Nvidia becoming the first company to reach $5 trillion in market value, has added fuel to that fire.
It’s all too easy to get caught up in these kinds of headlines and decide to stay out of the AI sector or stock market altogether. But after looking deeper into the numbers, we don’t buy the bubble narrative.
Yes, the market is concentrated. And yes, valuations are higher than we’ve seen in recent years. But if we look at the tech-heavy Nasdaq-100 index, the earnings multiple isn’t in crazy territory.
That means that while valuations have soared recently, they’ve largely been backed up by rising profits – a sign of genuine earnings power rather than pure speculation. Importantly, we also think that the current group of market leaders are significantly stronger operationally and financially than the bubble stocks of the dot-com era.
Still, investors should remain mindful of how much future growth is already priced in. Consensus forecasts point to double-digit earnings growth in most sectors for 2026, with the highest rates in technology and industrials. Any disappointment could trigger sharp pullbacks.
While we remain positive on AI and view its integration into workflows as being in its early stages, spreading your eggs across several baskets looks like the wisest move. Diversifying both within the AI theme and across sectors can help balance risk and reward.
Sectors trading on more modest valuations – like financials, healthcare, and parts of consumer staples – could offer opportunities as the benefits of AI begin to filter through the wider economy. Expected increased efficiencies, higher outputs and improved profitability across industries should support broader earnings growth over time. But patience and selectivity will be key.
Key takeaways for investors
2026 looks set to be a year where the overall direction of travel for US earnings looks positive, but the drivers behind that growth are shifting.
Macro matters – Inflation and interest rates remain key swing factors for earnings. A smoother disinflation path and lower borrowing costs would support profits, but any surprises from the Fed in either direction or fresh trade tensions could quickly change sentiment.
AI and productivity – The biggest theme continues to be AI, but the focus has moved from hype to delivery. Investors should look for companies using AI to grow revenues and expand margins, not just those talking about it.
Long-term tailwinds – The defence, cybersecurity, and healthcare sectors all stand out as areas currently benefitting from structural growth drivers. They are supported by long-term government and demographic trends, rather than short-term cycles. Investors should keep an eye out for these kinds of markets and look to take advantage of any short-term mispricing.
Valuations matter – Even in strong growth stories, investors should weigh earnings potential against what’s already priced in. Tools like the Price/Earnings to Growth ratio can help assess whether a valuation looks justified by growth expectations.
Overall, 2026 could reward those companies and investors focusing on execution, efficiency, and pricing power, rather than chasing short-term momentum.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Past performance is not a guide to the future. Investments rise and fall in value so investors could make a loss. Yields are variable and not guaranteed.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.