Hi, I’m Carl Tannenbaum, Chief Economist for Northern Trust. I participated on a panel recently, where the moderator characterized 2025 as an “eventful” year.  When my turn to speak arrived, I suggested that “seismic,” “transformational,” or “challenging” might be better descriptors.

During the past 12 months, we have witnessed some of the most significant policy shifts in recent memory.  Economic, strategic and fiscal norms have all been challenged, creating a level of uncertainty that has been hard to keep up with. Firms, households, and governments have had to chart new courses.

Fortunately, challenges to the foundations of global growth did not cause them to crack, and we expect the global expansion to continue at a modest pace in 2026.

But this prediction will depend critically on three themes, which offer grounds for both optimism and concern.

Fly-In: Theme 1: Rising Innovation, Declining Demographics

The first of these is “Rising Innovation, Declining Demographics.”

Technological progress continues to accelerate, with artificial intelligence at the heart of it. AI promises to deliver efficiency gains and unlock new growth opportunities.  In doing so, it will compensate for the aging of societies.

The United States and China are competing fiercely for leadership in the AI arena.  Countries that are unable to keep pace will struggle to sustain long-term economic growth.

For all of its potential, AI could bring some downsides.  Stress on the electric grid, job displacement, privacy concerns and the use of the technology for ill rather than good will require careful handling.

Fly-In: Theme 2: The Global Shift to Self-Reliance

Our second theme for the new year is “The Global Shift to Self-Reliance.”

The tariff wars of 2025 accelerated a trend toward greater economic self-sufficiency.  While this shift promises resilience, it comes with higher costs. 

For economies that depend on exports, the shift threatens growth prospects.  For importers like the United States, sourcing and pricing have become more complicated. The related paradigm change in global security could have important long-term consequences for some countries and regions.

Fly-In: Theme 3: Debt and Deficits Loom Large

Our final theme for 2026 is “Debt and Deficits Loom Large.”

Fiscal discipline has been in short supply around the world, but the need for it is rising.  Massive debt burdens threaten higher interest rates, higher taxes and higher inflation in the years ahead.  Investors have been reasonably patient with the global accumulation of debt, but a day of reckoning may be on the horizon. 

Other terms that have been used to describe the past year are “volatile,” “path-breaking,” and “exhausting.”  2025 was all of those things, and more.  When we will look back on things a year from now, I hope that the terms “settled,” “balanced,” and “prosperous” will feature prominently in our retrospective.  A little calm after this year’s storms would be most welcome.

And that’s the view from here.