Estate, Gift & Trust Conference - Virtual-Boyle

Boyle - Economic Outlook

Pdf Summary

Northern Trust’s May 2026 outlook argues that the global economy faces a broad set of disruptions, led by conflict in the Middle East, trade policy uncertainty, labor-market shifts, and emerging financial risks.<br /><br />The report says the ceasefire in the Iran-Israel war is fragile and that any long-term settlement will be difficult because both sides view the conflict as existential. The closure of the Strait of Hormuz has created major supply shocks, disrupting oil, LNG, shipping, fertilizers, and other commodities. Energy prices have risen sharply, with knock-on effects for transport costs and inflation. Northern Trust expects these shocks to weigh on growth, especially in Europe and Asia, while also putting upward pressure on interest rates and complicating central bank decisions.<br /><br />In the U.S., inflation is expected to rise modestly from higher fuel, heating, and airfare costs, but core inflation should remain relatively contained and long-run inflation expectations anchored. Central banks, especially the ECB, may stay cautious or even tighten if inflation risks spread. The report also notes that a Supreme Court ruling is forcing a reset in U.S. tariff policy, which could increase trade uncertainty and reduce Treasury tariff revenue.<br /><br />The labor market remains in a “no hire, no fire” pattern: payroll growth is subdued, layoffs are still contained, and low labor-force participation is keeping unemployment in check. Immigration sentiment has turned more negative.<br /><br />The Federal Reserve faces familiar inflation and policy challenges despite new leadership. Meanwhile, private credit markets are drawing concern due to opacity, redemption pressure, and potential systemic risk.<br /><br />The report closes by highlighting AI as a major investment theme with productivity potential, but also warns of job displacement and heavy demands on electricity and water infrastructure.<br /><br />Northern Trust’s latest forecasts show slower but positive global growth in 2026 and 2027.

Keywords

global economy

Middle East conflict

Iran-Israel war

Strait of Hormuz

energy prices

trade policy uncertainty

labor market

inflation

Federal Reserve

artificial intelligence