The United States and Canada are proving more resilient than most other regions to the global economic fallout from the Middle East conflict, according to S&P Global Ratings' third-quarter 2026 global economic outlook. As net energy exporters, both countries have largely avoided the worst effects of the disruption to shipping through the Strait of Hormuz, which has roiled energy-importing economies elsewhere.
S&P Global Ratings has kept its 2026 GDP growth forecast for the U.S. broadly steady at 2.1%, and it has trimmed the probability of a U.S. recession to between 20% and 25%. The agency expects the labor market to continue strengthening modestly, with the unemployment rate remaining roughly flat in the near term. Headline consumer price index inflation in the U.S., currently running at 4.2%, is thought to be close to its peak.
The continued buildout of artificial intelligence infrastructure remains a meaningful growth driver for the U.S. economy, although S&P Global Ratings expects that contribution to taper off going forward. The agency estimates that AI-related investment, broadly defined, accounted for roughly half of U.S. private-sector spending growth in 2025, a trend it says is carrying into 2026 based on rising hyperscaler capital expenditure and debt issuance.
Canada's picture is more mixed. The economy stalled during the first quarter, though S&P Global Ratings expects a rebound in the second. Beyond that near-term recovery, the agency anticipates the Canadian economy will run below capacity for an extended stretch, with annual growth projected at around 1.1% for 2026 before climbing toward 2.0% in 2027.
On monetary policy, S&P Global Ratings expects the Federal Reserve to maintain a hawkish hold through the remainder of 2026, even as the likelihood of a further rate increase has ticked up. A resumption of rate cuts toward a neutral setting is expected to begin next year. The Bank of Canada, meanwhile, is forecast to hold its policy rate steady for the rest of this year.
The relatively resilient North American outlook stands in contrast to conditions across much of Europe and other energy-importing regions, where S&P Global Ratings has raised inflation forecasts and cut growth projections in response to the supply shock triggered by the conflict. Globally, the agency described the current economic environment as a tug of war between the disruption stemming from the Hormuz closure and the offsetting boost from AI-related investment.
A memorandum of understanding signed between the U.S. and Iran has introduced upside risk to the broader forecast, though S&P Global Ratings cautioned that shipping and energy flows through the strait will likely remain below prewar levels through the end of 2026 even if tensions ease. For advisors, the outlook suggests that client portfolios may benefit from continued U.S. equity exposure, though the Allianz Survey: 62% of Americans Fear Recession, 58% Seek More Portfolio Protection indicates persistent caution among retail investors.
Meanwhile, the Bain Report: Wealthy Clients Shift Spending from Goods to Experiences as Global Luxury Market Stabilizes highlights changing consumption patterns that could influence sector allocations. Additionally, the SoLo Funds Report: 44% of Americans Are Cash-Poor, Including 1 in 5 Earning Over $75,000 underscores the fragility of household balance sheets even amid a resilient macro backdrop.
