One of the oddest features of the U.S. economy in 2026 is how unsettled everything feels without an obvious crisis to point to. Growth lurches rather than glides. Inflation ebbs but does not quite disappear. The labor market cools in some sectors and stays tight in others. Financial conditions oscillate with every policy hint and geopolitical headline. It's not the smooth expansions of the 1990s, nor the sharp boom‑and‑bust of 2008. It is something more jagged.
Markets are slowly adjusting. For much of the last decade, investors had a one‑way bet: weakness brought easier money, which reflated asset prices. That assumption doesn't hold. With rates off the floor and inflation still a concern, policymakers have less freedom to respond to every wobble with easing. Good data can be seen as bad for bonds; weak data is not automatically good for equities if it raises stagflation fears.
For businesses, this "jagged cycle" shows up as persistent difficulty in planning. Input costs are more volatile. Wage dynamics differ by industry and region. Demand forecasts shift suddenly. The notion of a stable trend line has given way to acceptance that volatility is part of the base case.
Some sectors adapt more easily: strong balance sheets, flexible cost structures, pricing power. Others—highly leveraged, fixed costs, thin margins, discretionary spending—are at the mercy of each twist.
Equity investors are relearning the importance of resilience: diversified revenue, conservative financing, management discipline across cycles. The market is less forgiving of "single narrative" stories.
In fixed income, the jagged cycle complicates duration. A negative growth shock might be met with only modest easing if inflation is still above target. Many allocators stay closer to the front and middle of the curve.
Corporate credit: refinancing walls loom. Each quarter brings issuers who must decide whether to lock in higher coupons or pursue liability management. The difference between businesses that can self‑fund and those dependent on market access has rarely mattered more.
Perhaps the most subtle change: how risk is perceived. For much of the last cycle, risk was volatility alone, and volatility was low. In 2026, volatility is higher but not catastrophic. Instead of a single threat, there is a cluster of medium‑sized uncertainties: geopolitics, climate, cyber, policy mistakes, social unrest.
For long‑term investors, the rational response is not retreat but diversification, avoiding assumptions that yesterday's hedges will behave the same. The jagged business cycle does not guarantee disaster. It may even be healthier than an artificially smoothed one. But it demands a different temperament: less reliance on zero‑rate playbooks, more humility about macro forecasting, more emphasis on structures that can survive a range of plausible futures.