Downtown Bend will soon welcome The Hudson, a high-end steakhouse replacing 900 Wall, a longtime local favorite known for offering one of the best happy hours in Central Oregon. This change is more than a restaurant swap — it reflects a broader economic dynamic likely to define 2026: the continued rise of the K-shaped economy.
Households in the top 20% of income earners are experiencing sustained growth in discretionary spending power, fueling demand for premium goods and experiences. Meanwhile, lower-income households are pulling back as rising costs outpace wage growth. This divergence in consumer behavior is not a short-term anomaly; it is a structural trend that we expect to persist through 2026 and beyond.
A second defining trend for 2026 is the direction of inflation. Contrary to the widespread expectation that inflation will continue to ease, the underlying forces point to renewed upward pressure. Despite frequent political emphasis on “affordability,” several inflationary drivers are already in motion. The U.S. federal deficit is projected to exceed $1 trillion in 2026 — even amid strong economic growth nearing 3% and record tariff revenues. Treasury debt issuance remains at historic highs, electricity costs continue to rise, and businesses are facing higher wage demands due to an ongoing shortage of qualified workers.
Taken together, these factors suggest inflation could approach an annualized rate of 4% by the end of 2026. Higher inflation, in turn, is likely to keep borrowing costs elevated for both consumers and businesses, influencing investment decisions and long-term planning.
Against this backdrop, one of the greatest challenges business owners — and individuals more broadly — will face in 2026 is the sheer volume of noise and uncertainty. Elevated stock market valuations may be viewed by some as a warning sign, while others see them as evidence of a technology-driven productivity boom. Tariffs will continue to divide opinion, seen either as a strategic policy lever or simply another cost borne by American consumers. Adding to the complexity, the 2026 midterm election cycle will amplify political rhetoric and economic speculation.
In such an environment, success will favor those who can filter out the noise and concentrate on what they can control: pricing strategy, cost discipline, talent retention, customer value, and long-term positioning. While uncertainty may be unavoidable, clarity of focus will be a decisive advantage in 2026.
