Alex's Analysis: Economic and Markets Update

In this episode of Bundy Group Insights, Managing Director Clint Bundy welcomes back Alex Chausovsky, President and CEO of 3DM Consulting and Bundy Group's economics and markets partner, for a wide-ranging discussion on the economic and geopolitical forces shaping 2026. As the conversation moves beyond a 2025 defined by uncertainty, Alex outlines why the operating environment ahead is better described as one of structural complexity—requiring more adaptive, scenario-driven decision-making from business leaders.

A central focus of the episode is tariffs and inflation, including what actually occurred in 2025 versus what many feared. Alex breaks down how tariff costs were absorbed across the system, with U.S. companies, consumers, and foreign exporters each bearing a share of the burden. While inflation remained relatively contained, Alex explains why margin pressure, pricing discipline, and cautious capital allocation will be defining themes in 2026, limiting expectations for near-term interest rate relief.

The discussion then turns to value creation for privately held businesses and how buyers are underwriting acquisitions in today's environment. Alex emphasizes that acquirers are investing in future cash flows—not historical results—making scenario planning, strategic flexibility, and resilience critical differentiators in an M&A process. The episode closes with a review of industry-level winners and losers, with particular emphasis on critical infrastructure services—including power solutions, energy, water, automation, and industrial services—alongside the accelerating role of AI and the geopolitical risks that could reshape global markets in the years ahead.

Key Takeaways

• 2026 is defined by complexity, requiring multifaceted strategies rather than single-path planning.
• Tariffs are a durable feature of the economic landscape, even as their structure continues to evolve.
• Inflation remained muted in 2025, but cost pressures are increasingly being passed through to end customers.
• Buyers prioritize confidence in future cash flows and a company's ability to perform across multiple scenarios.
• Critical infrastructure services—including power solutions, energy infrastructure, automation, and AI-adjacent sectors—are positioned to outperform in a bifurcated economy.

Key Insights

• Effective tariff rates rose sharply in 2025, but real-world impacts were softened through pricing, sourcing, and margin strategies.
• Roughly half of tariff costs were absorbed by U.S. companies, with approximately one-third passed to consumers.
• Interest rate policy is unlikely to provide a near-term catalyst for accelerated capital spending.
• Automation has shifted from a "nice-to-have" to a necessity due to labor constraints and clear ROI dynamics.
• Shifting global alliances and geopolitical tensions represent long-term risks that business leaders must actively plan around.

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