The U.S. economy enters 2026 on the back of a landmark year for corporate performance. Large U.S. companies, as represented by the S&P 500 Index, achieved record operating earnings in 2025. This robust profitability has not merely been returned to shareholders; it is being aggressively recycled into the real economy through historic levels of capital expenditure. Analysts expect another year of strong earnings growth in 2026, according to FactSet.
A New Era of Fixed Investment
Domestic businesses are investing in the future at an unprecedented scale. Private nonresidential fixed investment, a critical metric encompassing factories, equipment, and software, reached a new all-time high of approximately $4.3 trillion, according to Federal Reserve data. This surge is particularly evident in two key areas:
- Manufacturing Facilities: Driven by onshoring initiatives, investment in domestic production capacity has skyrocketed in recent years.
- Intellectual Property (IP): The race for Artificial Intelligence (AI) dominance has pushed IP investment to record levels, as firms integrate AI-enabled manufacturing systems and predictive maintenance tools into their operations.
Driving Long-Term Productivity
These investments are the primary catalysts for industrial capacity and workforce productivity. As the labor market faces structural tightening due to slowing labor force growth, companies are using technology to do more with less. Goldman Sachs Research indicates that AI-related spending alone contributed nearly a full percentage point to U.S. GDP growth recently, effectively shielding the economy from stagnation.
By modernizing the capital stock, U.S. firms are increasing the output per hour worked. This transition from fiscal dominance to productivity dominance ensures that wage growth can remain resilient without triggering inflationary spirals, anchoring the U.S. as a global leader in innovation-led growth.
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Any forecasts, figures, opinions or investment techniques and strategies explained are solely the authors as of the date of publication. They are considered to be accurate at the time of writing, but no warranty of accuracy is given and no liability in respect to error or omission is accepted. They are subject to change without reference or notification. The views contained herein are not be taken as an advice or a recommendation to buy or sell any investment and the material should not be relied upon as containing sufficient information to support an investment decision. It should be noted that the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested.
Past performance and yield may not be a reliable guide to future performance. Current performance may be higher or lower than the performance quoted. The securities identified and described may not represent all of the securities purchased, sold or recommended for client accounts. The reader should not assume that an investment in the securities identified was or will be profitable.
Data is provided by various sources and prepared by Shelton Capital Management
