Wars in Ukraine and Iran, shifting tariff policies, persistent inflation and the rapid rise of artificial intelligence have created no shortage of reasons for investors to feel uneasy about North America’s economic outlook. Yet despite the uncertainty, some market strategists see reasons for cautious optimism.

That was the message from Richard Belley, Managing Director, Fixed Income Strategist and Portfolio Manager at BMO Private Wealth, and François Trahan, Managing Director and Chief Investment Strategist at BMO Capital Markets, during the Perspectives 2026 conference held at BMO’s Montreal headquarters on June 9. While both acknowledged the challenges facing investors, they argued that several powerful economic forces could support growth in North America over the coming year.

“There has been so much noise in the markets over the past two years that investor fatigue can set in,” Belley said. “That can create volatility, but it’s important to stay focused on long-term growth objectives.”

Trahan, who joined BMO earlier this year, shared a similar view. In particular, he believes the full impact of lower interest rates has yet to be felt. “It typically takes about two years for rate cuts to work their way through the economy,” he said. “We’re getting close to that point now, and economic data should begin improving soon.”

While Trahan described himself as somewhat more optimistic than the consensus on both the Canadian and U.S. economies, he noted that the United States currently benefits from a significant advantage: fiscal policy.

The “Big Beautiful Bill,” passed in 2025, is expected to contribute more than one percentage point to U.S. economic growth this year, he said. At the same time, the massive investment cycle underway in data centres is providing another meaningful boost.

According to Trahan, spending by the five largest U.S. data-centre operators could add roughly 1.3 percentage points to GDP growth. Combined, those two factors account for nearly 2.5 percentage points of economic growth. “You could reasonably see the U.S. economy growing 3% to 4% in 2026,” he said.

The challenge, however, is that stronger growth may also lead to renewed inflationary pressures.

Inflation has already been pushed higher by Trump’s tariffs, Belley noted. He also questioned whether the U.S.-Iran conflict could add further upward pressure if oil prices remain elevated. “Even if oil prices come down somewhat, inflation remains relatively high,” he said.

Trahan agreed that higher oil prices can feed through to inflation quickly, but argued that North American economies are far better positioned to absorb those increases than they were years ago. “A US$100 barrel of oil today is not as damaging as it was 20 years ago,” he said. “We’re much more efficient, and both the Canadian and U.S. economies have a greater ability to absorb those higher prices. Expansionary monetary policy also helps.”

Even so, inflation remains one of his biggest concerns, particularly in the United States. “Almost every major policy coming from the Trump administration is inflationary,” he said. “That starts with tariffs, but it also includes the deportation of undocumented workers.”

One reason Trahan remains concerned about inflation is the ongoing pressure in the U.S. labour market. Since 2010, the retirement of baby boomers has removed roughly one million workers from the labour force each year. Retirees now account for approximately 20% of the U.S. population, up from 15% fifteen years ago.

The result is an unusually tight labour market. “There are now more job openings than available workers,” Trahan said. “We haven’t seen anything like this since the Vietnam War era.”

In his view, immigration is one of the few ways to ease those pressures in the short term. Yet current U.S. policy is moving in the opposite direction. According to data from the U.S. Bureau of Labor Statistics, undocumented workers account for nearly 7% of the workforce and more than one-third of construction workers.

As labour becomes scarcer, wages will naturally rise. While that may seem positive on the surface, Trahan argued that wage inflation ultimately contributes to broader inflationary pressures. “Wage inflation and economic inflation are really the same thing,” he said. “The Fed needs to be thinking carefully about that.”

Artificial intelligence is often cited as a potential solution to labour shortages because of its ability to improve productivity. However, both speakers suggested its impact on employment is likely to unfold more gradually than many expect.

Belley noted that AI is already helping businesses become more productive, raising questions about whether that productivity could eventually reduce demand for workers. Younger employees, for example, are already facing a more challenging entry-level job market.

Trahan believes those concerns may be overstated in the near term. Small and medium-sized businesses, which account for roughly three-quarters of U.S. employment, have not yet broadly adopted AI technologies.

“Until the local hardware store has the tools and infrastructure needed to effectively use AI, the impact on employment is likely to be limited. We’re talking about an impact on jobs that will probably unfold over three to five years,” he said.

While large corporations have invested heavily in AI, surveys from the National Federation of Independent Business suggest most small businesses remain focused on more immediate challenges, including inflation, energy costs and trade uncertainty.

The rapid expansion of data centres has also put additional pressure on energy costs. More than 4,200 data centres have contributed to a sharp increase in electricity demand over the past five years, helping push power prices roughly 50% higher.

“For most small businesses, the priority right now is managing inflation and navigating changes in trade,” Trahan said.

That focus may ultimately shape the political landscape as well. If inflation remains elevated, he suggested, voters could deliver a reminder to policymakers of what really matters to them economically during this year’s U.S. midterm elections.