2026 Predictions
This week we review our 2025 predictions, make new ones for 2026, and give thanks.
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2026 Predictions…
Each year I make market predictions for the year ahead. It’s mostly just for fun, but it’s also turned out to be a useful way to reflect on the year gone by and think about how markets might behave next.
Last year, I made a few predictions - let’s see the results.
Major indices do less well than in 2024: Result - Correct, but let’s face it markets had another stellar year, up 18% (vs 27% YTD 2024).
International stocks outshine US stocks: Result - Correct, but marginally. Year-to-date the Global ex-US index is up 19%.
AI will hit a wall (temporarily): Result - Incorrect - The AI play has continued to outshine this year, with the Artificial Intelligence & Tech ETF (AIQ) up 33% this year. Not only that but we saw several ‘AI Losers’ perform terribly in comparison. For example, the WisdomTree Cloud Computing Fund is down nearly 6% YTD.
M&A Activity/IPOs will pick up: Result - Correct - According to JPM, so far this year M&A volume is up 39% versus last year, and according to EY the number of Global IPOs increased about 4% versus last year. This number likely would have been higher had it not been the tariff tantrum in Q2.
3/4 ain’t bad! Generally, I think if you played 2025 just like you played 2024 (US-weighted with a tech focus) you would have done just fine. The question becomes will that same strategy work in 2026?
The AI Trade:
Many are calling a market top on the back of the AI bubble. It’s easy to see why. We’re seeing startups raise billions just months after launch or shortly after their previous round. We’re also seeing a degree of circular investing and revenue, with hyperscalers and chip companies funding the very startups that, in turn, consume their compute and services.
Market participants often point to the early-2000s tech bubble as a warning sign. But my study of that period suggests something more nuanced. Despite many seasoned investors calling a bubble as early as late 1998, things went on to get far crazier, with the market not peaking until mid-2000. Importantly, today’s “excesses” are not entirely unbacked. Revenue is real. Even in the case of circular economics, a company like OpenAI is still on track to exit 2025 with roughly $20 billion in revenue. Capex is undeniably high, but in many cases it is being funded through balance sheets and operating cash flows, as with companies like Alphabet.
Critics often argue that heavy capex inevitably leads to overbuilding, pointing to the fiber glut of 2000 as evidence. That risk exists, but it is better described as uncertainty rather than inevitability. The outcome can only be judged after the fact. Moreover, the fuel behind this cycle is far larger than it was in 2000. There are more venture firms, more sovereign wealth capital, deeper credit pools, and larger pension funds capable of sustaining the trade for longer.
My point is not that the bubble will not pop. It’s that it will likely take longer this time. Which is why my first prediction for 2026 is simple: the AI bubble is more likely to keep inflating than to deflate.
Gold:
My second prediction is that gold continues to run. Gold has already had an epic year, up over 70%. However, this may just be the start of a more extreme move. There are several structural factors that should support, if not increase, the price of gold going forward. First, central banks have been buying more gold since the U.S. froze Russian dollar-denominated assets. Second, volatility under the Trump administration has accelerated the search for assets outside U.S. Treasuries. Today, 43% of central banks expect to buy more gold over the next year, up from just 8% in 2019. Third, loose monetary policy and persistent inflation have pushed investors away from fiat currencies, while crypto has failed to prove itself as a reliable uncorrelated asset, unlike gold. Lastly, we remain in an interest-rate-cutting cycle, which has historically been supportive for the metal. (That said, an hour after I wrote this I walked by the Gold trading shop near my office, and there was a line out the door…so… expect a few pullbacks)
Many smaller predictions:
The above predictions have some skin in the game as our portfolio reflects both realities coming true. Below are predictions that could have large ramifications, but more gut feel than anything I can justify with data or evidence.
The China trade fades - China tech is not that cheap anymore, the economy continues to struggle.
Bonds have a bad year - Declining rates are offset by an increase in risk premium as market loses faith in fiscal health of the US economy/government.
Defense stocks take a breather - Wars simmer down, a peace deal reached with Russia/Ukraine, global fears dialed back
US Supreme Court repeals tariffs - retailers, cross-border tech, industrials all rally.
Remember, the above is just for fun - predicting macro is in my opinion a fool’s errand, but just like politics it doesn’t mean it’s not interesting to talk about.
Lastly, on a final note, this blog grew significantly again this year. Its always surprising/humbling to think people from all over the world find what I have to say interesting. So, I can’t thank you enough for taking the time to read these posts. May you have a great end of the year, and wishing the best for you and your families for 2026. Thanks for reading, and happy investing!
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Good read as always
With subtle observation and deep study you have narrated it all aspects.