From the studio

Video: Mark Haefele’s five New Year resolutions for 2026 (3 mins)
Video:Why gold isn’t the only commodity you need in 2026, with CIO’s Wayne Gordon (6 mins)
Video: The right alternatives mix for 2026, with Karim Cherif (6 mins)

Thought of the day

What happened?
US equities rose on Thursday as strong tech earnings reignited optimism in the AI trade, while a relatively tame inflation release bolstered hopes of further Federal Reserve easing. The S&P 500 rose 0.8%, and the tech-heavy Nasdaq gained 1.4%.

Micron shares jumped 10% after the memory chipmaker exceeded consensus estimates on both earnings and revenue. The company also provided profit guidance well ahead of analyst estimates and raised its capex, signaling confidence in future growth.

Meanwhile, inflation data also played a role in shaping market sentiment. The release of November’s consumer price index (CPI) revealed inflation moderating more than expected. Headline CPI rose at an annualized rate of 2.7%, below consensus expectations of 3.1%, while core CPI, which excludes volatile food and energy prices, increased 2.6% over the past year, compared to a prior estimate of 3%. Given the absence of October core readings, the report reflected an implied monthly increase of 0.08%, the lowest since March.

Despite lingering uncertainty about the accuracy of the data due to the government shutdown and the cancelation of October’s report, the benign set of inflation prints follows labor market data earlier in the week that revealed the highest unemployment rate in over four years, reinforcing market expectations for a more accommodative monetary policy stance from the Fed.

What do we think?
Tech stocks have experienced elevated volatility in recent weeks, prompted partially by rising concerns about an AI bubble. Notwithstanding the uncertainty, we remain constructive on the theme amid a resilient earnings growth outlook. We expect overall AI spending to reach USD 1.3tr by 2030, implying a 25% CAGR between 2025 and 2030, while the total addressable market (TAM) for AI is likely to grow to USD 3.1tr by 2030, reflecting a 30% CAGR over the same period.

On inflation, we note that the underlying data may not fully reflect actual price trends, as the Bureau of Labor Statistics (BLS) addressed missing data from the government shutdown period by applying adjustments that introduced biases into the report. For example, zero inflation was likely assumed more broadly than anticipated in many items. The BLS did not provide additional guidance on the size of the bias, and the report provided limited insight into the state of tariff pass-through on goods and the momentum in shelter disinflation.

We think policymakers may be cautious about interpreting this report as a definitive shift in inflation trends due to the methodological uncertainties, but we also believe this week’s data in aggregate does not prevent the Fed from moving closer to a neutral policy stance to support economic growth. We maintain our view for a 25-basis-point rate cut by the end of the first quarter of 2026.

How to invest
Against this current backdrop, we maintain an Attractive view on US equities, driven by resilient economic growth, Fed rate cuts, and AI advances.

We also see opportunities in quality bonds and gold. With the appeal of the US dollar eroding amid lower interest rates, we recommend that investors review their currency allocations. We expect US dollar weakness to persist into the first half of 2026. Investors should align their asset class allocations with their financial plan.

Add to equities. We believe the current environment of solid economic growth, healthy corporate earnings, lower interest rates, and structural innovation drivers makes this an opportune time to add tactical exposure to equity markets. The Fed’s rate cuts should support US stocks as historically experienced in non-recession periods. We forecast S&P 500 earnings per share will reach USD 305 in 2026—up 10% year over year—and see the index advancing to 7,700 by end-2026. Within US equities, we see compelling opportunities in tech, health care, utilities, as well as financials, broadening the foundation for further gains.

Transformational Innovation Opportunities (TRIOs). Our TRIO ideas of Artificial intelligence, Power and resources, and Longevity are founded on longer-term structural trends, and we see opportunities to add exposure over a tactical horizon. While the AI capex outlook remains robust, we expect that value creation will increasingly shift from the “enabling layer” to the “application layer” of the AI value chain. In Power and resources, the buildout of AI infrastructure should continue to support data center-linked demand. We also see broader opportunities in companies facilitating grid modernization and supplying critical raw materials. In the Longevity field, we expect strong growth in the obesity, oncology, and medical device markets.

Favor commodities. Commodities are set to play a more prominent role in portfolios in 2026. Our forecasts point to attractive returns, supported by supply-demand imbalances, heightened geopolitical risks, and long-term trends like the global energy transition. Because commodities have historically shown low correlation with equities and bonds, they can help cushion portfolios during periods of market stress. Within the asset class, we see particular opportunities in copper, aluminum, and agriculture, while gold remains a valuable diversifier against geopolitical risk.

Seek diversified income. The mix of tight credit spreads, uncertainty about government debt sustainability, and emergent stresses in credit markets suggests investors need to take a nuanced and diversified approach to yield generation. We believe this should include a mix of high-quality bonds, equity income strategies, and yield-generating structured investments, as well as select exposure to private credit. For 2026, we expect medium-duration quality bonds (four to seven years) to deliver mid-single-digit returns, from a mix of yield and capital appreciation as the Fed cuts rates.