🔭 The 2026 OptimistiCallie anti-outlook

Hey hey, happy Monday! 

It’s my last OptimistiCallie post before going out on maternity leave (I’m awaiting the arrival of twins in the next two months, eek!) and it’s the beginning of Wall Street outlook season, so why not go out with a bang?

Today…the 2026 OptimistiCallie anti-outlook. No predictions, no targets. Just the themes I’m watching next year, because nobody has a crystal ball. 

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Mariah Carey’s famous holiday song is playing at your local grocery store.

You know what that means.

You’d better start shopping for presents and getting those holiday cards together.

Also, it’s Wall Street’s merry outlook season.

A time when market experts across the land peer into their crystal balls and give us long, in-depth proclamations about what the numbers and vibes tell them will happen in the upcoming year. Complete with predictions, year-end targets, cautiously optimistic mantras– the whole shebang.

Then they retreat to their ski chalets in the Poconos for the holidays.

I don’t have a ski chalet, so I technically can’t participate in this honored tradition. In fact, I won’t be skiing at all over the holidays, unless you count on a mountain of diapers.

But I’ll indulge you, because this year has been a long one, and I think there’s value in discussing what could broadly shape markets and the economy over the next 12 months. Especially since I’m about to go radio silent (ish, writers always get the itch from time to time, no promises!).

So, I present to you: the OptimistiCallie 2026 anti-outlook.

No targets. No predictions. No sales pitches or marketing gimmicks.

Just the good stuff – the themes I’m watching, and what they could mean for your money.

First up, the AI trade. Of course.

By now, it’s hard to argue that AI isn’t a game-changing technology.

I’ll give you some numbers.

• OpenAI, the brand name of LLMs, has about 800 million monthly active users.

• 88% of businesses have begun experimenting with AI, according to a November McKinsey report.

• A Bloomberg index of the top 20 AI-focused stocks has grown by $4.3 trillion in market value.

Staggering numbers, with more discovery likely ahead.

We’re past the early days of wide-eyed exploration, though. By now, your friends and family are using ChatGPT and we’re all talking about how robots will displace us from our jobs. The expectations for AI are high when just a few years ago, they were virtually non-existent.

High expectations are a tough setup for stock gains, mainly because market values reflect what investors think is coming. Disappointment with a high bar can kneecap a rally.

Case in point – AI spending. Tech investors are starting to furrow their brows over hundreds of billions in hyperscaler spending expected for next year (I wrote about this a few weeks back). Not every tech company can pay for it out of pocket, either.

Enter big debt sales and depressed free cash flow projections, which have cracked the seemingly untouchable AI trade. As I’m writing this, Meta and Oracle are down more than 20% from recent highs on skepticism that they’re paying more than their balance sheets can handle for an unproven project.

People are becoming more discerning about AI stocks instead of blindly throwing cash at every company that partners with OpenAI.

That doesn’t mean the AI rally is dead, just maturing. This is the lifecycle of tech innovation.

Try not to over-index on AI in the upcoming year. Tech is showing us just how fleeting the spotlight can be. Be extra attentive to how much of your portfolio is allocated to tech, because you’re probably more invested than you think. And going all in on Nvidia sounds like an excellent idea until a DeepSeek moment or tariff headline wipes out 30% of your position.

Lucky for us, though – Wall Street analysts think profit growth will be more broad-based next year. Tech earnings momentum is expected to slow, yet every sector is expected to increase its earnings next year for the first time since 2018.

Small-cap profit growth is also expected to exceed large-cap growth for the first year since 2022.

The stock market is too reliant on AI – a compelling story that’s feeling challenged at the moment. Look for growth outside of tech, because broad participation is way overdue. If AI skepticism overwhelms everything else and stock prices turn, more fairly valued sectors could cushion your portfolio.

Corporate America may look sturdy heading into next year, but our current economic struggles don’t magically evaporate with a turn of the calendar.

In January, Wall Street was riding high on a job market recovery.

Hiring had mysteriously surged in the last two months of 2024 after a rough summer. Somehow, the fate of the labor market had turned around with a few interest rate cuts. It felt like the Federal Reserve’s band of nerds had officially turned the ship around.

Fast forward, and the hope has deflated fast. Payrolls have stagnated, unemployment has crept higher and faith in the job market has dwindled away.

You could point to several labor indicators at the moment that show we’re on the edge of a recession. Corporate America’s sturdiness is coming as they shed jobs and nuke expansion plans. Not great.

And yet, Americans keep spending.

Why? It’s complicated. 

Trends over the next few months could make labor market signals even more screwy. Consumers are set to reap more in tax refunds and businesses could enjoy more flexibility on deductions and tax breaks thanks to the OBBBA. The government shutdown could lead to a rebound in spending early next year. Heck, most international tariffs could be struck down by the Supreme Court. The engine of the economy might get an extra jolt.

Next year could feel like a reprieve for the economy if we make it through what could be a tough fourth quarter. But will it be the start of a permanent recovery? Doubtful.

The job market is currently on the edge of the cliff, and I’m not sure what pulls us back from the brink.

Another tricky dynamic: inflation.

Affordability is still the big thorn in Americans’ sides.

For a while there, you could make the argument that paychecks were growing faster than prices.  Sure, you gasped every time you checked out at the grocery store, but from a birds’ eye view, many Americans saw their income surpass inflation.

Now, with the average cost of living growing at a 3% clip and wage growth slowing down in a fairly weak job market, our ability to outearn inflation is shrinking. As of August, pay for non-supervisory workers grew 3.9% year over year, while prices (via the Consumer Price Index) rose 2.9% year over year.

To make things worse, we’re staring down two mini inflation crises that feel particularly insolvable right now: medical/insurance and electricity costs. Affordable Care Act subsidies are set to run out at the end of this year, which could boost insurance premiums by 20 to 30% for ACA users (and potentially bleed into employers’ and private insurance holders’ wallets).

Electricity demand has surged with AI usage, and some energy experts worry about rising utility costs down the road. These are two early storylines, but they’re worth watching with medical services and energy comprising about 40% of CPI.

Oh yeah, and there’s the possibility of more burdensome tariffs.

Speaking of…we need to talk about the policy rollercoaster.

I’m not going to beat around the bush here.

2025 was exhausting in policy land, and the economy is likely worse off now because of all the snip-snap decisions.

The policy nonsense shows no signs of slowing down. If tariffs are deemed illegal by the Supreme Court, the White House will likely impose the same policy under different statutes. Sure, it’ll be a more onerous process, but not impossible.

The Fed isn’t in the best position to help, either. Its main job is to balance maximum employment with stable price growth, but right now, both sides of that equation need help. While Fed policymakers have helped the job market’s woes with recent rate cuts, their ability to help may be limited until inflation nosedives. For that, we might need to see the job market fall off that proverbial cliff.

Policy still has the economy in a chokehold, even though that grip may ease a little heading into next year. That low-rate, easy-money feeling though? We’re probably not going to get it without a little economic pain.

So how do you survive a year with little signal and lack of direction?

Become the ocean.

I know, I know. Very Wall Street strategist of me to pile a bunch of worries on you then close with a vague line.

It’s tough to say what jolts us out of this wishy-washy, mixed signals, everything is blah environment.

But look, ruts can happen – in life and in markets. My best advice is to stay flexible and nimble with your money. Like water crashing on the rocks, changing form but never shattering on impact.

How do you do this in your portfolio? Revisit how different assets work in your favor.

Stocks help you build wealth faster than inflation over time. Fixed income protects you from the unexpected – a recession, an inflation spike, a tax policy change, or a sudden need for income. Commodities and alternatives step in as the investments move to the beat of their own drum. Cash gives you tangible security in the palm of your hand. Crypto…is crypto (okay fine, a young and maturing market). Each plays a role in helping you stay resilient and invested through a number of scenarios. Build a portfolio of different assets and they’ll play to their strengths when you need them.

Also, this world may feel like it’s stuck in a loop of binaries: tariffs or no tariffs, rate cut or no cut, shutdown or deal, desperation or euphoria.

But there’s more grey area than people lead on to.

You don’t have to be all in or all out of the stock market. History says it’s wise to stay invested – after all, bull markets since 1950 have averaged 5.4 years in length and delivered average annual gains of 20%. But staying invested looks different for everyone.

Focus on balance as we head into 2026. Stability may be the right goal for a time with so much ground shifting underneath our feet.

Have a happy holiday season. I’ll see y’all sometime next year.

Thanks for reading!

Callie

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