If 2025 felt like a movie with a surprising ending, consider 2026 the sequel that already has a script: stronger corporate profits, record AI spending and a more synchronized global economy. Investors who spent last year fretting about a delayed recession instead watched the S&P 500 notch a roughly 17.9% total return — a reminder that headlines and outcomes often live in different zip codes.
Markets aren’t driven by mood alone. They run on earnings, capital spending and the broad economic backdrop. Three different takes — from independent advisory research, a father-and-son investment duo on Seeking Alpha, and big-bank strategy notes — converge on a common theme: this cycle has fuel left in the tank, but staying on the wave will demand discipline.
Why earnings matter (and why they look solid)
Carson Group’s outlook leans heavily on fundamentals: S&P 500 earnings growth of roughly 14% for 2026 is their base case, helped by expanding profit margins. That’s an important distinction from earlier bull runs where price-to-earnings expansion did the heavy lifting. When profits themselves are rising, downside risk to valuations is more muted.
At the same time, the Seeking Alpha duo frames 2026 as a sequential macro story: cooling inflation into the low-2% range, steadier growth and, crucially, a domino effect where each macro improvement supports the next. If inflation indeed drifts toward that range, the path for policy accommodation widens and real returns for bonds and equities both look better.
The AI buildout: infrastructure, not just hype
This isn’t the dot-com era redux. Tech giants are committing historically large capital expenditures to build AI stacks — think hyperscale compute, networking and storage — and that spending shows up in corporate capex figures and supplier profits. Carson cites headline numbers for tech capex and calls this the mid-innings of a cycle; others echo similar views.
The technology is moving fast on multiple fronts, from generative image models to agentic features in consumer products. Practical deployments and tooling — whether it’s new text-to-image engines like Microsoft’s recent MAI work or agentic booking and search features rolling into browsers — point to real, monetizable product changes, not just flashy demos. See Microsoft’s MAI Image work for an example of where models are going, and how consumer interfaces are shifting with Google's AI Mode experiments Microsoft's MAI-Image-1 and Google's AI Mode agentic booking.
Large-scale infrastructure plans are also interesting: cloud and edge data center footprints are evolving, and experimental ideas — from orbital data centers to novel power strategies — are no longer purely sci-fi. Projects exploring out-of-the-box data-center concepts hint at the scale of thinking under way Google's Project Suncatcher.
A global handoff — and why diversification matters
2025's rally wasn’t purely a U.S. story. International markets, including emerging markets, outperformed in many pockets. JPMorgan and other strategists emphasize a multi-theme backdrop for 2026: fiscal reflation in parts of the world, pockets of monetary easing, and cyclical industry tailwinds. That suggests active sector and regional allocation matters more than a simple ‘own everything’ approach.
Carson’s counsel is practical here: remain equity-heavy but diversify regionally and by sector. Tech and AI infrastructure are top narratives, but financials, industrials and cyclicals stand to benefit from global growth and capex waves.
Volatility is the price of riding the wave
Midterm years have historically been choppier; Carson points to historical peak-to-trough corrections north of 17% within the cycle. Short, sharp drawdowns are painful but expected. The smarter response is to size positions, keep dry powder and avoid reflexive selling on headline risk.
That said, downside risk is not zero. Growth disappointments, policy missteps, or an abrupt re-pricing of AI expectations could produce deeper corrections. The difference now is that corporate earnings and capex provide a firmer anchor than in some past cycles.
Practical moves for investors (not a checklist, just ideas to consider)
- Tilt toward companies with visible earnings upgrades and durable cash flows rather than pure story stocks.
- Keep global exposure meaningful; the market leadership in 2025 shows winners can emerge outside the U.S.
- Treat volatility as an opportunity: rebalances and selective adds often work better than market timing.
2026 will reward judgment more than passivity. The narrative is less about whether the bull market continues and more about how you position for an era where AI investment, regional growth differences and policy shifts interact. Stay curious about the technology — from new model capabilities to where compute will live — but keep the financials front and center: profits, margins and balance-sheet resilience tell you how much of the tech story is being monetized.
One last thought: waves are exhilarating until they aren’t. The smarter surfers study the forecast, pick their breaks and keep a leash on risk. Investing today is the same kind of craft — know the rhythm, respect the undertow, and be ready to paddle when the next swell forms.