What Will 2026 Look Like?
The market entered 2026 on strong footing. The economy has shed some jobs, but employment remains strong. Inflation is still currently in check. The Congressional Budget Office estimates that The One Big Beautiful Bill will boost GDP growth by 0.9% in 2026. And don’t forget (I know you won’t) we have midterms elections with the Republicans forecasted to lose the House, so anticipate a lot of programs and spending.
The question for investors in 2026 is where AI spending will land, and whether the AI- and tech-themed surge in markets will continue. The market started the year with what seems to be a rotation in the S&P 500 from the top 7 to the other 493. If history is any indication, markets are usually flat in the second term of presidential cycle, but last year far exceeded expectations, which could be good or bad. But AI spending is at least estimated to continue to rise. Globally, fiscal growth looks positive, and the old faithful consumers have continued to spend.
We would be remiss not to mention the situation in Venezuela. What does this mean for oil and investors? Venezuela produces only 1% of the total oil demand, down from their high of 3%. They have old, rusted and depleted resources that will take billions of dollars to get fixed. Also, the oil is akin to coffee grounds as opposed US shale being like champagne. There is timing, it will take many years for this to be completed and any company thinking about entering will need to look out for 10 years at least. That could be two more administrations, not an enticing outlook. Chevron is the only US major in Venezuela as Conoco and Exxon had their assets nationalized. So, barring government backing, we do not anticipate much hunger. Also, according to Torsten Slok at Apollo, the reserves may be BS.
