Julian Emanuel on 2026 Market Outlook: AI, Volatility, and Global Yields

2026 Market Outlook and AI

• 💡 The AI story and technology in general are viewed as a contrarian play due to recent skepticism, setting up an exciting opportunity.
• 🚀 The market has been driven by the secular growth and productivity potential of AI, despite facing various challenges over the last three years.
• 📈 Company surveys have hit their highest levels since early 2024, indicating positive movement in the right direction for the economy.

Market Volatility and Patience

• ⚠️ The market is expected to experience higher volatility in 2026, with multiple bouts anticipated.
• ⏳ Investors will need patience and the ability to deploy cash during downturns, potentially seeing multiple dips on the way to year-end targets.
• 📉 The rapid nature of past market downturns, like the February to April leg down last year, meant many missed the opportunity to react.

Global Yields and Bond Market

• 🌏 The explosion of Japanese yields is increasing global competition for capital, which is expected to put upward pressure on US yields.
• 📈 The 40-year secular bond bull market ended in 2020, ushering in a new higher yield regime that is likely to persist after three years of sideways movement.
• 📊 2025 is projected to be a solid year for bond investors, with high single-digit total returns, though 2026 may be more complicated.

Geopolitical Factors and Economic Growth

• 🌍 Geopolitical events, such as discussions around Greenland and tariffs, create additional volatility at the margin.
• 🇺🇸 Despite geopolitical noise, there is still American GDP to drive revenues and earnings, with the economic team raising forecasts to 2.5% GDP for 2026.
• 🗣️ Comments from President Trump, while maintaining his style, have been interpreted as a dialing down of substance, which may have eased market concerns.