Shannon Saccocia on AI, Market Trends, and 2026 Investment Themes

Market Sentiment and AI Trade

• 📊 The market currently feels like it has "ups and downs," with a positive outlook on the AI trade showing renewed life.
• 💡 A continued rally in AI stocks on Monday and Tuesday could complement the rotation seen in other sectors, like Oracle's performance.
• ⚠️ The focus will shift to the US consumer's engagement and holiday season performance in the first few weeks of January.

Durable Investment Themes for 2026

• 🚀 AI is expected to remain a significant tailwind through 2026, with anticipated capex from sectors beyond technology, such as industrials and financials.
• 💊 Healthcare companies agreeing to price cuts could also act as a tailwind, pushing companies to commit to and justify AI capital expenditures.
• 📈 The speaker favors large-cap stocks for the most part, despite a recent rally in small caps being driven by lower-quality companies.

Economic Outlook and Interest Rates

• 📉 The expectation is for at least one more interest rate cut in the first quarter of 2026, with a wait-and-see approach for the second half of the year.
• ⚠️ While the jobs market is softening but not rapidly deteriorating, and inflation is expected to decrease, the Fed may adopt a more accommodative stance later in the year.
• 💰 The focus remains on the transmission of already implemented rate cuts and the potential for continued small-cap outperformance in the first half of 2026, supported by economic growth and liquidity.

Global Market Opportunities

• 🇺🇸 The US market continues to show meaningful strength.
• 🇯🇵 Optimism surrounds Japan, and developed markets outside the US are attractive, with Japan being a significant component.
• 🌍 Europe presents a mixed picture, while Emerging Markets (EM) are becoming more attractive, even with concerns about China's consumer and real estate.
• 🇰🇷 Specific opportunities are seen in Korea as part of the next phase of the AI trade, advocating for a diversified EM basket beyond just China.