What Will Happen in 2026?
Wednesday December 31, 2026
First, What Happened Today? Not much.
MACRO:
The FOMC Meeting notes came out yesterday. Nothing really surprising. Today, initial jobless claims in slightly under expectations which is good for the rate cut narrative.
MICRO:
FDA approval came early for Vanda Pharmaceuticals NASDAQ:$VNDA. We still own this and are up 100% this round. I do expect to sell before February.
Predictions for 2026:
I expect hedge funds are going to have to seek yield in 2026 as most have really underperformed in 2025 and the easy trade is no longer looking very safe. Riding tech stocks is no longer where it’s at. Momentum here is key. Even if the engine stops AI plays will continue to drift for months (or maybe years) before stopping and reversing.
You can see this new paradigm in the faces of CEOs now. They’re all looking around for the greater fool and finding an empty room. But the room isn’t on fire either.
Hedge funds always claim to seek yield but their livelihoods and beach houses depend on it now after an abysmal year in 2025.
My hunch is smaller firms are going to go back to manipulating stocks with low floats, i.e. post-RS setups. And, I have already positioned our speculative accounts to benefit here. The recent rule change regarding maximum combined reverse split ratios changed the game for vulture funds. They can’t just distribute shares over and over again.
Controlling the float has always been a good strategy. It’s the only reason you know Warren Buffet’s name. But, it’s also a strategy that takes more patience than the typical vulture has.
Larger firms are just going to under perform. Again. As private equity investments bleed out public returns can’t stall for too long of those clients might get antsy.
Or might not.
Everyone wants rate cuts i.e. cheap money but no one wants the economy crashing to be the cause. Right now it’s a rush to get yours before the AI bubble bursts WHILE simultaneously not looking stupid and selling early if the AI bubble doesn’t burst. More people want to be right than to have outsized returns. Being right once (publicly) can make you money for the rest of your life.
Marks and the like are beginning to predict a flat decade. Others are predicting various versions of a market crash. There are shades of 1929, 2000 and 2008. Someone will be right. I just don’t know who yet.
A bubble can deflate or burst. That’s really the unknown outcome here.
People are different today than in 2000 though. In 2000, the average market participant grew up hiding under the desks once a quarter for a nuclear fallout drill, watched the Challenger explode and lived through the AIDS epidemic.
Much like the tech sector ran into metaverse to keep the pump then into AI to keep up the pump those companies now have to gamble on wearables, AI companions/life style coaches, etc ramping up revenues or punt onto robotics as the future… to keep the pump up.
There is no real “Soviet” threat anymore. COVID was meh. We now live in a world where influencers walk up Moose and try and pet them. The people today are just different.
Until the Pokémon bubble bursts this generation will have never known stress other than that which is self manufactured. They grew up with endless credit. And I am not just referring to GenZ or Millenials.
The CEOS are different too. The CEOs of companies in the late 90s were greedy in a very different way than the CEOs of today.
Back then they were greedy for status on the golf course. Most of them lived through the Vietnam era. Lived through a time when “seedy” actually meant something viscous.
Today they are greedy for status online. Bezos might be the last of the old generation now that Stockton Rush has liquified himself. Bezos did fly to near orbit … but also wears spandex.
Beware of drawing too many parallels based on only charts because the market is just a group of people. And the people are just too different now. If I were to make any connections it would be to the 1920s.
Flappers would have crushed with OnlyFans.
As overall market volatility settles (temporarily) we are just sticking to playing any outsized movements, i.e. flipping. I closed my IWM PUT position this morning for 30% and will now just wait for another opportunity. It isn’t glamorous or exciting but it keeps the line going in the general direction of up. Silver maintaining puts on silver.
There are no more institutional shorts now that Burry has become a common blogger. I will still monitor prospectus to see if anyone is brave enough to raise capital for a short fund but I doubt it will happen. People will rush to short only after the market has crashed.
Because, of this I don’t expect much from the market near term. Unlike last year, I don’t expect anybody being forced to sell in April to pay an unexpected 2025 tax bill either. Everyone made money last year but no one made a lot of money last year.
If I am wrong, I think I will be wrong immediately. There is a chance that people will run into the market having taking tax losses in November.
Social media is full of antisocial types but the investor class are happy hippos in pools of warm shit right now. As long as nothing gets marked-to-market 2026 they won’t panic. The auction market is just absolutely insane. Common books are selling for 3-5x pre-auction estimates. No one with money is showing any signs of economic stress right now.
The immediate concern is SCOTUS’ upcoming ruling on IEPA. Companies like Nike should benefit from tariffs being over ruled but Trump will just figure out another way fuck things up. How that ruling and fallout plays out I have no idea.
Then for the next 4-6 months it’s all about PCE/CPI. As long as that figure comes down every one will be happy.
Until some unknown LLC misses a bond payment that is. Just continue watching share repurchase rates. When those stop you do not want to be still riding the train.
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As always, if you think there are spelling errors update your dictionary to the latest version. Happy speculation!
— AJ