2026: The Year of Convergence – Melt-up, Moonshots, or Mid-cycle Correction?

Happy New Year!

After another period of self-imposed hibernation from the blog—partly due to the festivals, travel, intertia and partly to watch the dust settle on a chaotic 2025—I decided to use the quiet of this New Year’s morning to finally reboot. 

Looking back at my October post, “Clicks to Tokens,” the hunch about the AI theme held firm. We spent much of 2025 debating whether we were in 1998 or 2000. As we enter 2026, the answer seems to be "neither and both." We have the roaring optimism of the 1920s fueled by "Silicon Spirits," but with the high-speed volatility of the 2020s.

So, as the calendar flips, what is in store for 2026? Markets may experience melt-up (S&P touching 8000),  with some moonshots (like SpaceX and OpenAI) IPOs or even see mid-cycle correction bringing down S&P to 6000. That's a wide range and will be decided by Four R's...

Here are my thoughts on the "Four R’s": Rates, Robots, Rotations, and Real Assets.

1. Rates -  The Macro Picture: The Fed’s Final Act?

The Fed spent 2025 playing a delicate game of "tag" with inflation. With interest rates finally settling into a "new normal" range, the question for 2026 is whether they will hold steady or be forced to cut further to prevent a cooling labor market.

• Prediction: I expect the Fed to remain "data-dependent" but leaning dovish. We might see a "Goldilocks" first half with at least one rate cut before Powell hands over the reins to newly appointed and most likely "rate" friendly chairman. Once that transition happens, we may have two more cuts in rest of 2026 totaling 3 rate-cuts of 25 basis points in year.

2. Robots - AI: From "Hype" to "Harvest"

2024 was about the chips; 2025 was about the infrastructure. I believe 2026 will be the year of the Agentic Economy. We are moving from chatbots to "Agents" that actually execute tasks.

• Investment Hunch: Keep holding the "picks and shovels" (ETF like SMH) but start looking at the "applied AI" winners—companies in healthcare and logistics that are actually showing margin expansion from automation, not just talking about it in earnings calls. SAAS companies stocks should show some life in 2026. (ETF: IGV)

3. The Great Rotation: Looking Beyond the "Wall"

While 2025 was a year where most investors felt safer staying behind the high walls of US Mega-cap Tech, 2026 is shaping up to be the year of the "Great Rotation." 

• Europe’s Reawakening: Germany is finally moving past its stagnation with massive infrastructure and defense spending. With the ECB likely to be more dovish than the Fed, the Eurozone is looking at a "catch-up" year. (ETF: IDEV)

• Emerging Markets & India: On a cyclically adjusted basis, US equities are trading at a massive premium. The "India + 1" theme remains the obvious beneficiary of supply chain decoupling. After the 2024 reality check and 2025 consolidation, 2026 looks like a year where Indian manufacturing finally catches up to the digital service hype. (ETF: IEMG)

4. Real Assets: The Return of Sound Money (Gold & Silver)

2026 requires a serious look at "Hard Assets." With the US deficit ballooning and central banks diversifying away from the Dollar, Gold and Silver are no longer just for the "preppers."

• Gold (The Anchor): Gold hit record highs in 2025, but 2026 could see it move from a "fear trade" to a "structural trade." As central banks in the East continue to swap Treasuries for bullion, Gold remains the ultimate insurance policy.

• Silver (The High-Beta Play): If Gold is the anchor, Silver is the sail. Given its industrial necessity in the AI-driven power grid and the Green Transition, Silver is significantly undervalued relative to Gold.

• Hunch: We might see the Gold-to-Silver ratio compress significantly this year. If Inflation and Innovation collide, Silver could be the surprise outperformer of 2026.  Would we see GOLD at 5000 and Silver at 100? It's possible given the momentum and structural changes unleashed since "liberation day". Best way to get exposure to these is via ETF focused on mining companies (GDX, SLVP)

Lots to write on Crypto, movies, geo-politics, sports etc but maybe later in January...

Final Thoughts

In the spirit of the Samudra-Vasane Devi stotra I’ve shared before, let’s remember to keep our feet on the ground even as our portfolios reach for the stars. 2026 will likely be a year of high "vibration"—lots of noise, but for the patient investor, plenty of signals to find alpha.

Wishing you all a healthy, prosperous, and peaceful 2026

/Shyam

Clicks to Tokens: Will 2026 Echo 1998's Boom or 2000's Bust?

My "blogging" was in hibernation last 8 months due to my self-imposed restraint given the environment as well as built-in inertia to get started despite so many interesting events and markets reaching all time highs after taking a big dump around "Liberation Day" in Apr...Around that time I had the blog ready that it would be repeat of Mar/Apr 2020 panic and recovery during onset of Covid Pandemic. The hunch happened to be correct and I was glad that I could keep and take some positions which I am still holding especially around AI theme.

But that was then...as 2025 is about to wrap up in 10+ weeks, let's look at what's in store for rest of 2025 and 2026. And what's better time than to start writing again just before one of the most important week on the calendar with multiple key events coming up next week...

• Fed meeting to decide the course of interest rates - it's almost guaranteed that Fed will cut rates by 25 basis points (2nd time in 2025) and could also indicate another cut in Dec due to weakened labor conditions despite economy running slightly hotter to Fed's comfort. But given that Fed is coming to realization that with inflation "3% is new 2%" (I wrote about this about 2 years ago)...
• Earnings from big tech players of "MMAANG" group  - MMAANG = Microsoft, Meta, Apple, Amazon, Nvidia, Google. (it's play on hindi word माँग means demand or request). The markets demand a strong earnings from these companies which most probably they will deliver. On top of their earnings, markets would be looking for their Capex spending plans for 2026 and even more importantly how they are able to convert these huge outlays into actual revenues and earnings. And this is where "token" economy comes in play - more on this later 
• USA and China trade discussions with Nov 1st deadline...today morning news are saying that treasury secretary Bessent is making progress and 100% tariffs on China due to their blockade of export of rare earth materials are on hold. So cooling of these tariffs wars between two biggest economies should help continue market's "hot streak"

As markets are reaching all time highs, many pundits and newspapers have started publishing articles about "AI bubble" similar to articles in 1998/1999 about dot.com bubble...which eventually did burst in 2000-2001. 

So let's look at "Will 2026 Echo 1998's Boom or 2000's Bust"?

At end of 2024, I wrote about "2025 = is it going to be 1997 or 2000" and 2025 is turning out to be like 1997. Hopefully many of my readers invested in ETFs like XLK, IGV, SMH etc which handily beat S&P - SMH is up nearly 47% in first 10 months. So logically 2026 should be like 1998.. would it be?

There are key differences between Internet heydays days and today's AI enthusiasm...

• Click vs Token pricing model - Internet boom was based on "clicks" with no clear plans on how to convert "clicks" into $ because end consumer was not directly paying for clicks - companies had to depend on users clicking on ads and getting paid. AI boom is based on "tokens" which is getting converted into real $ with subscriptions ranging from $20 per month to $200 per month for some high-end enterprise plans.
• The business model behind companies laying out fiber plants to connect the websites were flawed with no immediate revenue conversion..Hence most of these companies like Global Crossing etc went belly-up. Compared to these, the neo-clouds and Cloud titans investment in buildout of AI infrastructure is based on actual "token" consumption instead of "all you can consume" model. So as long as "token" consumption continue to grow exponentially, the business model behind these large Capex investments will work
• Demand - Here is where we could take some lessons from Internet days -  even in depth of busting of internet bubble, internet traffic was 30+ times larger than when bubble was forming
• 1998: Global internet traffic was approximately 12 petabytes (PB) per month.
• 2002: Global internet traffic reached approximately 405 PB per month.
• No one would doubt that token consumption would be multi-fold higher in 4 years from now than it is today given adoption of AI in our daily lives as well as small and large businesses to improve their productivity, revenues and earnings.
• There is no froth in IPO market like internet bubble days when stocks of flimsy companies with no revenues were doubling on opening day and more later. In fact most of the recent IPOs such as Klarna (KLAR), FIGMA (FIG) have billion $ plus revenues and still markets are skeptical about their valuations - they are trading to close to their IPO prices after first day enthusiasm. This is healthy

We can keep going on factors why so called AI bubble may be different or we may still be in early cycle. Hence 2026 would feel more like continuation of 2024/25 with higher volatility the way Internet driven markets were in 1998/1999.

So what should one do with their portfolios? - simple advice: Stay invested and do systematic time based (weekly/monthly) investments in ETFs focused on secular trend of AI, Energy and productivity boosting industries while also allocating some capital for dividend producing ETFs (I personally prefer JEPI/JEPQ)

I am reading latest book by Andrew Ross Sorkin titled "1929"..it's well timed and well written book. Still early in my reading so  not ready to provide analogy to Roaring 20s of 100 years back which led to biggest market crash of 1929...

In meanwhile - Happy Diwali (delayed) and Happy Halloween!

/Shyam

And the Oscar goes to...

It's Oscar Sunday and time for predictions for few categories - before I digress into talking about drama in DC or markets. 

First of all, I want to recognize the damage LA fires have done to the beloved areas of Los Angeles and impacted families across all spectrums. My heart goes out to them and wish them recovery and rebuilding of their lives...

This year's Oscar nominees and post nomination period had been interesting to say the least. Due to this, the field is wide open in almost all categories and that's what makes prediction game so interesting. Just to set expectations, I would consider a win if I get even 50% predictions correct given the dynamics of nominees this year. So here are my predictions - "And the Oscar goes to..."

1. Best Picture - Anora (surprise could be "The Brutalist")
2. Best Director - Sean Baker for "Anora" (Surprise could be Brady Corbet for "The Brutalist")
3. Best Actor - Adrien Brody for "The Brutalist" (long shot surprise could be Timothee Chalamet for "The complete unknown")
4. Best Actress - Demi Moore for "The Substance" (surprise could be Mikey Madison or Cynthia Erivo)
5. Best Supporting Actor - Kieren Culkin for "A Real Pain" (there is no competition in this category)
6. Best Supporting Actress - Zoe Saldana for 'Emilia Perez"
7. Animated Picture - "Flow". I saw this just yesterday and it's such a refreshing take on animation movie (you must check out on Max) and I really feel that it should win despite heavy marketing for Inside Out 2 or Wild Robot
8. International Feature - "I am Still Here" - Brazil

Now turning the page to other topics...where do I start...it's only 6 weeks since USA has new President and it's already feeling that it has been more than one year...some aspects are good - moving at corporate or even faster pace while some are not that good...government is not a business and instead of worrying about quarterly results, it need's to look at long term impact. I won't get into individual policies but only statement I will make it - Washington DC needed a shock therapy since status quo was not delivering...maybe it got more than it bargained for.

Markets are reacting to every news coming out of DC instantly...the Oval office briefings are making impacts similar to days during 2008-09 financial crisis. For now, markets are still holding up reasonably well but its just matter of time when economy and markets will take a decisive turn (up or down) as reaction to these constant onslaught of policy changes and associated news. As an investor, one should turn off this noise and not react/panic and instead should just stay the course of weekly investment plan you may have setup...because no matter what happens every day in DC, in the long run, US economy and markets are the best place to invest your hard earned money.

Have a great Oscar evening and great week ahead

/Shyam

The Politics and Gamesmanship of TikTok!

TikTok is less than 3 hours from going dark on USA's east coast if TikTok owner Bytedance (and Chinese Government) follows thru its "bluff" to honor the law "Protecting Americans from Foreign Adversary Controlled Applications Act" which goes into effect on Jan 19, 2025. And suddenly there is lots of politics and gamesmanship around TikTok.. Let's look at the players and their positions

US Congress:

The "TikTok Ban" law was passed by congress with bipartisan support and coincidently it goes into effect one day before new administration takes charge. Everyone knew the exact date and time of oath taking ceremony of new President...but maybe the congress did not think that there would be change of President and did not bother to put effective date post new government taking charge...that created a window of 36 hours of "law being in effect" unless...

President Biden:

Biden himself did not think that he won't be President for 2nd term. So now it comes to Biden to either do nothing (means law goes into effect) or extend the deadline by 48 hours so that further decision can be taken by Trump...But President Biden does not want his last decision to be over-ruling the law which was passed by bi-partisan support and signed by him. So they are pushing TikTok to continue operating as if law is not in effect and push....

President Trump:

Biden's decision to not provide extension means President Trump would have to make the decision of what to do about the law as one of his first few decisions in 2nd term...Trump was supportive of TikTok ban in his first term only to change the opinion given how it helped him win 2nd term with billions of views to his account on TikTok...so suddenly he wants to keep it running by providing 90 day extension to law taking effect and do what he does best...play negotiator to broker a deal so that it's owned by American entity....unless

Chinese Government:

Chinese government understands that it got a strong bargaining chip since the app is popular among 170 million Americans and livelihoods of thousands of creators depend on app running....so they want to put this in the mix of negotiations around tariffs, export controls and many other thorny issues between USA and China...they don't mind economic aspects of total shutdown may cost Bytedance $50-100 Billion of valuation...and potentially billions to its....

American Investors:

While exact amount invested is not known, American investors are sitting on billions of investment gains on their investments in TikTok and they would like to see TikTok keep running and keep growing their huge gains...they must be lobbying tech billionaires who have become friends of Trump and would be....

The Acquirers:

There are already two bids for TikTok US - one from 2 year old company Perplexity which was valued at 300 M just 12 months back and is now worth about 9 Billion. This is bold move by Perplexity to bid for TikTok which may be 8 times bigger in terms of valuation and 50-100 times bigger in terms of revenues..they want access to troves of data TikTok has amassed to help train their AI models and engines...and then there are other large players like Google, Oracle, Meta (it's also competitor with its Instagram Reels and one to benefit most with the ban), OpenAI, Musk companies (X, X.AI) who will like to have piece of this lucrative property..and don't forget Trump's company Truth Social which also will like to be in the play...with business friendly administration in Washington and forced by law, acquirer will have easier time to get approval from regulators under the premise of concerns for.....

The Americans:

I must say TikTok is addictive and quite entertaining...it provides entertainment to 170 million people and by one estimate has contributed to 71 billion to American Economy....so Americans enjoy the app and many of them get their news from TikTok videos...most of them open it multiple times and on an average spend about 54 minutes per day on....

TikTok:

TikTok has become synonymous to short videos and its algorithm does pretty good job in keeping the engagement (much better than its competitors). It is growing by leaps and bounds and has created real employment (direct and indirect). The company claims that data collected on users is kept in the USA and will not comply in case Chinese Government asks access to the data. By one estimate, US operations of the company has revenues of about $8 Billion and valuation of 50-80 billion. Its owner Bytedance has valuation of over $300 billion and would like to keep TikTok US. But due to law, it has to divest it to American investor(s) provided Chinese Government approves. It does not want to be on wrong side of Chinese Government (knowing fate of Alibaba and Didi) so will do what can be approved by Chinese Government.....

I can keep going but let's see what most likely is going to happen...

President Biden will provide short-term last minute reprieve to delay the ban...or TikTok will go dark for about 48 hours...

President trump will provide 90 day extension and start negotiating the deal involving all the players mentioned above and in the end TikTok will remain in USA and Americans will forget why the law was even passed in the first place...

Maybe someone should make a TikTok video on this topic followed by full-length movie as this saga unfolds...

/Shyam