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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

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