Themes for 2026

As we enter 2026, artificial intelligence is driving an infrastructure boom that rivals past industrial revolutions, creating unprecedented demand for chips, power, and data centers. Meanwhile, persistent volatility and diverging central bank policies are forcing investors to rethink traditional portfolios, pushing capital toward alternative strategies and sectors positioned to benefit from monetary easing. The year ahead will be defined by those who can navigate the tension between transformative AI growth and the rebalancing required in an environment where scale, power availability, and capital efficiency separate winners from losers. Here are the themes we see playing a crucial role in 2026.

1.       The AI Industrial Revolution: 2026 Prediction

Picks and shovels to fuel the AI revolution. These sectors should prosper in 2026 because they are the firm prerequisites for this transition.

Core Compute: The demand for processing power is outpacing supply. By 2026, the semiconductor market is projected to approach $1 trillion. As models grow exponentially larger, the chip industry effectively becomes the world's most valuable manufacturing sector.

Infrastructure: Current data centers cannot handle the heat of current-era computing. This forces an immense construction boom for specialized facilities featuring liquid cooling and high-density racking. This sector prospers because the entire physical backbone of the internet must be retrofitted to support AI.

Power: Energy accessibility is becoming the single most challenging constraint on AI scaling. Utilities and grid providers will prosper in 2026 by holding the "scarcity value”.

Cloud Platforms: The major hyperscalers are projected to spend over $500 billion in CapEx in 2026. They flourish because they possess the unique scale to integrate chips, power, and cooling into a sellable service, effectively becoming the vital "utilities" of the modern economy.

2.       Alternative strategies thrive in 2026

Alternative ETF strategies should thrive in 2026 because the macro environment will be outlined by higher volatility, diverging global central bank policies, and continuing currency debasement. This environment breaks down the traditional stock-bond portfolio, forcing investors to seek sources of returns outside of the stock market.

Each alternative strategy solves a distinctive problem:

Crypto & Digital Assets are set to benefit from institutional adoption and serve as a non-sovereign hedge against the debasement of fiat currencies.

Precious Metals (Gold & Silver) act as the ultimate haven against geopolitical instability, fueled by continued central bank purchasing and monetary uncertainty. Silver gains dual support from industrial demand in the energy transition.

Commodities are a primary hedge against lingering inflation and benefit directly from physical scarcity. Demand for industrial metals like copper (for the AI-driven grid buildout) and energy (for data centers) is expected to push prices higher.

Managed Futures, these nimble strategies profit from sustained trends, especially in currencies and rates, driven by divergent interest rate decisions from central banks worldwide.

Absolute Return/Market Neutral strategies thrive in a "stock picker's market," exploiting dispersion to generate positive returns even if the overall stock market remains flat or choppy.

3.       Power Up

In 2026, AI demand is likely to continue making electricity a critical resource. Data centers and AI usage are expanding quickly and the power grid will need to keep up. The EIA forecasts that US electricity demand will rise 2.6% in 2026, partially driven by AI workloads. While 2.6% may not sound like a large number, it contrasts with the relatively flat trend of electricity demand in the mid-2000s and early 2020s. 

AI growth depends on power availability and grid readiness. The largest data centers in the US are being planned at power levels approaching a gigawatt, which is enough power for 750,000 US homes. According to a Bloomberg report, if data centers were a country by 2035, they would be the 4th largest consumer of electricity, behind the US, China and India. Without major investment and faster grid expansion, power shortages could become a bottleneck on AI progress.

Source: https://www.eia.gov/todayinenergy/

4.       Stablecoins: A Rising Force in Modern Payments

Stablecoins are digital currencies issued on blockchains and designed to hold a steady value, unlike Bitcoin and other more volatile crypto currencies. Stablecoins offer an alternative and complement to traditional payment systems. 

There are 3 main types of stablecoins: Fiat-backed stablecoins are backed by real money in the bank, crypto-backed stablecoins are backed by other cryptocurrencies, and algorithmic stablecoins try to maintain stability using automated rules rather than real assets. Two of the most widely used stablecoins are Circle’s USDC and Tether’s USDT, both of which are fiat-backed.

Stablecoins are not limited to banking hours or borders, and offer substantial improvements on current payment infrastructure, including speed, cost, transparency and availability. For example, an international wire typically costs around $20.00 and requires 1-5 business days to settle, an efficient stablecoin transaction often costs a few cents or less (depending on the blockchain used) and settles nearly instantly. Major payment companies such as MasterCard and Visa have already begun piloting and integrating stablecoins.

The GENIUS Act was enacted in 2025 and provides the first comprehensive regulatory framework for payment stablecoins in the U.S. While stablecoins carry their own risks, the clearer regulatory foundation is expected to support broader adoption and continued growth in 2026 and beyond.

5.       Job markets to remain soft

Unemployment is expected to softly increase in 2026, continuing the slow but increasing trend for the past several years.  Additionally, we are seeing slow job growth for well over a year now. With unemployment rates expected to be in the range of 4.4-4.5% in the US, it will be up to job creation and a restart of hiring to help steady the slow increase and/job loss. Manufacturing data suggests that the tariff costs have not been entirely passed down the supply chain to the end user and are waiting to see how the market responses to price increases on products before hiring again. There remains some uncertainty in given industries when it comes to demand and trade. A soft market with steadying trends can eventually turn the ship to see some growth again. Positioning the portfolios where there is some stability and diversifying using alternative investments will help offset equity and fixed income markets dependent on economic data.

6.       Inflation to continue to cool

Inflation has been cooling over the past several months and year post pandemic peaks. Although it seems to remain range bound between 2-3%, the Fed would still like to see it more consistently move towards the low end. That being said, the Fed started to cut rates in late 2025 with an expectation that a few more will occur in 2026 and then economic data will determine if there will be more. Initial rate cutting cycles typically come with some market volatility in the beginning as the consequences of the cuts remain uncertain on whether they will impact the economy enough to either stimulate growth or keep inflation in check. It is no secret that the US administration would like to replace Powell with a Chair that will continue to cut rates. Fighting the trend will be difficult and therefore positioning the portfolio to take advantage of slowing inflation will be key.  Often, sectors like consumer discretionary, financials and technology benefit from lower rates.

7.       Artificial Intelligence Investment Supercycle

AI will remain the dominant investment theme in 2026, with both corporates and governments globally accelerating investments in AI for productivity gains.

The momentum is spreading across sectors such as Technology, Utilities, Banks, Health Care, and Logistics, but is also amplifying polarization within economies and markets.

AI 30 companies are expected to contribute the bulk of incremental growth, while the rest of the S&P 500 is also forecast to deliver solid earnings expansion.

Data Centers are expected to remain the most attractive end market for 2026, with consensus capex growth forecasts upgraded to 22% from 10% previously.

AI-driven innovation has been a major driver of equity markets, with the information technology sector accounting for 28% of the MSCI AC World index.

China's technology sector is highlighted as a top global opportunity, with strong liquidity, retail flows, and earnings growth expected to sustain momentum for Chinese equities.

Semiconductors and broader IT sectors remain promising for 2026, while key cyclicals such as consumer discretionary and financials should also be considered due to the macro backdrop and earnings outlook.

Key Risks: Massive capital infusion into AI sector raises concerns about debt and equity returns on invested capital, with some investments likely not working out due to the speed of capital deployment.

8.       Monetary Policy Divergence and Rate Sensitivity

Global economic growth is projected to slow to 3.1% in 2026, with advanced economies growing at 1.6% and emerging markets showing greater divergence.

Elevated global interest rates and high debt burdens are expected to persist, intensifying fiscal-monetary policy interactions.

The Federal Reserve is expected to deliver 2-3 rate cuts over the next year, which would typically support risk assets and drive further multiple expansion. 

Regional interest rates are expected to remain benign in ASEAN markets, supporting equities despite external headwinds.

Benefiting Regions/Sectors: Small-cap and rate-sensitive sectors, emerging markets with strong fundamentals, banking sectors leveraged to credit upcycles benefit from monetary easing.

Key Risks: Persistent macro and market forces including ongoing US-China tensions and fiscal risks will continue to define global equity outlook.

9.       Sector Rotation and Value vs. Growth Rebalancing

Sector rotation is expected to broaden in 2026, with a tilt toward cyclical and value-oriented sectors.

Value style is expected to remain preferred over Growth in Europe and Japan, while Quality Growth and Momentum are favored in the US.

Over weights are recommended in Materials, Industrials, Consumer Discretionary, and Healthcare, while Energy, Consumer Staples, and Utilities are underweighted.

Regional allocation strategy favors emerging markets over developed markets, with particular emphasis on China, Korea, and Latin America.

Emerging markets have taken the lead in global equity performance, powered by AI and chip-driven growth, while a defensive rotation into health care has occurred as tech valuations come under pressure.

Key Risks: Traditional linear diversification is less effective due to rising cross-asset correlations and amplified price sensitivity to policy changes.

10.   Caution Around Hyperscalers   

Artificial Intelligence has the potential to radically change our lives and society. However, for that to happen, the need for data centre infrastructure is immense. Morgan Stanley estimates that there will be USD$3 trillion in cumulative capex in this area through 2028. Almost everyone believes scale will be very important and there is a chance that this becomes a monopoly, duopoly or oligopoly. Consequently, we believe a handful of very large companies will be making major investments in artificial intelligence and data centre infrastructure in effort to be “the one” or at least one of a very few. Furthermore, a significant portion of this spending will likely be funded with increased debt issuance.

Thus far in 2025, five hyperscalers (AMZN, GOOGL, META, MSFT and ORCL) have issued ~US$120 billion in debt. This is significantly higher than the ~US$17 billion of issuance for this group in 2024 and ~US$14 billion of issuance in 2023. We think this trend of elevated issuance is likely to continue.

To be clear, we are not expecting any of these companies to default on any of their obligations. We simply think that these companies may need to pay higher credit spreads for the market to digest these large issuance levels in one sector.

11.       Look for Opportunities in US Banks

We would encourage investors to look for potential investment opportunities in US Banks.

We forecast the Federal Open Market Committee (“FOMC”) is likely to reduce short-term interest rates multiple times in 2026. In addition, Jerome Powell’s term as Chair of the FOMC comes to an end on May 15, 2026. We believe the administration will look to replace Mr. Powell with an individual more dovish in approach (i.e. more likely to reduce short-term interest rates in the hopes of stimulating the economy and increasing employment). All else equal, lower short-term interest rates should reduce funding costs for U.S. Banks.

We do not expect a similar decline in longer-term rates. If short-term interest rates are reduced, investors in longer-term bonds may demand higher interest rates to compensate them for the risk of higher or increasing inflation. Most governments around the world are running relatively large budget deficits and seem to have little desire to reduce government spending. President Trump is currently proposing to issue one-time US$2,000 payments to most U.S. residents in 2026. This should stimulate the economy (potentially helping lower credit losses) but may increase inflation and cause longer-term interest rates to fall to a lesser degree than short-term interest rates or even to increase.

All of this leads us to believe curve steeping is likely in 2026. Assuming credit losses remain reasonable, this should be a good environment for banks who generally borrow short-term and lend longer-term.

12.        Travel to the US will return, though unlikely in 2026

Is the boycott of travelling to the US real and will it last? Due to political tensions, immigration fears at the border, and rising cost, many have decided to either cancel or postpone travel to the US in 2025. Although airlines have adjusted to new demands, people travelling to the US by car have not decided to return and property sales from foreign owners are on the rise. Once the snowbirds have left, they might not return, especially due to incentives to travel other places. For example, Westjet has direct flights to Japan, Costa Rica and South Korea.

Until trade relations and foreign visitor policies encourage travel again, the travel industry within the US may worsen before it gets better. Likely just a matter of time.