Ten Predictions for 2026

We are pleased to share what has become a favorite research tradition here at Wavelength: predictions for the new year from our CIO, Andrew Dassori.

2025 was a year of moving pieces – from tariffs and interest rates to a changing geopolitical landscape – all of which had major impacts on markets and the economy. In this environment, while the Super Bowl kept us humble, many of our predictions from last year came to fruition as economic growth remained strong amidst softening employment, bonds outperformed cash, and Chapell Roan won the Grammy for Best New Artist (credit to my daughters on that one). Nuclear power also staged the comeback we projected, and although Time Magazine’s Person of the Year was not artificially intelligent, the award went to the “Architects of AI” in what was a transformational year for technology.

With this backdrop, we know we can’t predict everything, and we recommend that investors hedge when they have less than a 50% chance of being correct and invest where they have a clear, repeatable edge. For considerations outside of the investment process, our predictions for 2026 are listed below. We wish you great health, happiness, and luck in the year ahead..

1. A near-term cyclical boost to the economy will collide with long-term structural issues.
   The economy is positioned for near-term tailwinds as outsized refunds from the Big Beautiful Bill are set to drive higher levels of spending, but longer-term structural issues will keep a sustained acceleration at bay. Recent growth has exceeded the consensus expectations of forecasters in part due to significant investments in AI-related sectors, which has led the economy to a uniquely concentrated and potentially vulnerable position in the event that the market turns. Employment stagnation is also being driven by this dynamic – particularly for entry-level roles – and the workforce’s need to reskill to adapt to technological change is set to counterbalance an otherwise stimulative backdrop for growth in 2026.
2. Automation, not AI as it's commonly thought of, is where money will be made in the current technology boom.
   The rise of ChatGPT has been remarkable and something we predicted in this space back in 2022, but the true payoff from the recent boom in technology won't come from chatbots. Automation will ultimately be where the rubber meets the road – quite literally for Waymo's driverless cars, but more broadly across the robotic applications used by businesses in the physical world.
3. The path ahead for stocks won't be as smooth as the market expects.
   At a time when every analyst on Wall Street is now predicting a rally in stocks and the CBOE Volatility Index is hovering close to its annual lows below a level of 15, the calm priced by the market is easy to see along with its vulnerability to downside surprises. With an oncoming leadership transition at the Fed, midterm elections, and the potential for China to undercut US tech growth with cheap open source models, there are plenty of known and unknown risks on the horizon to increase volatility from current levels.
4. Prediction markets will lead to questions of election interference.
   In November's midterm elections, there will be plenty on the line – for both voters and bettors – as the use of prediction markets is expected to proliferate. This dynamic raises the potential for manipulation from bad actors on either side of the political spectrum seeking to influence election outcomes with market-moving bets at a key juncture for US politics.
5. The US Treasury will twist the maturity of debt issuance.
   While coupon issuance has been stable over the past couple of years, a steep yield curve has combined with increased front-end demand from Fed purchases and stablecoin growth to make increasing the amount of T-bills outstanding while reducing long-end issuance more attractive. Less supply at the long-end could help lower long-term interest rates – a stated goal of Treasury Secretary Scott Bessent and President Trump – and the changing shape of demand along the yield curve has made this increasingly possible.
6. Lindsey Vonn will cap a legendary comeback by winning gold at the Olympics in Cortina.
   After five years away from the sport and a knee replacement in 2024, the former winningest women's alpine skier has returned from retirement and qualified for her fifth-career Winter Olympic Games. Already the oldest female medalist in alpine skiing following her bronze in South Korea at 33, a win this year by Vonn – now 41 – would be unprecedented and complete her mission of setting "a new standard of what's possible”.
7. Trump will nominate a Kevin as the next Chair of the Federal Reserve.
   It looks like a toss-up between Hassett and Warsh, but no matter the pick, they’ll face the same challenge. Beyond managing the nation's financial stability, they'll need to prove their independence to investors to avoid disrupting risk premia across financial markets.
8. The rise in fraud will be met by notable growth in the market for fraud protection.
   Artificial intelligence has expanded human capacities for both good and bad pursuits, and while it’s enhanced our ability to detect fraudulent activity, it’s also made that activity more accessible and scalable to carry out. Of particular concern is the rise of deepfakes – a powerful and growing tool for misinformation – and Pindrop Pulse's detection platform was recently named one of Time Magazine's Best Inventions of 2025. With technology enabling these new forms of deception, detection and prevention will become increasingly critical areas for businesses in the year ahead.
9. One Battle After Another will win Best Picture at the Academy Awards.
   After getting the past four Oscar picks in our annual predictions correct, it may be a good time to pump the brakes, but Paul Thomas Anderson's screwball thriller is uniquely positioned for a Best Picture win. An all-star cast of Leonardo DiCaprio, Sean Penn, Chase Infiniti, Benicio Del Toro, and Teyana Taylor, and a compelling plot – adapted from Thomas Pynchon's novel Vineland – have resonated with audiences and critics alike, and after a slow start, the film is building momentum at the right time heading into awards season.
10. There will be a populist backlash against AI.
    Rising electricity prices offer a tangible example of the unintended consequences artificial intelligence is having on people’s daily lives, and these will combine with anxieties over job displacement and a widening wealth gap to spark a movement against the technology. While the train has left the station in many ways for this now critical industry, tensions from the other side of its promising developments will increase along with its growth.

*** 

DISCLAIMER:

Wavelength Capital Management, LLC (“Wavelength”) is an SEC-registered¹ investment adviser located in Connecticut. Wavelength may only transact business in those states in which it is notice filed or qualifies for a corresponding exemption from such requirements. Wavelength's website is limited to the dissemination of general information regarding its investment advisory services to United States residents residing in states where providing such information is not prohibited by applicable law.

Accordingly, the publication of Wavelength's website on the Internet should not be construed as Wavelength's solicitation to effect, or attempt to effect, transactions in securities or the rendering of personalized investment advice for compensation over the Internet.

Investing involves the risk of loss and investors should be prepared to bear potential losses. Past performance may not be indicative of future results and may have been impacted by events and economic conditions that will not prevail in the future. No portion of this commentary is to be construed as a solicitation to buy or sell a security or the provision of personalized investment, tax or legal advice. Certain information contained in this report is derived from sources that Wavelength believes to be reliable; however, the Firm does not guarantee the accuracy or timeliness of such information and assumes no liability for any resulting damages.

For information pertaining to the registration status of Wavelength, please view the United States Securities and Exchange Commission’s website at www.adviserinfo.sec.gov. A copy of Wavelength's current written disclosure statement discussing Wavelength's business operations, services and fees is available from Wavelength upon written request. Wavelength does not make any representations as to the accuracy, timeliness, suitability, completeness or relevance of any information prepared by any unaffiliated third party, whether linked to Wavelength's website or incorporated herein, and takes no responsibility therefore. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

¹ SEC registration does not indicate a certain level of skill or training.