"Next year could bring more of the same - especially if the Federal Reserve cuts rates even more at its next meeting. Plus, we could see a new Fed boss who could significantly cut interest rates. In fact, President Trump may be leaning toward Treasury Secretary Scott Bessent, who is reportedly an advocate for aggressive interest rate cutting. While lower rates may sound attractive, they can also stoke inflation, followed by the potential for aggressive tightening to get inflation under control."
"There's the artificial intelligence boom, where analysts expect to see even more upside for the AI story, especially with an increase in capex. Microsoft said its capex hit $16.75 billion in the third quarter. Moving forward, the company plans to spend $80 billion in 2025. Meta also increased its 2025 capex to reflect an "increase in the expected cost of infrastructure hardware" from suppliers around the world."
Markets were flat in the final days of 2025 with the S&P 500 up marginally and major indexes near unchanged while the year produced strong returns. The S&P posted consecutive large rallies in prior years, positioning stocks for further gains. Potential 2026 catalysts include additional Federal Reserve rate cuts and a possible Fed leadership change favoring aggressive easing, which could raise inflation risks and later tightening. Large corporate capital expenditures for artificial intelligence, highlighted by Microsoft’s planned $80 billion 2025 spend and Meta’s raised $64–72 billion capex outlook, support the bull case alongside expected real GDP growth above 2%.
Read at 24/7 Wall St.
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