Weaker parts of the economy will rebound in 2026, says CIO Group's Steven Wieting

Economic Outlook - The Federal Reserve's potential rate cut could be influenced by the evolving economy, with industrial production growth at sub 1% and a 2% drop in construction over the year, while IT equipment investment has seen a 47% increase, indicating a bifurcated economy [2][4] - There is an expectation for construction and trade to improve in the coming year, which may lead to a consensus that the Fed should not have cut rates [3] Labor Market and Productivity - The labor market is cooling, with job openings and surveys indicating a slowdown, potentially exacerbated by AI advancements that may increase unemployment trends [4][9] - The notion that productivity gains could justify lower interest rates is challenged, as easier monetary policy could lead to financial instability and economic bubbles [5][8] Investment Themes - Despite concerns about overvaluation in tech stocks, the market is expected to continue performing well, with a historical median S&P return of 15% and an average of 10% [10] - Optimism for 2026 is noted, with expectations of a 15-20% return in the healthcare sector next year, which is seen as a lowly correlated source of return compared to leading market sectors [11][12]