Why Schwab expects a ‘vibepression' from sticky inflation and a sector rotation next year

Core Insights - Stubborn inflation is expected to persist, influencing consumer behavior and spending patterns in 2026 [1] - A K-shaped recovery in consumption indicates that different sectors will experience varying levels of growth, leading to a divergence in economic performance [1] - Sectoral rotation will be a significant trend, with investors shifting their focus to industries that are likely to benefit from the prevailing economic conditions [1] Inflation - Inflation rates are projected to remain high, affecting purchasing power and consumer confidence [1] - The persistence of inflation may lead to changes in monetary policy and interest rates, impacting investment strategies [1] Consumption Patterns - The K-shaped consumption trend suggests that higher-income households will continue to spend, while lower-income households may struggle, leading to unequal recovery [1] - This divergence in spending will create opportunities in luxury goods and services, while essential goods may face challenges [1] Sectoral Rotation - Investors are likely to rotate their investments towards sectors that are expected to outperform in an inflationary environment, such as energy and commodities [1] - Technology and consumer discretionary sectors may face headwinds as consumers prioritize essential spending over discretionary items [1]