All Eyes on Inflation & A.I. in 2026

Economic Data Insights - Recent economic data, including CPI and jobs report, showed a 4.6% unemployment rate and GDP growth exceeding expectations, but skepticism remains regarding the reliability of the data collection process [1][2][4] - The inflation data indicates potential signs of easing in previously sticky areas, which could be a positive signal for the markets [4][5] Labor Market Analysis - The labor market is currently vulnerable, with hiring concentrated in specific sectors like healthcare and local governments, which have seen a decline [9][10] - There is a concern about whether current labor market conditions are a normalization following post-pandemic hiring or a sign of destabilization [11] Earnings and AI Impact - Strong earnings, particularly from AI-related sectors, are expected to support the economy, with anticipated earnings growth of around 10% [12][13] - The AI sector is experiencing a prolonged buildout, with supply still lagging behind demand, suggesting that significant transformations may take time [15][16] Investment Opportunities - While broad bargains in tech are not seen, there are select opportunities where strong fundamentals align with lower valuations, particularly in AI suppliers [17][19] - Investors are advised to consider reallocating investments during periods of market volatility, particularly moving from defensive sectors to AI opportunities [21][22] Market Outlook for 2026 - The market is expected to trend upward but remain volatile, with periodic moments of doubt regarding AI and other sectors [20][21] - Investors should look to capitalize on these moments of doubt to add exposure to AI rather than during euphoric periods [23]