The S&P 500 faces negative returns in 2026, GMO warns

Core Viewpoint - GMO's Ben Inker predicts weak returns for the S&P 500 due to high concentration in expensive AI stocks, suggesting a market rotation towards cheaper sectors in 2026 [1][5]. Group 1: Market Predictions - Inker anticipates that the S&P 500 is more likely to experience single-digit percentage losses by 2026, rather than a significant collapse [3]. - The firm does not foresee a mega bubble, as speculation appears to be largely confined to AI stocks, unlike the widespread overvaluation seen in previous market bubbles [4]. Group 2: Investment Opportunities - Inker highlights that while AI stocks are overvalued, there are still attractive investment opportunities in non-AI sectors, particularly in Japanese small-cap stocks and European value stocks [4][5]. - The expectation is that as AI stocks underperform, investors will shift their focus to these cheaper stocks, which may lead to a drag on the overall index [2][3].