With Christmas over and New Year’s fast approaching, I find myself thinking about what the new year will bring for the markets and my personal investments. I am not overly concerned with the markets themselves, but rather with the economy as a whole. We are being fed good economic numbers, but how reliable are those numbers? How do we know that the people putting those numbers together are not playing into the political games that we see today?
There was a point in time when no one questioned the validity of the economic numbers coming out. It was not until President Trump’s second term that we began to consider this option. What do incorrect numbers do to the markets and the actual economy?
I am not a professional investor, but I don’t feel like it takes a professional to see what is happening in the economy or the markets. If the population paid attention to what was around them, they would see that government-provided economic data could be incorrect. The country cannot claim that over a million jobs have been added, given that companies have announced over 1.2 million layoffs this year. The government cannot say that prices are coming down and inflation is easing if people are still struggling massively to afford groceries and other staples. But what effect do these numbers have on the markets?
When positive economic numbers are released, such as a rise in growth, a lower-than-expected unemployment rate, or a national average price that appears to be lowering, the markets generally rise. If the news is reversed, the markets fall, and bonds typically go up. This causes the markets to become overpriced and over hyped. However, there is also a push from the White House to become the world leader in artificial intelligence (AI). The people pushing this new technology will either not be affected by it, have not considered how it will impact others, or they simply don’t care, as they are primarily concerned with surpassing China.
It is said that AI has not only created a bubble but is also taking jobs away from people. When positive news emerges about AI and its progress, tech stocks rise, becoming more expensive. The AI push also demands large data centers that require a significant amount of electricity, straining the already insufficient power grid. This push is causing electricity prices to rise, in turn, increasing the cost of electric company stocks. The irony is that the republicans said the electric vehicle (EV) push would do the same thing. So, not only are stocks becoming more expensive and overvalued, but essential living costs are also rising.
The increased demand for electricity is also driving oil and oil company stocks higher. Gas prices have decreased slightly since Trump’s election in 2024, but not to the level the population had expected. You may be wondering what this has to do with 2026; hang on, and I’ll share my opinion.
In 2026, I see the economy struggling once the proper health measures become apparent. The new tax policies and tariffs will start to reveal the impact. We will see more job losses due to AI, utility prices will keep going up because of the demand for AI data centers, and oil prices will continue to fall because of the increase in production to use as fuel to power these data centers.
The job losses will impact the economy in a negative way. There will be less money flowing throught the economy and less money means falling stock prices. Because there will be less money flowing into the economy, there is only one way for companies to continue to report record prices, raise prices. This will make affordability less achievable.
I see the markets going through a correction to make up for the overvaluation in securities. I also see markets struggling with the rising impact of AI. Currently, AI provides a tool that many companies are utilizing to enhance efficiency and automation; it is also proving to be more cost-effective than hiring entry-level employees. The move to incorporate AI into business for the purpose of automating entry-level positions will also further degrade the job market. Freshly minted college graduates will struggle to find jobs, and those in the workforce who are older and don’t understand technology will struggle to keep their jobs, as employees will have to learn AI prompts and how to operate the AI agents that are designed to help them with their jobs.
2026 will also bring the impact of the AI bubble into focus. This should be the time when AI companies start to make a profit. If the profits are not what is expected, the markets will decline, and some of the smaller companies will go under. The .com bubble of 1999 and 2000 is what we are looking at. Mergers and acquisitions, along with failures and strain on the banking system because of bankruptcies and bad loans. I feel like this next year will be a combination of 2000 and the banking crisis of 2008. In 2025, several regional banks failed, which put pressure on the banking system as a whole. 2026 is expected to bring increased pressure on the banking system due to economic conditions and challenges related to AI.
While money is being made right now, we must remember that no one really knows when a decline or correction will happen, and that is when everyday people get hurt. Advisors and brokers will struggle because people have put confidence in them to manage their money. No one will be immune to the fallout.
Some things can give us an indication of what is to come. We need to monitor the actions of company leadership and board members. If they start to dump stock, there could be a very good reason; they know something we don’t know. At the same time, if they begin to buy stock, we have already missed the opportunity. We also need to keep a close eye on the government. If Congress and the White House intensify their push for AI dominance, we should wonder whether they are invested in the tech companies developing AI chips and computers. We will also need to pay attention to the ratio of layoffs to new job additions.
These tips and events to watch can keep you and your money safe in the new year. Remember that many people are out for themselves. As much as I don’t want to continue beating the drum, but the government is not actually working in our best interest; they are doing whatever they need to do to get reelected and enriched.
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