Select Dividend  '10 Surprises for 2026'

In homage to the late Byron Wien -- a well-known investment strategist at Morgan Stanley and later Blackstone --  our ‘10 Surprises for 2026’ list contains events whereby the market looks to be pricing in a less than 1:3 probability of occurrence but we believe the odds are 50% or higher. 

We will be wrong of course on several but hopefully directionally accurate on most. Still, we view this as a useful thought exercise that helps shape our portfolio construction with a focus on tail-risk events.

1. Global Reacceleration: Resilient economic growth combined with productivity gains and fiscal stimulus in all major regions result in above consensus global GDP growth. U.S. labor markets are in balance while leading indicators continue to improve. Inflation remains well anchored in all regions except the U.S.
2. No AI Bubble: By 2H26, more articles reference “inflation” than “AI bubble”. The Fed cuts fewer times than the market expects, and the 10-year Treasury trades closer to 5% than 4% as the bond market reacts to sticky inflation. AI efforts becomes less speculative and more focused on real-world applications.
3. Private Market Bubble: The private market asset class will underperform public equity markets again. In aggregate, the asset class (private equity, venture capital, hedge funds, real estate, private credit) continues its fifth straight year of more capital calls than cash returns.
4. The Fed is Not Captured: Kevin Hassett is the next Federal Reserve Chair but is unable to muscle the Fed Funds rate lower as the FOMC returns to the more chaotic, pre-Greenspan decision making process. Fed independence is maintained, though at the cost of higher interest-rate volatility driven by more public dissents and policy pivots than in recent Fed-watching memory.
5. Europe Outperforms the U.S. Again: The U.S. is a narrow Tech story while Europe is one of breadth. An improving economy and supportive fiscal policy lead to another year of outperformance for the Old World.
6. Blue Wave at the Midterms: Trump loses his political superpowers and becomes a lame-duck President. Two or more cabinet members exit the admin as fallout from the GOP midterm losses. Public policy volatility increases as presidential powers are limited to executive orders and the Foreign Policy realm.
7. Higher Structural Market Volatility: Global GDP growth surprises to the upside, but higher-than-expected inflation and a Fed narrative that turns from “how many cuts?” to “does the Fed hike?” increase U.S. market volatility. Binomial events like the midterms and the Supreme Court tariff decision heighten policy volatility, causing the VIX to trade at higher levels.
8. Deregulation: Red tape is cut at pace across Financial Services, AI/Tech Services and the Energy sectors under the guise of National Security to prop up economic growth before the midterms. Great Financial Crisis capital requirements are watered down, benefitting banks the most.
9. Oil Renaissance: Oil prices climb into the $60–70 per barrel range by Q4 2026 as demand drivers (e.g., corporates) exhibit firmer underlying consumption amid more constrained supply growth than widely assumed by a market that believes oil is oversupplied.
10. Nuclear Fusion Breakthrough: The AI race catalyzes nuclear fusion research, with at least three private-sector companies achieving the Net Energy Gain milestone in the new year. One of them goes on to reach Sustained High-Power Density Operation in a manner viable for a fusion power plant by late 2026.

The '10 Surprises for 2026' are not intended as statements of fact. They are predictions that may or may not occur based on a variety of circumstances.

Past performance does not guarantee future results. Investing in securities involves risk, including the possibility of the loss of principal.

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