2026 Begins With Market Sentiment Similar To 2025

We begin 2026 similarly to the year prior as it relates to general economic and market sentiment. While various pockets of worry and uncertainty persist, economists’ forecasts entering the new year are largely optimistic. The median economist forecast on Bloomberg for key economic metrics could best be described as “steady” in 2026. It was a strong year for most financial assets in 2025, and if the economy were to track current expectations, it would be another solid year.

Below are some economic themes we will be tracking over the next 12 months, followed by potential risks and more optimistic expectations.

1. A Quieter Policy Year

One of our 2025 themes was “messier than expected.” While markets focused on the Trump administration’s views on taxes and regulation as a strong economic tailwind, we worried that other policy decisions, particularly tariffs, could prove messy. As we enter 2026, and the consequential midterm elections loom later this year, we expect less noise on the policy front.

The Supreme Court has yet to rule on the legality of reciprocal tariffs using an emergency powers act. Regardless, the White House will likely try to avoid any new actions that spark a negative reaction from financial markets, whether trade, immigration, or other policy issues. If this proves true, it could lead to increased business investment, which lagged in 2025 for everything but data center build outs.

2. Digital Infrastructure Tailwind

Continuing that last thought, we saw a major uptick in digital infrastructure spending in the second half of 2025 for everything from computers and software to data and power centers. Up to this point, large technology companies had largely funded these expenditures with free cashflow, but that changed in 2025 with large corporate debt issues by companies like Oracle, Google, and Meta. We also saw a notable increase in securitized debt issuance for financing data centers, and this issuance is expected to accelerate in 2026.

While there are ample worries about the speed at which AI development is occurring and the associated costs, the spending should be a tailwind for overall economic growth this year. However, the notable debt supply will act as a headwind for fixed income spreads across several sectors, including corporate debt and asset-backed securities (ABS).

3. An Ongoing Struggle For Low-Income Households

As the year progressed, there were more references to a “K-shaped” economy in articles and media reports. This describes an economic expansion where high-income households thrive and low- and middle-income households struggle. Elevated inflation hits lower earners most, and consumer delinquencies have been more elevated relative to historical trends for borrowers with lower credit scores.

While inflation could slow modestly in 2026, it is unlikely that wage growth could accelerate enough to materially improve the current affordability issues for many low- and middle-income consumers. As such, credit risk will remain elevated for loans to these borrowers.

Visit ALM First to read more about the latest economic data and overall monthly market trends.

Jason Haley joined ALM First in 2008 and is the firm’s chief investment officer. He heads ALM First’s Investment Management Group (IMG), which is responsible for leading the investment process and investment theme development. Haley also oversees all capital markets activities, including portfolio management, trading, market research and commentary, and execution of hedging and funding strategies for the firm’s depository clients. He holds an MBA with a concentration in finance and a BBA with a concentration in marketing, both from The University of Mississippi.

Not an offer for investment advisory services. This content is provided for general educational information and market commentary purposes only.