U.S. economic growth in 2026 will be supported by AI investment, wealth effects and supportive monetary and fiscal policy, but investors will have to navigate “blind spots” including AI, continued inflation and tariffs, according to a market forecast released by iCapital on Wednesday.
The U.S. economy is “expected to grow near trend” (about 2%) next year, says iCapital’s “2026 Market Outlook, Balancing Divergences Amid Blind Spots.”
“There have been few times in the past decade when investors have been so divided about the future,” Sonali Basak, Managing Director and Chief Investment Strategist at iCapital, says at the start of the forecast.
“Some of the same voices that predicted the 2008 crisis are now bullish heading into 2026,” she says. “Others, after three years of double-digit S&P 500 gains, fear an AI bubble is about to burst. The same investors who are enjoying the prosperity that’s been forming from the AI revolution are also warning that calamity might be coming for companies that are not set to benefit from the rapid pace of technological change.”
But she notes, “There are divergences forming among those winners and losers, one that might be painful for investors to endure in the coming months and years.”
“Of course, there are risks. The road to gains is often paved with losses,” she adds.
“Of course, there are risks. The road to gains is often paved with losses.” — Sonali Basak, Managing Director and Chief Investment Strategist, iCapital
The forecast says, “We expect 2026 to be a true balancing act, one where the trajectory of growth will hinge on how key divergences are ultimately resolved.”
It notes divergences in three areas: the “K-shaped economy” differences between high and low income households, the tension in growth versus labor data, and the hawk versus dove policy divide at the Federal Reserve.
The blind spots iCapital outlines include inflation, financing and depreciation of AI investments, tariffs and the deficit, which names are market leaders next year and the monetization of 2021 and 2022 “vintages” of general partnership investments.
Turning to investment implications, the firm forecasts “upside” for equities and risk assets, but with increased volatility, expecting returns in the middle to high single digit range, driven by earnings.
iCapital says that policy clarity and falling short and long-term interest rates will make private markets attractive.
It also warns that midterm election years tend to be volatile.
Jeff Berman, Contributing Editor and Reporter at Wealth Solutions Report, can be reached at jeff.berman@wealthsolutionsreport.com.
