Five Questions for 2026

Each January, we ask Five Questions that encapsulate our tentative research agenda for the year.

We take this approach because questions are often more useful than predictions. They force us to be explicit about assumptions – what actually has to happen for markets and the economy to unfold in a particular way? They also help investors remain flexible as new information inevitably reshapes the outlook.

Heading into 2026, the consensus view is broadly constructive: accelerating growth, easing inflation, lower interest rates, and another leg higher for equities. We don’t disagree with this direction of travel. But rather than simply accept it, we want to test its durability. How might voters’ concerns about affordability influence the direction of monetary policy? Are we paying attention to the areas of the financial system where the greatest risk has accumulated? And where might today’s AI-inflected capex boom begin to run up against real economic or portfolio constraints?

Taken together, our five questions for this year are not meant to point to a single forecast. Instead, they are meant to highlight where the balance of risks may be shifting, where old frameworks may be under strain, and where investors may need to think differently as policy, capital, and institutions adjust to a changed world.

Here are five questions that we believe will be central to market activity in 2026:

1. How will the “affordability crisis” impact Fed policy?

By the fall of 2025, an “affordability crisis” emerged as the topic du jour in Washington, DC. A simple and easy-to-observe phenomenon – the Fed tolerating nearly five years of above-target inflation – had mutated into something more exotic and intractable. As the midterm elections approach, Fed policy may get “politicized” in a manner contrary to expectations.

2. Have critics focused on the wrong credit boom?

It seems that nearly everyone suspects that private credit will be the epicenter of the next financial tremor. But private credit seems an unusual candidate for trouble, especially when viewed relative to the explosion of short-term debt issued virtually everywhere else in the financial system.

3. Are data centers “crowding out” investment in other sectors?

When discussing risks to the AI capex outlook, one often hears concerns about the long lead times for power generation capacity, shortage of skilled labor, and need for public support. But the sums involved have reached levels that it may be time to consider economy-wide resource constraints and investors’ collective willingness to absorb incremental data center risk.

4. What message are bond and FX markets sending about Japan?

There’s nothing alarming about the normalization of interest rates in an economy that’s finally exited convalescence from its deflationary slump. Japanese policymakers want this process to unfold gradually while preserving the benefits of a competitive exchange rate.

5. Does the European Union need a new treaty?

More than a year after its release, barely 10% of former ECB President Mario Draghi’s competitiveness agenda has been implemented. While many blame the lack of progress on insufficient political will or the absence of an economic crisis to spur action, the problem may be institutional. Recent fissures in the transatlantic relationship could open the door to changes on a scale that transforms investors’ perceptions of the continent.

Read the full Five Questions for 2026 white paper