Midyear outlook: Revisiting our five questions for 2026

We expected 2026 to be a year of transition. Not sudden discontinuities, but subtle changes in the macro discourse, allocation trends, and public policy. With half the year in the books, it’s time to “mark to market” and consider how the five questions we posed have thus far been answered.

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

Recent election results have delivered a simple message: if the Fed won’t deliver price stability, voters will take matters into their own hands.

2) Are data centers “crowding out” investment in other sectors?

First half data reveal that AI spending may not be “propping up” the economy so much as bidding away a large and growing share of its finite resources. Investors may balk at accepting the concentration risk future capex plans imply.

3) What message are bond and FX markets sending about Japan?

Far from an expression of “no confidence,” the market seems to believe the Bank of Japan can normalize policy at a faster pace.

4) Have critics focused on the wrong credit boom?

As direct lenders’ liability structures have proved their durability, attention turns to the explosion of short-term, “runnable” liabilities in much of the rest of the financial system.

5) Does the European Union need a new treaty?

As it turns out, improvisation may not be all bad. Collaboration among the six largest EU economies may prove a de facto substitute for the treaty reform we thought indispensable.