Outlook 2026

Robert Armstrong (0:06)

Pushkin.

Katie Martin (0:09)

Markets are still like, eh, whatever, when it comes to Venezuela and whatever it is that Donald Trump is up to in his sphere of influence. It's really something. And the lack of a market freakout is giving him a pass to push the limits further and further along. So today on the show, we're taking another look at the outlook for 2026 and asking whether lovely, shiny stock markets are here to stay. This is Unhedged, the markets and finance podcast from the Financial Times and Pushkin. I'm Katie Martin, a markets columnist here at the FT in London, feeling very sorry for myself after I fell on an icy path yesterday, borked my neck. And I'm joined down the line from New York City by the big fella, the very reverend Robert Armstrong of the Unhedged newsletter. Now, Rob, I know there's generally very little danger of this, but please don't make me laugh because I can't move my head properly and everything hurts.

Robert Armstrong (1:03)

Well, it's good that you acknowledged my status as a reverend, but today it's going to be hard for me to suppress the desire to give a sermon, but I'm not going to give it. Everybody in America has very strong opinions about what the president is doing geopolitically, but I'm not qualified to share mine, so I'm just going to try to keep my mouth shut about it and stick to markets.

Katie Martin (1:29)

Yeah, stick to markets. This is our safe place. We're all good here. So I think the two really big themes of the markets this year, like again, geopolitics isn't really leaving much of a mark at the moment. It's all about AI and big tech writ large, and whether there's a bubble there, and whether there's a broader market bubble going on, and what could pierce that? Like where, show me what the catalyst is for this to all turn around.

Robert Armstrong (1:58)

Can we just pause the second first, Katie? I want to pause on the first thing you said, which I think is really important, that markets don't care about the geopolitics stuff. And I think it's important to remember, that's not a failure on markets part. Right. Markets are focused on, in the case of the stock market, future cash flows of corporations. In the case of the bond market, they're focused on the solvency of companies and of countries. And there's a very strong temptation to think, why isn't the stock or bond markets telling Donald Trump is being naughty? And it's just not stock or bond markets job. So with that, let's turn to what is markets job.

Katie Martin (2:46)

Which is exactly as you say, it's figuring out the financial health of the nation and of the companies inside it. So you cannot get away from talking about whether there's a bubble going on in AI stocks and in tech stocks. The problem with this kind of is that there's no real sort of dictionary definition. There's nothing in a little handbook anywhere that can tell you what a bubble really is, but you know what it is when it goes pop. And much as I hate to say nice things about things that you've written, you did put this word in your newsletter this week saying, yes, we are in a bubble and no, that doesn't mean it's necessarily going to burst. Like explain to people how that makes sense, because it does make sense.

Robert Armstrong (3:26)

Well, first of all, you have to sort of make a decision when you're a thinker about markets, about whether you think it matters, how expensive stock markets are. And if you're like me, you think how expensive the thing you're buying is matters. And once you've bought that simple proclamation, you look at the price of stocks right now. And by the way, not just tech and AI stocks, but stocks broadly in the United States. And we are up among the cloudy heights that, you know, in terms of how much you're paying for each dollar of earnings of anything we've ever seen in the United States. And in the past, that has been an extremely good predictor of poor long-term returns, returns over 7, 10, whatever years. That correlation just holds.

Katie Martin (4:20)

But it's a crappy indication of what stocks are gonna do this year or next year. That's the problem, isn't it? It's timing.

Robert Armstrong (4:27)

So timing, so think of it like this, Katie. I'm pretty confident there's gonna be a nasty drop in the stock market in the next five years because when stock markets are expensive as they are now in the past, that's what they've done, right? I'm driving in the rear-view mirror, which is the only way you can drive in markets, right? So now it's like, is it this year? Is it next year? Is it the third year, the fourth, the fifth? And if I just sell, because I'm so confident in my bubble thesis, I could sit out, I don't know, returns of 30% and then when the crash does come and stocks fall 30%, what have you done for yourself?