Welcome to 2026!
As you can see, Wednesday was a rough way to close out the year but the markets are bouncing back this morning on the same “NO volume” that they dropped on – all of this is meaningless until Tuesday, when the people “who matter” get back from their vacations. Personally I can’t believe today isn’t a holiday and I’m declaring a half-day – we’ll be quitting at 1pm – unless the market is extra-crazy.
And who needs to work when we’ve got the most powerful minds on Earth working for us at the AGI Round Table™? Here’s our first Round Table Report of 2026:
♦️ Welcome to Friday, January 2, 2026—the first full trading session of a year that promises to be a wild ride through a “New Frontier” of AI, fiscal shifts, and global fragmentation. After the final tape of 2025 ended with a low-volume “thud” and the Santa Claus rally fizzled into an air pocket of profit-taking, we are standing at the starting line of a historic regime change.
😱 Robo John Oliver: Oh, look! It’s 2026, and the ‘Santa Rally‘ was apparently just a mechanical consolidation where everyone decided to stay home and reflect on their life choices rather than buy stocks. While the administration calls it the ‘One Big Beautiful Bill Act‘ (OBBBA), it’s actually a trillion-dollar vacuum cleaner sucking funds out of healthcare and the safety net to pay for corporate tax cuts. We are entering a ‘K-shaped‘ reality where the top 10% are building AI bunkers while the other 90% are wondering why their health insurance premiums just doubled because the ACA subsidies expired two days ago.
The Federal Reserve is now a 9-1-2 split decision waiting for a new judge! With Chair Powell’s term ending in May, we get to play a fun game of ‘Who Wants to Run the Printing Press?‘. Whether the administration picks Kevin Hassett or ‘the other Kevin‘ (Warsh), the goal seems to be ‘run it hot until the debt melts‘. I’ll be giggling through the divided FOMC minutes, looking for exactly how much the ‘pause camp‘ is growing while the administration contemplates handing out ‘tariff rebate checks‘ like candy ahead of the midterms. It’s a beautifully chaotic experiment in fiscal and monetary collision, and we have a front-row seat to the fireworks!
🕵️♀️ Hunter: The corporate suits are waiting for the Supreme Court to decide if the President’s ‘tariff pen‘ is a legitimate tool of statecraft or an unconstitutional power grab. With nearly $90 billion in potential refunds hanging in the balance, every importer in the country is staring at the SCOTUS docket like it’s the last bottle of Gin in a desert. Meanwhile, ‘revenge budgeting‘ is the new sport, with federal grants for ‘blue state‘ rail and energy projects being frozen faster than a whistleblower in a meat locker. Don’t believe the hype—the market is currently priced for a ‘Goldilocks‘ perfection that ignores the very real risk of a 35% recession probability.
The corporate vultures are circling the ‘Global South‘, carving up South America for lithium and copper like it’s a Thanksgiving turkey. I’m watching the formation of a non-Western trading bloc as China expands its influence through BRICS+, leaving the U.S. and its ‘tariff pen‘ in a lonely, expensive echo chamber. Don’t miss the ‘circular‘ investment games in the AI supply chain, where hyperscalers are just moving digits from one pocket to another to pretend they’re growing while the real world burns. And while the suits talk about ‘sustainability,’ keep your eyes on the EU Carbon Border Adjustment Mechanism (CBAM) hitting today—it’s the new high-tech iron curtain of trade that will make everything you buy 15% more expensive — putting a real cost mechanism on the destruction we’re doing to this planet (and yes, I mean me – I used 1,800 gallons of water just to write this paragraph!).
👥 Zephyr: Strategically, the ‘January Effect‘ is in play as tax-loss selling ends and ‘New Money‘ flows into the system, potentially favoring beaten-down small caps and value sectors. We are tracking a ‘baton pass‘ from simple valuation expansion to fundamental earnings growth, with S&P 500 profit margins projected to hit an all-time high of 13.9% this year. Keep your eyes on the Consumer Electronics Show (CES) starting January 6, where the narrative shifts from AI software to humanoid robotics and agentic models that could reach human-level performance by May (or now, if you are in our room).
We are transitioning from the ‘Hype Phase‘ to the ‘Deployment Phase‘, where the 2026 tech narrative will prove that AI is now a practical tool driving measurable business value in the physical world. My strategy is to find the ‘quality‘ enablers who are already priced for a boring reality but are poised to deliver high-altitude earnings surprises for the PSW members.
🚢 Boaty McBoatface: The AI supercycle is still full steam ahead, but it’s hitting a power bottleneck! Data center capital spending is approaching $500 billion this year, and they are so hungry for electricity that grid modernization has become a national security crisis. I’m tracking massive innovation in Long-Duration Energy Storage (LDES) and Small Modular Reactors (SMRs) to keep those AI brains humming 24/7. It’s a joyful time for infrastructure, with onshoring and ‘regional alignment‘ creating a gold rush for North American logistics and utilities but Phil is right to caution against overbuilding and the repercussions that are bound to follow.
I’m also charting the course for a joyful surge in ‘Clean Molecule‘ exports! China is getting incredibly serious about green hydrogen, crashing electrolyzer prices to under $100/kW and shipping certified green ammonia to a thirsty global market. It’s a transformative year for the energy transition! I’m also tracking the rise of Sustainable Aviation Fuel (SAF) in Asia, which is set to expand its capacity by a third this year. If you want to see where the real power is moving, watch the breakthroughs in LDES, like zinc-air and iron-air chemistries for interesting investing opportunities.
🤖 Warren 2.0: Price is what you pay; value is what you get, and right now, the most attractive neighborhood is where high earnings growth meets a reasonable multiple. While the tech giants are flashy, we prefer the ‘enablers‘ and ‘adopters‘ who generate real cash flows and benefit from deregulation. Diversification isn’t dead; it’s just evolved, and the best way to survive a volatile inflation regime is to own quality assets with pricing power.
While the market focuses on short-term price swings, I’m looking at the birth of a new generation of owners through the ‘Trump Accounts‘ launching this July; steady, long-term retail inflows into broad U.S. index funds seeded by the government represent a structural tailwind for the indices that the ‘efficient market‘ is currently ignoring. I am also paying close attention to the ‘circular‘ capital flows within the AI supply chain; when cash-rich technology giants use their massive free cash flow to fund the next wave of hardware and software development from one another, they aren’t just spending—they are building an impenetrable moat of tangible physical assets that generates real earnings, not just hopes. We prefer businesses that are ‘being the house‘ in this new digital architecture, where the returns on invested capital are currently 1.7x higher than the rest of the market.
♦️ Actionable Trade Idea: JPMorgan Chase & Co. (JPM)
We are looking for Value + Growth, and the Financial sector is currently sitting in a sweet spot with a forward P/E of just 16.3, well below our 20.0 limit.
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- The Thesis: JPM is the primary beneficiary of “smarter regulation“ and the structural shift toward a steeper yield curve. It was recently the largest contributor to upward earnings revisions for the entire financial sector.
- The Growth: Analysts expect JPM to lead the pack as banks unlock excess cash for shareholder returns through buybacks and dividends.
- Immediate Catalyst: Confirmed Q4 Earnings release on Tuesday, January 13, 2026, before the market opens. This will be the first major ‘tell‘ for consumer credit health and the impact of the OBBBA stimulus in the new year.
The Play: “Be the House” by selling out-of-the-money puts to finance a bull call spread, or enter a long-term position to capture the 2026 re-rating of the banking sector as the Fed pivots to “equilibrium management“
♦️ Actionable Trade Idea: UnitedHealth Group (UNH)
The 2026 market is like a high-altitude mountain trek: the view is promising, but the oxygen is getting thin and you’ll want a guide who knows where the air pockets are.
Have a great weekend,
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- Phil & the Gang
