Five Wall Street Investors Explain How They’re Approaching the Coming Year
Here’s how they are looking at artificial intelligence, interest rates and economic pressures.
4 min
The S&P 500 just completed one of its best three-year runs ever, rising around 80% from the start of 2023 through New Year’s Eve. Wall Street thinks the party is just getting started.
Few expect the good times to keep rolling indefinitely, but you would be hard-pressed to find a major bank predicting anything except more gains in 2026.
Yet worries abound about the stretched valuations of artificial-intelligence companies, the path of interest rates and the outlook in Washington, D.C.
So we asked five investors where they’re putting their money:
Alex Chaloff
Count Alex Chaloff among the investors concerned about a reckoning with the huge gains in AI stocks.
The chief investment officer at Bernstein Private Wealth Management fielded questions from clients on the topic all last year.
After several years of huge returns, he is advocating a more surgical approach to picking stocks.
“On one hand, they’re thrilled with the returns. On the other, they’re scared of what the next chapter is, because I’ve been telling them: It’s 1990-something,” Chaloff said, referring to the final years of the dot-com bubble.
“Our view is that we still have room to run, but there will be an end to this.”
Chaloff isn’t selling out of AI, but he is happy to help concerned clients seeking protection against declines in the whole index or a handful of individual big tech stocks.
One tool he is using is buffered exchange-traded funds, which seek to smooth out market swings. Those offer “some upside exposure with either defined or variable protection, and a great level of visibility, transparency and liquidity,” he said.
Bernstein is also working on an “AI loser” list, screening specifically for companies with high debt loads and low free-cash flow—those that have gotten AI hype, but might lack the fundamentals to survive an arms race.
He also holds an upbeat outlook for U.S. growth, especially if the Supreme Court ends up striking down President Trump’s tariffs: “I think that possibility is being overlooked a bit. It could reduce inflationary pressures, allow more rate cuts and accelerate the economy.”
Saira Malik
Tech bulls point out a key difference between now and the dot-com bubble: Today’s most-valuable companies, such as Nvidia, Microsoft and Alphabet, are some of the most profitable in history. And those profits are growing fast.
Saira Malik , who oversees $1.4 trillion as chief investment officer at Nuveen, thinks there is more upside ahead to the technology and AI trade, and she plans to add to some of her favorite holdings in 2026. It all comes down to profits.
The Magnificent Seven tech companies plus chip maker Broadcom —a group Malik is now referring to as the “Great Eight”—are forecast to grow earnings by 24% this year, well over double the forecast for the S&P 500 as a whole.
“We think the earnings growth and future growth justifies the premium valuations in tech, which will continue to dominate and lead the S&P 500 higher,” Malik said.
Tech stocks’ years long dominant run has made a handful of the biggest companies a larger share of the S&P 500 index than ever, making some investors fret over concentration risk. Malik shrugs those concerns off.
“I don’t necessarily say the market has to broaden out for it to be healthy. We’ve been living in this world of tech dominance for basically a decade straight…as long as the earnings power is there, the stocks will follow,” she said.
Outside of stocks, Nuveen expects municipal bonds and private equity both to bounce back in 2026.
Heavy supply of new muni bonds led to them lagging behind taxable bonds last year, a trend that Malik expects to reverse in a “catch-up trade.” Private equity, meanwhile, stands to benefit from lower interest rates and a pickup in deal activity, she has told clients.
Jack Ablin
Concentration risk isn’t just a stock-market issue, says Jack Ablin , chief investment strategist at Cresset Capital. He worries about the growing share of consumer spending coming from wealthy individuals, which he said puts the economy at risk as well.
“We have a narrowing prosperity on both Wall Street and Main Street, and it probably does create a vulnerability. A minority of the participants are accounting for most of the results,” Ablin said.
Stock owners are feeling a wealth effect that leads to freer spending. That could change quickly during a market downturn, however, leading to a scenario where a drop in the stock market could push the economy into a recession, Ablin said.
Cresset has leaned into value stocks and small-caps recently, expecting that both will benefit from interest-rate cuts and lower financing costs this year.
When it comes to AI, Ablin isn’t ready to pick winners and losers.
“I don’t have a crystal ball. So we buy everything for now, and the winners will ultimately pay for the losers.
Larry Adam
Raymond James Chief Investment Officer Larry Adam thinks stocks will have a more modest 2026, projecting around a 4% gain for the S&P 500.
Equity valuations will struggle to move higher than they currently are, meaning those gains will need to come from earnings growth, he said.
“I think the market is vulnerable to some disappointment after going so long with remarkably low volatility,” he said.
Raymond James is adding to bets on the industrials and consumer discretionary sectors this year. Industrials look like an indirect AI play, since they act as suppliers to utility companies and others helping build out AI infrastructure.
Consumer discretionary stands to benefit from a pickup in consumer spending, Adam reckons, with major tax refunds from the One Big Beautiful Bill Act set to hit pockets this spring.
Rob Arnott
Is there an AI bubble? Rob Arnott says yes, though the Research Affiliates founder and chairman cautions that it isn’t easy to profit on that idea.
“Shorting a bubble is a very fast way to go bankrupt. Bubbles can last longer and go further that you can imagine,” he said.
Like many on Wall Street, Arnott is convinced that AI is the “real deal” and a technological revolution is coming.
But he also warned that technological revolutions take time to play out—and said it is far too early to know which companies will emerge from the pack. During the dot-com boom, he said, Lucent and Nokia numbered among the world’s most-valuable companies.
“Dating back to the industrial revolution, every time you see major disruption there are winners and losers. A lot of losers,” he said. “The disrupters get disrupted.”
Arnott is now running a strategy that automatically trims exposure to stocks if their valuations soar quickly. “Just like averaging in is a time-honoured way to build a position in something cheap, averaging out is a great way to reduce exposure to what’s frothy and expensive,” he said.
With the profits taken from trimming exposure to fast-growing names, Arnott is putting money into areas that look cheaper and less loved, such as international and value stocks, to boost diversification.
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Mirzaian is a senior director within CBRE’s Development NSW business, operating across the company’s Western Sydney and North Sydney offices
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Wall Street’s hottest momentum trade has reversed sharply, as former winners tumble and heavily shorted stocks surge.
3 min
Wall Street’s hottest trade has gone ice cold.
For years, it paid off to buy stocks that were rising in price—and bet against struggling shares. The momentum trade was especially profitable this year, as investors piled into hot stocks including Micron Technology, Nvidia, Advanced Micro Devices and other artificial-intelligence darlings while wagering against those likely to be hurt by the embrace of AI.
The S&P 500 Momentum Index soared 44% in the second quarter, its best quarterly performance on record, and it surged 133% over the past five years, nearly double the broad market’s performance.
Mega funds and rookie investors alike piled into the trade, some using leverage and options contracts in an effort to amplify their returns, propelling the underlying shares higher.
“It is a self-fulfilling prophecy,” said Matthew Tym, managing director at Cantor Fitzgerald, of the trade.
Suddenly, the trade is a loser. The momentum index has tumbled more than 9% since July 1, lagging behind the S&P 500’s 2.8% gain. The index—which tracks stocks in the S&P 500 based on a “momentum score”—is on track for the biggest quarterly underperformance in 25 years. July was the second-worst month for the momentum trade in around 40 years, according to Bank of America estimates; the only month worse was April 2009, in the teeth of the global financial crisis.
Hedge funds that bought momentum shares while shorting low-momentum stocks suffered even more. At the same time, a basket of the most popular stocks held by hedge funds tracked by Goldman Sachs recorded its biggest one-month underperformance in July relative to the S&P 500 in more than 20 years, according to the bank’s analysts.
Momentum trading is based on a rather simple observation: Investments that go up tend to keep outperforming; those that underperform often remain laggards. This kind of trading might seem too simple a stock-picking strategy to work. Yet it often has.
“For decades, it didn’t take a lot of sophistication to run a momentum strategy and make a decent living at it,” says Agustin Lebron, senior researcher at EquiLibre, a trading firm.
Part of the reason: It takes a while for corporate and other information to spread to various investors, so they slowly build positions, producing buying momentum.
“A huge pension fund can’t flip around its positions in a day,” says Lebron. “Behavioral biases also account for some of the effect, as well—people tend to sell their winners too early and hold losers too long.”
Fans of the strategy point to the human tendency to extrapolate from past results—and chase investment returns—noting that momentum patterns have been evident in markets for decades, even centuries. They also say that some of the worst months for momentum strategies are during longer periods of outperformance.
Some have been doing the trade by buying the strongest investments in a sector while shorting the weakest; others lean in to rising markets or asset classes. Still others use a quantitative approach or turn to banks or others who sell ways to make distinct wagers on momentum as a “tradable factor” or a “thematic basket.”
The fans remain believers. “Any strategy has disappointing periods,” says Antti Ilmanen, global co-head of the portfolio solutions group at AQR Capital Management.
The surge in Moderna and other biotech stocks helped crush the momentum trade. These shares were among the most heavily shorted in recent years, but positive news on a cancer vaccine from Moderna and Merck sent those stocks flying, crushing some quant and other hedge funds. Moderna is up around 150% so far this month.
These traders had an especially rough day on Aug. 19, which Goldman Sachs told its clients was the worst day for “systematic long-short managers” in more than two years. About half of the losses were because of momentum trades, the bank said.
Some traders have begun to short, or bet against, the very stocks that propelled the momentum trade earlier this year. Net short positions in futures tied to the Nasdaq-100 index among speculators recently climbed to some of the highest levels of the past two decades, according to data from the Commodity Futures Trading Commission.
The about-face is a sign of how markets have become more treacherous for investors, even as indexes keep climbing. Part of the issue: the recent meltdown of Situational Awareness, a hedge fund that had piled into some of the most popular momentum shares, including chip stocks. After a period of market tumult, Nvidia shares rocketed almost 9% after its earnings, showing how quickly sentiment can shift.
Some investors say the run-up in share prices driving tech stocks higher reminds them at times of the dot-com frenzy decades ago.
Mike Ogborne, the founder of San Francisco-based Ogborne Capital Management, said he has grown more cautious on technology stocks and is keeping more of his portfolio in cash than he typically does.
And he is nervous about the surge in spending by technology giants and quarterly capital expenditures that keep rising.
“It is a little bit like Cinderella and the clock striking midnight. You don’t know when midnight is going to come around,” Ogborne said. “They don’t send a memo around telling you when the capex cycle is over.”
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