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Consumer sentiment revised lower for December as year-ahead inflation expectation revised up a tick. Tech giants brace to spend billions more in CapEx as AI race heats up. 2026 S&P 500 Outlook: I’m The Lone Bull In The China Shop.
This is an abridged transcript.
2025….has been a year.
But don’t we say the same thing at the end of every year?
Well, today we’re looking at the year as a whole and remembering three big topics that shaped 2025 and we’re peaking into 2026.
Of course, this is a countdown so we’re starting off with number three.
Vibecession…
There’s this disconnect between the average person and how they feel about the economy and what the economic data says about the economy.
That’s Jack Bowman with Bowman Capital Management on Seeking Alpha.
One of the big major players in consumer sentiment, which is at an all time low and largely driven by this feeling that the economy is not as good as the data says it is.
The most recent data shows The Consumer Price Index rose 2.7% Y/Y in November.
Although it’s very regionally dependent, right? Where I live in southern California our Y/Y inflation was 4.5% but someone in Dallas saw a 1.1%, way far off.
According to the latest data, December consumer sentiment was revised down to 52.9 from the University of Michigan’s initial estimate of 53.3, though it improved from 51.0 in November.
Gains in sentiment were concentrated among lower-income consumers, while sentiment among higher-income consumers remained steady. Meanwhile, year-ahead inflation expectations declined for a fourth straight month to 4.2%—the lowest level in 11 months—though still above the 3.3% recorded in January.
So, what could potentially turn things around?
One of the things I think will help is time, unfortunately.
Number two is the one that you can probably count on being on everyone’s list.
It has to be tariffs and liberation day was the most watched day in market history for the recent years.
April 2, 2025
So, the rates we saw that day no longer matter. That famous image of President Trump with the big board with all the numbers on it, none of those are accurate to what it is now.
But Jack admits sometimes things don’t play out the way you expect them to.
Some of these were geopolitically useful but some of these I think were taken at face value right away. And I’m guilty of that too. When those numbers came out I said, “Oh no this is going to be really bad.” And since then I’ve tapered back a lot of my expectations about how bad it’s actually going to be.
It’s December, where are we now? Well this act is still going…
The only thing I think that could be unpredictable for 2026 is how the China situation is going to unfold. We’re currently in a trade truce for the next year so most of 2026 will be spent on negotiating what that end result will be and I have no idea where that’s going to go.
If you’re searching for the latest news and analysis on tariffs. Just put the word tariffs in the search bar on Seeking Alpha and it comes right up.
The biggest one to me was AI capex spending.
Big tech companies including Alphabet (GOOG, GOOGL), Amazon (AMZN), Microsoft (MSFT), and Meta (META) are investing billions in AI infrastructure as the race to lead in AI accelerates.
I kind of make this joke that 2025 was the year where we went from covering the planet in solar panels to covering the planet in data centers. We made the switch really fast.
Let’s consider a few of these: Meta (META) expects 2025 capital expenditures, including principal payments on finance leases, to be in the range of $70B to $72B, increased from its prior outlook of $66B to $72B.
Meta said it will “spend aggressively” next year, warning its capital expenditures will be “notably larger” in 2026 and total expenses will grow at a “significantly faster percentage rate.”
Alphabet (GOOG) (GOOGL) raised its forecast for capital expenditure for 2025 and 2026.
“We’re continuing to invest aggressively due to the demand we’re experiencing from Cloud customers as well as the growth opportunities we see across the company. We now expect CapEx to be in the range of $91 billion to $93 billion in 2025, up from our previous estimate of $85 billion,” said Alphabet’s Senior Vice President and CFO Anat Ashkenazi during the third quarter earnings call.
Amazon (AMZN) said its cash CapEx was $34.2B in the third quarter and the company has spent $89.9B so far this year. The e-commerce giant noted that it will continue to make significant investments, especially in AI.
So I’ve been happy with how much is being spent because it means we’re getting to that phase where we don’t have to spend as much anymore sooner.
Meta Platforms (META) has a Quant rating of HOLD on Seeking Alpha. Alphabet (GOOG) (GOOGL) has the same rating though Seeking Alpha analysts say it’s a buy and Wall Street says it’s a strong buy. Amazon’s (AMZN) Quant rating on Seeking Alpha is Strong Buy.
Enough about 2025, what about next year?
I’m calling that I think the S&P is gonna rise another 10-15%.
But why?
I mostly give that bullish take because I don’t see a lot of the tailwinds behind technology stocks like their big spending. The fact that most of them are insulated and immune from tariffs, at least the big 10 companies that make up half of the S&P. And they seem to continuously be expanding their profit margins even as they get into what I assume will be a very low margin business, AI.
So there you have it, a broad look at 2025 and a prediction for 2026.
By the way, if you’re interested in the Top Stocks of 2026. I’ll leave a link so that you can register for our webinar coming up on the 6th of January with our VP of Quantitative Strategy Steven Cress. This is a hot ticket every year.
No special hours for the market today.
Thanks for listening to part 1 of our year-in-review. I’ll have part 2 on New Year’s Eve. It’s all about the headlines that you were most interested in.
Enjoy your weekend. I’ll see you back here on Monday.