Meketa enters 2026 with a deliberate refusal to chase a single dominant macro narrative. Instead, the firm frames the year as one defined by interaction effects—between policy and markets, between growth engines, and between confidence and credibility. As Meketa Investment Group’s Alison Adams, Richard O’Neill, and Orray Taft put it, “2026 may be less about a single dominant macro narrative and more about the interaction of policy and markets,” a year in which outcomes may widen even if the base case remains benign.
The framework Meketa deploys in its Global Macroeconomic Research Series report “What We Are Watching in 2026”1, centers on four themes that “we believe will do the most to shape portfolio outcomes”: the outlook for the U.S. economy, the Federal Reserve’s policy path amid leadership transition, global monetary-policy divergence, and the AI-driven concentration in U.S. equities and its implications for rotation, volatility, and financing conditions.
Rather than forecasting precision, the report emphasizes conditionality—what would force reassessment, what would widen risk premia, and what would change the market regime quickly.
The U.S. Economy: Resilient, But Increasingly Bifurcated
The most immediate surprise framing Meketa’s outlook is simple: the recession never came. “The long-anticipated US recession never arrived in 2025,” the authors write, noting that the economy entering 2026 has “a lot more underlying momentum than many expected just a year ago.”
Consumer spending remains the backbone of that resilience. Rising wages, “household balance sheets that remain healthy,” and positive wealth effects from equities and housing continue to support consumption. Even with “some recent signs of weakness,” Meketa emphasizes that the labor market remains “relatively stable,” reinforcing spending capacity.
Yet Meketa is careful to stress that this is not a one-engine economy.
AI as a Macro Growth Engine—And a Source of Fragility
Beyond the consumer, Meketa identifies a second, increasingly decisive engine: AI-related investment. The report describes the “massive amount of spending related to the buildout of AI infrastructure including data centers, semiconductors, and software” as having “become a genuine growth driver,” one that has helped offset cyclical slowing elsewhere.
The scale is striking. Meketa notes that “some estimate that data center and high-tech investment in the US may have accounted for 80% of final private domestic demand,” a concentration that has materially altered the growth mix.
GDP expectations for 2026 span a wide range—roughly 1.5% to 2.5%—with the Fed and IMF clustered near the middle. But Meketa suggests upside is plausible given “the strength of the US consumer and the likely continued significant AI capital expenditures,” along with fiscal stimulus, potential rate cuts, tariff easing, and productivity gains.
Still, the AI boom is explicitly framed as a double-edged sword. “Misallocated capital or an abrupt pullback in tech investment would quickly expose how much recent optimism is tied to that single engine of growth,” the authors warn.
This asymmetry—where AI both stabilizes and concentrates risk—sets the tone for the remainder of the report.
The Federal Reserve: From Sequencing to Trade-Offs
If 2025 was about sequencing inflation before growth, 2026 is framed as something harder. “The dual mandate increasingly presents a true trade-off rather than a sequencing exercise,” Meketa writes. Inflation has moderated but is “not yet fully back to target,” while labor conditions are cooling.
In this environment, policy is less rule-bound and more reactive. Meketa highlights the growing risk of a stop-start easing cycle, where the Fed “may ease policy, pause to reassess progress, and adjust again if inflation dynamics or financial conditions evolve in unexpected ways.”
The risk is not simply the number of cuts, but their sequencing, especially as elevated asset valuations and financial conditions feedback into policy caution.
Leadership Transition and the Price of Credibility
Complicating matters is institutional uncertainty. Chair Powell’s term ends in May 2026, and Meketa notes that leadership transitions “historically introduce a modest risk premium.” Markets price uncertainty around “communication style, reaction function, and perceived independence.”
The report goes further, emphasizing that “changes in forward guidance or tone alone—even without immediate policy shifts—can materially affect volatility, rates, and currencies.”
Adding another layer, a Justice Department probe into aspects of Federal Reserve operations has heightened scrutiny. While not directed at policy decisions, Meketa stresses that “the risk is less about near-term policy results and more about confidence,” with prolonged pressure capable of widening the perceived distribution of outcomes and raising term premia.
Global Central Banks: Dispersion, Not Synchronization
Globally, 2026 is framed as a year of policy divergence. “Global monetary and fiscal policy… will be increasingly defined by dispersion rather than synchronization,” Meketa writes, with meaningful implications for currencies, capital flows, and fixed income positioning.
Japan stands at one extreme, having raised rates to 0.75% and debating further tightening. Even incremental moves represent “a structural shift after decades of ultra-easy policy,” with implications for yen-funded carry trades and global liquidity.
China, by contrast, is leaning more heavily on fiscal policy, underscoring “the limits of monetary easing in the current environment” and continued reliance on policy-driven demand rather than organic momentum.
In the euro area, resilience has allowed rates to become more anchored, reducing front-end volatility but limiting downside absent a growth shock. Meanwhile, U.S. policy remains the gravitational center, complicated by elevated fiscal issuance and higher term premia.
Meketa emphasizes that divergence expresses first through FX: “Policy divergence tends to express itself first through foreign exchange markets,” influencing hedging costs, carry strategies, and geographic rotation.
AI, Equities, and a Shifting Market Regime
By late 2025, cracks appeared in the AI-led equity narrative. Meketa highlights quarter-end dispersion among mega-caps and growing concerns around valuation, return on invested capital, and debt-financed expansion. What had been a rising tide became “more selective,” reducing the outsized influence of the Magnificent Seven.
Looking ahead, Meketa expects AI optimism to transition “to a more demanding stage where returns on that investment begin to matter.” Not all spend will translate into earnings, and the market is likely to “reward firms that can convert scale and data advantages into monetizable products,” while punishing others.
This creates space for broader leadership. As AI diffuses across the economy, sectors such as industrials, healthcare, financials, and smaller-cap firms may benefit from productivity gains, easing financial conditions, and more attractive valuations. Meketa notes that “the focus may shift… from who spends the most to who integrates it most effectively.”
Reassessment Triggers: When the Narrative Breaks
Meketa closes not with forecasts, but with fault lines. Signals that would challenge their views include “a sharp and sustained deterioration in labor-market breadth,” accelerating tariff-sensitive inflation, a rapid rise in term premia, material changes in Fed communication or independence, and a decisive break in equity-market breadth—either toward broadening or concentrated unwind.
Key Takeaways for Advisors and Investors
- 2026 is a distribution year, not a point forecast year. Even if the base case holds, volatility can rise as policy credibility and sequencing matter more than direction.
- AI is both stabilizer and risk concentrator. Growth depends on it—but so does fragility if capital discipline falters.
- The Fed’s challenge is institutional as much as macro. Leadership transition and perceived independence may move markets as much as data.
- Global dispersion favors active positioning. FX, term premia, and relative policy paths will increasingly drive cross-asset returns.
- Equity leadership is no longer automatic. The market is shifting from scale-based enthusiasm to earnings-based discrimination.
Footnote:
1 Meketa Investment Group, What We Are Watching in 2026: Four themes shaping the economic and market regime (January 2026).
