by Karl Denninger, Market Ticker:
Well here we are at the close of 2025, heading into 2026 and that means time to score my 2025 predictions, of course.
So here we go!
- “Deport ’em all” will be a bust. Ding-ding-ding-ding. I said it would be a show and it has been. 8 USC 1324 had all the tool he needed and he didn’t use it. Point.
- No effective action on H-1bs and will likely make it worse. Ding-ding-ding-ding. Expanding students is just part of it of course and simply put, TACO is properly-named on that one too. Point.
- Inflation monster Godzilla-style. Miss. Yes, it still well-elevated but I can’t take credit for that one.
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- Recession declared this year. Miss; its in the data but I said “declared” and it wasn’t.
- Medical monster will not be addressed. Ding-ding-ding-ding-GONG-GONG-GONG! If I could give myself two points I would, but that’s not the rule. As I pointed out it has now gone vertical in CMS and of course the Obamacare subsidies.
- Despite rhetoric MAHA will go nowhere. I can’t take more than half-a-point for that. The impending black-box warning headed to a shot near you doesn’t get there and neither do the other “tinkering around the edges” stuff, never mind that there is now on the table proof that the PREP Act’s immunity was pierced by obvious fraud in multiple places and yet no prosecutions. IMHO this is a bust.
- Ukraine is lost and settled. Lost recognized yes, settled no. Half-point, unless something happens before Jan 1, and it might.
- Middle East becomes much less stable. Miss. About the same; I certainly can’t take credit for less stable.
- Bubble pops in asset markets. Miss. I may be only a month or two early, but early is early.
- Housing is a five-alarm mess. Ding-ding-ding-ding. Just got reports that price levels are now actually going down and if you look at the listings and what’s moving in a lot of places, including those that were “hottest”, the drops are not small.
- CRE’s doom loop will tighten. I’ll take a half-point on this; it didn’t blow, but I didn’t predict a blowup — just the tightening of the doom. That’s there and it’ll continue for a good long while.
- Collapse of Green Mandates. Ding-ding-ding-ding! Yep. What mandates? Not here in the US anyway.
- EVs have had their day. Ding-ding-ding-ding! Indeed; the collapse in subsidies and the lack of real progress in the places where it needs to occur for them to continue (hint: There are physics problems with that) means in the US at least the game’s over.
- Chevron Deference will drive change. Half point. It has led to substantial changes, many upheld and a few on hold but not finished. But since I expected more, half.
- One Supreme Court vacancy. Miss. Unless someone kicks in the next few days.
- One or more major scandals. I’ll take credit for that and its not done. Minnesota (and now Ohio, it appears) anyone? Uh huh.
- Trump swallows the H-1b mess wholesale and all of this will trash 2026. Ding-ding-ding on the predicate, more on that below because the prediction had a carry-forward into this year which I still think is very real.
So let’s add it up.
10 hits (between halves and clear hits), 5 clean misses for 59% of the total. Not awful and better than last year. If I only count full hits its 8, with 9 misses which is not quite-so-good but I’ve always counted half-points so there you go.
So with that said….. Let’s go for 2026!
- Health care detonates for 10+ million. The Obamacare subsidies are effectively dead since the 15th (enrollment deadline for Jan 1) has come and gone, the Senate has killed both a Democrat and Republican proposal (the Democrat one just extended the Biden subsidies) and there’s no reasonable expectation anything will get done since both House and Senate are out on recess until after January 1st. Anyone with either little or no use or who is willing to accept “I’ll get on a plane to another nation and pay cash if I can walk, and if not well, my sand has run out” will, if they’re sane, drop it entirely since $20,000+ before a single penny is paid makes no sense for 95% of the population ($1k/month in premium with a $10,000 deductible.) If you can go abroad virtually anything can be worked and addressed for that sort of money therefore its a no-brainer unless its impossible (e.g. acute, “must now or else you die” situation.)
- The AI ‘wobble’ is recognized as real and trouble. Those who have placed bets (and there’s a lot of them through industry and the markets) are going to have severe indigestion this year. That doesn’t mean there won’t be survivors or even perhaps “winners”, but it does mean current valuations and the expectations driving them are going to cause problems across the markets, never mind projections for “AI data centers” that are farcical in that there is simply no power production capacity available and lead times to build out said power sources are in the realm of a decade or two, not a year or two — never mind that it is China that has the corner on cheap electrical power due to our (and Europe’s) fascination with “green” energy which is, on a delivered kWh basis with utility-grade reliability, materially — like double that of carbon-based fuels with modest emission controls — more-expensive. To make the prediction fair the point will require any of Nvidia, Microsoft, Oracle or Google to be down by 20% or more from the 12/31/25 closing price during the year. This is specific to the “AI” sector but if this prediction hits the general market is boned because of the concentration of those stocks in the indices.
- To go with the above the market will finish flat-to-seriously down (no more than a couple percent up to half or more negative) in 2026. Why? Because on a valuation basis it hasn’t been here since just before the Tech Wreck and that portends years of poor returns. Does the detonation have to come this coming year? No, it doesn’t, but it is rather unlikely that the stupidity we’re seeing today in this regard goes materially further, thus the prediction. If the blow-up comes this year it could be hideously bad — 2000-style or worse. Compared with the late 90s the hype machine is equally bad if not worse; circular financing, huge expenditures and no operating profits in the “AI” field. Oh sure, they say it will come. Uh huh. That maff don’t maff as I’ve been saying yet just like the Coyote off the cliff, its just that nobody has looked down yet.
- Housing will not stabilize in 2026. The cracks are already serious and so are price declines; people have been pulling listings rather than deal with reality. That works for a while until someone breaks the ice with a non-distressed sale for personal or job-related reasons and that sale resets the market expectations and comparable valuations in a given area. I’m already seeing some foreclosures when people think they can get “their price” and find out that it collides with their checkbook. That’s going to continue and while I believe this might be the year we get a large dislocation in that market I’m not confident enough to go that far to get the point; a flat-to-negative trend (which is contrary to everyone’s expectation that I can find) will do.
