Episode summary
Here's Our Midyear Outlook 2026 (FvF Ep. 196)
Facts vs Feelings
· · Hosts: Ryan Detrick, Sonu Varghese
Summary
Ryan Detrick and Sonu Varghese revisit Carson Group’s 2026 market outlook and argue that the year has strengthened enough to justify a higher equity target. They say the S&P 500 forecast has been raised from 12% to 15% to 15% to 18% for the full year, while bonds remain at 3% to 5%, because the market’s momentum and earnings revisions have both improved since January.
A central theme is that artificial intelligence is no longer just a stock-market story but a macroeconomic one. Varghese says AI-related hardware and software investment has contributed about 45% of real GDP growth over the last five quarters, or roughly 90 basis points per quarter, and that hyperscaler capex plans keep being revised sharply higher. The hosts connect that spending to stronger earnings estimates, especially in technology, energy, and materials, and to spillover demand across contractors, data-center infrastructure, and related industries.
They also argue that the labor market is holding up better than headlines suggest, with low layoffs, falling continuing claims, and business formation still running at very high levels. Inflation remains a concern rather than a solved problem, in their view, because tariffs, services inflation, reshoring, and AI-related shortages are all keeping prices elevated. On portfolio positioning, they favor staying overweight equities, keeping diversification across growth, value, small caps, and low-volatility holdings, and expecting some midyear volatility without a major drawdown.
Key takeaways
- Carson raised its 2026 S&P 500 target to 15% to 18% because the index is already up 11% total return year to date and momentum remains strong.
- Varghese says AI-related investment accounted for about 45% of real GDP growth over the last five quarters, or roughly 90 basis points per quarter.
- Hyperscaler capex expectations for 2026 have been revised up to about $740 billion, and 2027 spending is now seen near $900 billion.
- The hosts think the labor market is healthier than the headline payroll trend suggests, citing 110,000 average monthly job gains, 4.2% unemployment, and low continuing claims.
- They see inflation as persistent, not transitory, because tariffs, services costs, reshoring, and AI supply constraints are still working through the economy.
- They expect more rotation within equities, but not a major second-half correction beyond roughly the 9.1% peak-to-trough move already seen this year.
Notable quotes
“we have just upped our target for the S&P 500 this year to between 15 and 18% and we're leaving bonds at 3 to 5%”
“Over the last five quarters, Ryan, and this excludes Q2, right? Through Q1, all of 2025 and Q1, real GDP growth is 2.1% anyway”
“the S&P 500's 2026 EPS estimate would be was $308 a share. Today, it's at $339 a share. It's up 10%”
“I think it's a problem. Right”
How the episode opens
Welcome to the Facts Versus Feelings podcast. I'm your host, Ryan Dietrick, and I'm joined by my co-host, Sonu Varghese. — Cutting through the noise each week with Ryan Dietrick, chief market strategist, and Sonu Varghese, chief macro strategist, taking out the boring and helping investors focus on what really matters.
And here's our mid-year outlook for 2026. Sonu, we made it to the middle of the year. It's been a wild year so far. Um let's get into it. We'll do small talk cuz I know you want to talk about all your travels, watching a lot of soccer out there, but we'll get into
The only place I can talk about it because I don't think my wife wants to hear it. — No, she's probably very sick of it. Um and even even on our morning calls with our advisors, sometimes you have to kind of stick to game of giving them the info they want. But on this this is our podcast, we can talk about whatever we want. But actually on YouTube, let's show our t-shirts. We've got a You've got one, right? Yeah.
Oh, this is a special one. I have to sort of like We did this as a The Compound podcast. We gave this as a gift to Josh, Michael Batnick, and the whole crew there. — Yes. — And this is a little cheeky by you, right? You want to tell the folks what you
Yeah, it says It says Facts Versus Feelings and it says is my favorite podcast. So we handed that to The Compound friends, which is the largest podcast in our industry. It's kind of a joke. And the is my favorite, if you know The Compound the way they do it, they use like the Subway, you know, letters to make the words, and we we did that.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- sp 500 outlook
- ai capex gdp impact
- labor market resilience
- sticky inflation
- sector rotation and earnings revisions
Companies and tickers mentioned
- MU
- Carson Group
- Micron
Watch the episode
Watch “Here's Our Midyear Outlook 2026 (FvF Ep. 196)” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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