Welcome to 2026.
What an unbelievable start to the year – fires, cyclones, floods, an Ashes series win, and Academy Award (The Oscars) nominations for Australian artists. You must be an optimist in the first month.
We need to believe that the future can be better than the past. So, make 2026 an adventure – optimism plus volatility. It will not be a set and forget year.
What do I think will happen in 2026? I mentioned a few topics in my column in the Christmas Edition newsletter. I had a quick read to see if anything changed between December and now – the world is moving that fast!
Hot off the press this morning is the latest CPI data for the December 2025 quarter. The headline rate was 3.8%, which is up from the September quarter. Construction, electricity, and food were all up. The RBA’s preferred measure was at 3.4%, which is still up from the September quarter.
The question will be now whether the RBA will officially raise interest rates at their February 2026 meeting. Certainly, most commentators believe they will. I am sure the RBA will consider the stronger labour market report that came out for the December quarter as well.
I wrote my predication paragraphs below before this number came out, and I will not adjust any commentary for fairness. Let’s see how we go.
I believe that money will be made in various asset classes. Volatility will be a constant – not only for investors but business owners as well. Planning and researching will be vital. It is not a set and forget year. You will be rewarded for homework, hard work, and hustle. Be careful of the non-profitable revenue.
The Mag7 and the data centre economy will still make money but not as easily. Time to spend more homework hours in the picks and shovel players of the data centre ecosystem.
The “Mag 7” with a 35%+ weighting in the S&P 500 and higher in the NASDAQ may result in the index funds being outperformed by the stock pickers. Big call.
AI will continue to power forward – it is the 4th industrial revolution. It is happening and not stopping. Perhaps there is a bubble in parts of this ecosystem but there will be winners. Perhaps as the year progresses, Governments will start to impact the sector – whether by regulation due to unemployment, electricity price surges or black outs or excessive water usage. Storage for the AI players is a problem that might slow expansion. Massive amounts of money have been piled into the AI sector, now people are turning to calculate the return on investment (ROI) scenarios to see if profitability is possible. AI is a major trend to follow and learn whether you are an investor or a business owner. Spending time each week on understanding this area is compulsory.
I asked my 13-year-old daughter what her 2026 predication was, and her answer was the rise of Tesla’s humanoid robot. Maybe 2026 might be too early, but certainly highlights what younger generations are looking at for the future and what we as investors need to get an understanding around.
Australia feels positive at the moment due to the materials sector, precious metals and some early M&A activity. The market itself – it can be argued – is a little overvalued and with healthcare, construction and hospitality sectors feeling problematic and productivity lacking, it may be wise to spread the investment wings further afield in 2026. The consumer cannot keep as floating forever. At some point, business needs to invest substantially for our golden run to continue.
Gold, copper and nickel will continue to climb at the start of the 2026. Too many retail investors now jumping into the ETFs that provide access to these commodities. Bulk commodities (like iron ore, coal and oil) will flat to down for 2026.
Property will go up. Of course! Maybe but it will be rotational and selective. Demographics will play a large part in the residential sector, so do some homework before jumping in. Units and houses are moving in sync as more high-level product in the unit sector is released to the market. If interest rates are increased by the RBA in the first half of 2026, a slowdown is definite, but just a slower growth rate. I do not see a massive fall in prices.
Commercial property will be solid as investors move from residential investing (which favours the tenant too much) to a long-term commercial lease with all outgoings paid, being a very attractive proposition. Pricing might be rich as first timers may still believe in negative gearing for commercial property and underestimate how capital growth and cap rates work. Might be a few lessons learned the hard way as the year progresses and the economy tightens, and quality tenants are hard to come by.
Interest rates – on hold until after May 2026 Federal Budget. If the Budget is expansionary then bang interest rates go up. If the Government is contractionary in the Budget, then interest rates will remain on hold. I do not see a cut in official rates anytime soon. My bet is nothing moves officially, but behind the scenes, fixed rates move up and then start to move down as 2026 nears its closing.
Without a recession the movement in interest rates will be to a neutral market position. Whilst people have jobs, they will consume. I believe there is still 10 different definitions of “neutral market position” in the marketplace, so look to see more articles on interest rates in 2026. Australia’s unemployment rate fell in December 2025, so too the underutilisation rate. Maybe the data is seasonal, but it will keep the RBA on its toes around interest rate movements.
This time last year I wrote “Being the optimist, I will suggest no recession in 2025. I will kick that can into 2026”, so will it happen in 2026? I still do not think a recession will occur in 2026. There are plenty of businesses struggling and closing, yet pockets of consumption and service experience sectors are strong. Officially we may not see a recession.
For business owners, the new Payday Super rules kick in from 1 July 2026, so please start (if you have not already) doing some cashflow planning and system reviews for the impact on your business.
The Div 296 Wealth Tax kicks in from 1 July 2026 as well. Please discuss your individual circumstances with your advisor.
A real 50/50 year – some right and some wrong. Be nimble and be ready for falls in various asset classes. Falls are a healthy component of the longer investment cycle – so do not panic. We all know that markets do not go up in a straight line and time in the market is just as important. Stay the journey.
Happy Chinese New Year for February. It is the Year of the Horse (Fire Horse). I have been told with authority – that this year is associated with passion, speed and energy. The fire element adds intensity, bringing a reputation for being a highly dramatic year.
In next month’s newsletter, we will discuss some strategies and new developments in the Transport industry.
For any further information on what’s discussed throughout our Newsletter for this month, please feel free to contact the Adviser team – who would be happy to assist where possible.
Ian Walker
Executive Chairman