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With tariff rules finalized and inventories depleted, there’s light at the end of the tunnel for the medical and scientific tools manufacturer.

Danaher isn’t a household name, but if you were ever tested for Covid-19 at a clinic or doctor’s office, its products may have been up your nose. The Washington, D.C.–based conglomerate makes medical and scientific tools, spanning research to diagnostics, including Covid tests by its Cepheid division—one of the first-approved and widely used versions. Since the height of Covid in 2020-21, circumstances for Danaher have worsened.

From the pandemic’s aftermath to ever-changing U.S. policies, a number of factors have worked against the company in recent years, leaving its stock in the dust. That could finally change in 2026.

After the frenzy of the pandemic died down, there was less demand for diagnostics—even those tests that cover things like flu and RSV, which Danaher also makes. In addition, the company’s customers stockpiled its equipment earlier in the decade, and are still working through that inventory as medical research and testing have slowed. Demand similarly declined in Europe and China.

At the same time, the tariff roller coaster, along with the current administration’s rapid swings in government policy and anti-science stances, had a chilling effect on research and development, meaning these pharmaceutical firms and biotechs ordered less of the consumables that Danaher makes. A lack of acquisition opportunities—Danaher’s dealmaking is top notch and often a stock catalyst—has led to slower growth, too.

Add it all up, and it’s easy to understand why the shares went basically nowhere in 2025, and are badly trailing the broader market over the past five years, up just about 11% compared with the S&P 500’s 82% gain.

This year could look different. “There’s a light at the end of the tunnel,” says Joseph Ghio, an equity research analyst at Williams Jones Wealth Management.

With tariff rules finalized, drugmakers “will be incentivized to spend on R&D, and Danaher can offer end-to-end drug development” equipment, Ghio says. “Now that pharma companies know the rules and how to play the game, they will reinvest back into their pipeline…and we’ve already been through a multiyear destocking phase,” meaning pandemic-era equipment has been almost entirely used up.

Orders should start flowing again at the same time that trials are showing increasing promise for monoclonal antibodies, or mAbs. These treatments, which target specific proteins and help patients’ immune systems fight disease, are an area where Danaher has a lot of exposure. Demand for biologic medicines has grown by double digits annually for more than a decade and should continue apace.

The company’s ultraclean balance sheet will also allow it to start mergers-and-acquisitions activity again as soon as valuations come more in line with Danaher’s targets, and “this is a company that typically performs best when it’s making deals,” Ghio notes. It has long had success with the Danaher Business System, an operating framework that emphasizes efficiency and innovation and allows the company to make acquired businesses more profitable over time.

KeyBanc Capital Markets analyst Paul Knight likewise says a resumption of M&A activity could be the spark that turns the shares’ long slump around. “Danaher has the financial flexibility to execute a $10 billion+ transaction,” he wrote in mid-December, which could translate into half a billion dollars in incremental earnings before interest, taxes, depreciation, and amortization, or Ebitda. He thinks the stock should trade to $310, more than 30% above its current level.

Of course, there’s no guarantee Danaher will ink new deals in 2026, but even if it doesn’t, it seems poised to do better than it has in recent years.

Consensus calls for the company to return to earnings per share growth when it reports 2025 fourth-quarter results in late January, after years of declines: EPS of $7.71 would represent an increase of just over a 3% from last year, but 2026 estimates of $8.41 imply more than 9% year-over-year growth.

In other words, “it’s time,” as Morgan Stanley analyst Kallum Titchmarsh wrote when he initiated coverage of the stock in early December with an Overweight rating and top pick ranking. “[W]e are more optimistic on the setup into 2026 and believe Street numbers now provide a reasonable starting point.”

His optimism is bolstered by his recent survey of over 50 R&D executives from both large and small biopharma companies, who on average expect their budget will be 9.2% higher in 2026 than it was in 2025. That “paints a more optimistic picture” for the industry, Titchmarsh writes.

Still, after underperforming for so long, Danaher is likely a show-me story. If its customers’ spending on equipment remains depressed, or it continues to struggle with pricing power in key markets like China, or investors simply believe the company has lost its way, it will be difficult for the stock to break out.

Yet trading around 28 times 2026 expected earnings means it’s cheaper to bet on Danaher now than it has been in several years; its five-year average is above 38 times. The “multiple still looks comparatively attractive versus peers and history,” notes Titchmarsh. And although its dividend yield is a modest 0.5%, it spent some $2 billion on share repurchases in the third quarter alone.

In short, 2026 looks like the year Danaher stock generates healthy returns again.

Tech is expensive, but healthcare, utilities, and consumer names could rally in ‘26, our panelists say. Plus, 13 investment ideas, and an AI debate.

If the stock market climbs a wall of worry, that wall is getting higher by the day. Take your pick: Pricey valuations, index concentration, circular finance, sticky inflation, and government debt are just a few of investors’ many concerns. Then there is geopolitics, which took a shocking turn on Jan. 3 with the capture of Venezuela’s president, Nicolás Maduro, and his wife by U.S. troops.

Yet, for all the worries, old and new, most of the investors on the Barron’s Roundtable were in a chipper mood this year at our annual gathering, which took place Jan. 5 in New York. Most expect the U.S. stock market’s growth streak to continue in 2026, fueled by rising earnings, falling interest rates, government stimulus, and consumer spending. What’s more, they see many thriving companies whose stocks have yet to join the multiyear party on Wall Street—but soon will.

No surprise, the future of artificial intelligence was an overarching Roundtable theme. Whether it lowers “the marginal cost of human intelligence to zero,” as one panelist declared, or falls short of its promise, as another suggested, it is driving massive corporate spending and economic growth right now. Just for fun, we asked these 11 seers to identify other megatrends that will capture investors’ attention in coming years. Their answers were varied and illuminating.

This week’s edited Roundtable installment features the panelists’ macro forecasts, including those of our newest Roundtable member, Christopher Rossbach, chief investment officer of J. Stern, a London-based investment firm, and manager of its World Stars Global Equity strategy. Chris is well versed in global investing and a die-hard fan of quality stocks, wherever they are traded.

We also include here the 2026 investment picks of John W. Rogers Jr., the founder, chairman, co-CEO, and chief investment officer of Ariel Investments, and Sonal Desai, chief investment officer and portfolio manager at Franklin Templeton Fixed Income. John continues to hold out hope for a long-overdue rally in small and mid-cap stocks, five of which he explores in detail. Sonal likes the prospects for seven fixed-income-oriented funds, and sees even more gains for gold.

We’ll roll out the rest of the panelists’ picks in the next two weeks. Read on for the first Roundtable update.

Rajiv Jain: Our market view has shifted in the past 12 to 15 months. We believe the economy is softening across the board. We are seeing one- to three-year highs in the unemployment rate across almost all major nations. Inflation is unchanged, or higher. Interest rates are higher almost everywhere, except in China. Deficits are at a record percentage of GDP [gross domestic product]. There is still stimulus in the system.

The biggest driver of the economy seems to be the frothy stock market, which has seen a capex [capital expenditure] cycle, driven by AI. We are seeing signs of extreme late-cycle behavior, for example, in the debt financing of data centers. More than 60% of data centers are being built outside of hyperscalers [massive cloud computing companies] with heavy debt usage, far greater than in the dot-com era. Equity valuations are extremely high. In our view, you aren’t getting paid to take risks. And that is without discussing geopolitics.

Jain: We see significant downside to the market. A significant portion of earnings revisions are coming from capex. If Microsoft spends $100, it can write off that expense over a six- to 10-year period. But it shows up in revenue and earnings almost immediately at Nvidia or Broadcom or Amphenol. We believe earnings growth is going to slow down meaningfully for the biggest technology companies, not to mention semiconductor companies. We see the rate of change in capex peaking in 2025.

The biggest tech stocks driving the market are the companies ramping up capex. Amazon.com’s capital spending is on track to be higher than its AWS [Amazon Web Services cloud computing] revenue. Google’s capex is much higher than its cloud revenue. The company’s margins went from 5% in 2023 to 22% last year as depreciation was extended to six years from three years. Go back four years, and the business was losing money on a net basis. We believe the true economic life of GPUs [graphics processing units] or TPUs [tensor processing units] is closer to three years.

The market for public cloud appears to be 90%-plus penetrated. The market leaders’ growth has slowed. Public cloud and advertising are two key drivers for hyperscalers, but digital advertising penetration is also reaching 75% globally. The Magnificent Seven [Alphabet, Amazon.com, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla] are mature, with slowing revenue growth and declining free cash flow. That should have a negative impact on the market—and that assumes no blowup in the bond market or anything like that.

Can you estimate per-share depreciation costs across the Mag Seven?

Jain: It is hard to specify on a per-share basis, but in Alphabet’s case, there could be a six to seven percentage-point hit to earnings in 2026.

Also, we believe that stock-based compensation is becoming an issue. At Meta Platforms, SBC was 10% of revenue for the four quarters ended September 2025. Amazon’s cumulative free cash flow in the past five years was lower than that of Philip Morris International. Free cash flow is meaningfully deteriorating across almost all of the large tech companies. Google hasn’t seen any growth in free cash flow since 2021 once you adjust for SBC-related flows, even as its market capitalization has doubled. If the biggest tech stocks and semiconductor names fall, that will take down the broader market.

Todd Ahlsten: I can. We remain positive on the market. We have a year-end target for the S&P 500 of 7500 to 7800. That presumes a price/earnings multiple of 22 to 23 times earnings, on $340 in 2027 earnings. We consider four factors: What does the S&P 500 look like as an asset class? Is the AI buildout a generational theme? How does the U.S. economy look? Our fourth consideration is global liquidity.

To break them down, the S&P 500 is an incredible collection of companies, unmatched globally, that are investing in leading-edge technologies. The reinvestment rate in the U.S., or capex plus research-and-development spending divided by operating cash flow, is about 50% higher than in the rest of the world. U.S. companies continue to innovate, generate higher returns on capital, and widen their moats. They are in the catbird seat to monetize AI.

Rajiv mentioned potential cracks in the AI story, but we think this is a generational investment theme. Companies will invest multiple hundreds of billions of dollars annually for many years to come. There will be some rugged terrain, and perhaps supply-chain and power shortages and drawdowns in certain stocks. But AI will lead to a massive wave of productivity, and be a moat-widening event for U.S. companies.

Third, the U.S. economy looks pretty good in 2026. We expect growth of 2% to 2.5%. The economy has been incredibly resilient no matter geopolitics, policy variability, or the level of interest rates. With the midterm elections approaching, we are going to get fiscal and monetary support. Ultimately, we will have to pay for it, but it could be supportive of markets this year.

Likewise, global liquidity will be a tailwind for asset prices in 2026. U.S. regulators are lowering banks’ SLR [supplementary leverage ratios], which will free up capital. The Federal Reserve will probably cut interest rates a couple of times, and $10 trillion of U.S. debt will mature.

This could be a topping year for the market given all the fiscal and monetary stimulus, and the AI-buildout narrative could top for a bit. But we see upside to double-digit market returns in 2026. There are a lot of good places to invest.

Christopher Rossbach: As Charlie Munger, Warren Buffett’s late business partner, said, “Micro is what we do, macro is what we put up with.” We have had to put up with a lot of macro. I agree with Todd on the macro. The economy still looks robust. AI is a transformational technology, given the opportunity it affords to achieve productivity gains, and we think we are at the beginning of that process. We don’t yet have the computing capacity, infrastructure, or applications to fully realize its potential.

Turning to the markets, however, valuations are much fuller than they had been. We have had 10 to 15 years of solid index returns. A lot of companies aren’t just fully valued, but overvalued. Stock-picking is going to matter much more than it did. The index era is basically over. There are some great companies with good growth prospects selling at reasonable valuations, and other companies, particularly in the consumer space, that could turn around. These consumer companies are the cheapest part of the market, and could offer great opportunities this year.

John W. Rogers Jr.: There is more pressure to own the leading stocks in the indexes than I have ever seen. When people buy the same stocks just because they dominate the indexes, it is a sign of a market top. The Mag Seven account for 50% of the returns of the S&P 500. In the 12 months ended Sept. 30, if mid-cap growth managers didn’t match the Russell Midcap Growth Index exposure to Palantir Technologies and AppLovin, it resulted in a 9% lag to the index.

I come from Chicago. The University of Chicago helped to make indexing popular. I have a lot of respect for the great thinkers such as [Vanguard founder] Jack Bogle and [economist] Burton Malkiel, who argued that indexing is the smartest investment strategy. But capitalization-weighted indexes have become concentrated today in so few stocks and industries that benchmarking investments to an index could lead to massive underperformance in the next five to 10 years. We expect that to open the door to a new period of stock-picking.

Ahlsten: S&P 500 companies, ex-the Mag Seven, are in an unbelievable position to monetize the massive investment wave in AI, widen their moats, and drive higher margins and earnings growth. They account for more than 70% of the index’s expected 2026 net income, and they are undervalued. Some people think an AI selloff could lead to a market crash. I look at it another way: These companies have a massive opportunity.

Rogers: I’ll add one other thing. Warren Buffett bought stocks in the Dow Jones Industrial Average when he started out in the 1960s. The Dow 30 reflected domestic industries. It was considered a great index. The S&P 500, with 500 names, was later thought to be even better. I haven’t read any academic research about this, but maybe today’s index isn’t what it was supposed to be. Maybe it has morphed into something different than what its creators had thought. Everyone drinks the Kool-Aid and wants to own the index. But no one is doing the research to see whether equity indexes are as well constructed and relevant today as they were in the past.

Abby Cohen: I want to talk about valuations. If stocks are inexpensive, investors can deal with unpleasant news. But if they are fully priced, or pricing in a scenario that is wonderful, that is a risky situation with little margin for error.

The S&P 500, which is market-cap weighted, is trading for about 23 times forward earnings. On an equal-weight basis, it is trading for 17 times earnings. The gap is extraordinary, and speaks to the point others have raised: The opportunities from a valuation perspective aren’t in the large-cap names any longer. They are in smaller-cap names.

If you take a more rigorous valuation approach based on discounted cash flow, the S&P 500 is in challenging territory. Thus, I find myself looking not only at the pleasant consensus economic and earnings forecasts, but also at what could go wrong. There is a long list in 2026.

Cohen: AI-related capex has pushed up not only S&P 500 earnings but also U.S. GDP in the past couple of years. We should think about what will happen in the likely event this spending slows.

Another area of concern is private credit. A lot of money is going into this area, which has allowed companies to stay private for longer. But there is a lack of transparency regarding the quality and value of these investments.

I worry about crypto. Only a fraction of crypto-related transactions are for economic purposes. As crypto has become more widely used in the U.S., often through stablecoins, the use of margin debt has increased. Stablecoins can be backed by U.S. Treasuries but also by uninsured deposits at the issuing institution. There has also been a weakening of regulatory oversight and little international coordination.

We haven’t talked about the U.S. debt situation. The federal debt has been growing, which is unusual when the economy is doing well. The Congressional Budget Office estimates that the 2025 omnibus spending bill will add $3.5 trillion to the debt over the next decade, and it isn’t assuming a recession. An increase of this magnitude is disturbing.

Another potential risk relates to threats to Federal Reserve independence, which has been critical to our success as a nation and the dollar’s status as a reserve currency. Lastly, for now, if the U.S. feels comfortable going into Venezuela, the Chinese may feel more comfortable going into Taiwan, which is vulnerable to naval blockades. There is also a global reliance on Taiwan’s tech sector, which supplies 25% of memory chips and 45% of logic chips. Any destabilization there is a potential problem.

Cohen: My earnings outlook isn’t as robust as Todd’s, so I see a valuation for the S&P 500 in a range of 6700 to 7000. I don’t see large gains for the index, but I see a rotation into stocks that haven’t been winners, as Chris discussed. Some parts of the U.S. market offer good value. The U.S. consumer looks pretty solid. There are opportunities in healthcare, and diversification into international stocks makes sense. Last year I spoke about opportunities in some of the markets in East Asia. They did well because they were inexpensive and had good earnings growth. I would expect a rotation into some other markets this year. Later I will talk about India.

Sonal Desai: First, I want to talk about Venezuela. What happened wasn’t unprecedented. The U.S. has a history of intervening in Latin America. We did it in Panama in 1989. What happens next is unclear.

Medium term, U.S. involvement should send oil prices lower. Venezuela was supplying around 800,000 barrels a day in the recent past, down from well over three million in the 1990s. I keep reading about the U.S. robbing Venezuela, but American oil companies had their Venezuela facilities expropriated in 2007. If U.S. and international companies can begin producing oil again in Venezuela, the price of crude will eventually come down. That could be negative for Canada, the other supplier of heavy crude, and the Canadian dollar. From the bond market’s perspective, one implication would be the possible restructuring of PDVSA’s [Petróleos de Venezuela’s] debt, and Venezuela’s sovereign debt.

The first several people who spoke today had little to say about Venezuela, which gets to the broader impact, or lack thereof, on markets. This particular geopolitical development is unlikely to have a substantial or lasting impact on markets.

Regarding the economy, my GDP forecast tops Todd’s. I expect the U.S. economy to grow by 2.75% to 3% this year.

Ahlsten: I like that.

Desai: Consumption will be strong owing to fiscal tailwinds. Whether the deficit should have been expanded in the way it was expanded is a separate matter from the growth impact. Then, if the government sends out $2,000 tariff-rebate checks, as has been discussed, that will be substantially more even than the $1,400 helicopter drop in the first quarter of the Biden administration. The overall fiscal impulse will have a significant impact on consumption and inflation.

Second, the hyperscalers will have spent close to a trillion dollars from 2025 to 2026. That adds to the supportive growth backdrop. Third, the changing regulatory regime is important to the extent that it gets banks back into the business of lending.

Banks make money when there is an upward-sloping [Treasury] yield curve, and I expect the yield curve to steepen significantly this year. I would expect inflation to remain at the current 2.75% to 3% annual rate. The Fed shouldn’t have cut rates by 25 basis points in December. [A basis point is a hundredth of a percentage point.] I don’t think two more rate cuts are warranted this year. We might get one cut, but even that isn’t currently called for.

I tend to be less alarmed than others about the issue of Fed independence, largely because we already have a dovish Fed. We haven’t had a hawkish Fed chair since Paul Volcker. That said, further loosening [of monetary policy] would be a mistake at this point. I have said for a while that I think the neutral federal-funds rate [the rate that neither stimulates nor restricts growth] is closer to 4% than 3%. If additional rate cuts take the fed-funds rate down to 3.00% to 3.25%, we will essentially be looking at zero real rates.

That isn’t a good place for an economy with productivity growth of 2.25% to 2.50% and inflation running close to 3%. The 10-year Treasury yield is higher today than it was before 1.75 percentage points of rate cuts. Clearly, the market is paying attention to inflation and the fiscal outlook. The 10-year Treasury yield could scale 4.50% this year, and approach 5% with significant further fiscal expansion.

Against this backdrop, I wouldn’t be looking for major spread compression in fixed income. Emerging markets look attractive. The dollar came into last year overvalued against other currencies, and is now close to fair value against the euro. It is massively overvalued against the yen.

Scott Black: The accumulated national debt is $38.6 trillion, or 1.22 times nominal GDP. Money supply has been growing, and the Fed is no longer winding down its balance sheet. To the contrary, balance-sheet assets have been creeping up a bit. We have a $1.7 trillion fiscal deficit. The Fed is buying short-term paper. Who is going to fund long-term bonds? If the 10-year yield goes up to 4.5% to 5%, does that change the ballgame for the equity market?

Henry Ellenbogen: Every year there are reasons to be concerned, and this year is no different. I recently reread last year’s Roundtable. Only two panelists thought the market would go up in 2025: Todd and me. I have the same concerns as the rest of you, and if the 10-year Treasury yield breaks 5%, the stock market will struggle.

We should also be concerned about the U.S. relationship with China. The issue isn’t Venezuela. But if you believe the bond market and our relationship with China are under control, there are reasons to be positive about stocks.

You can’t understate what is going to happen to productivity in this country. Based on where AI is now, the marginal cost of intelligence in white-collar work is going to zero over the next several years. I’ll give you some examples. MercadoLibre is doing seven times the number of transactions it did several years ago, even as the number of customer service specialists has fallen to 7,000 from 10,000. Rocket Mortgage has said that it can serve 50% more clients per loan officer. In the physical world, trucking companies are using AI to leverage better data systems. XPO has 2% less labor hours per shipment, even with shipments down 6% this year. To Chris’s point, you have to get your data in the right place. You have to build the right workflows. Most important, you need agile management.

Abby, your old firm [Goldman Sachs] has said productivity will increase by about 150 basis points a year each year over the next 10 years. There will be a wide dispersion in productivity gains between companies that use AI and those that don’t. In coding, people say AI has led to about 30% more efficiency. The tools are getting better. I mentioned customer service. Harvey AI is doing the same in the legal space.

All this means a couple of things. Productivity will spread beyond the Mag Seven. I’m seeing the increase in productivity across my portfolio of companies and in early-stage companies in the private market. We are going to see a good IPO [initial public offering] market this year for agile companies harnessing the zero marginal cost of human intelligence to drive revenue higher and costs lower. And you will see a lot of large companies that can’t harness this technology. They will either be left behind and shrink, or ramp up the learning curve. The U.S. economy didn’t see a lot of productivity gains in the 2010s. Now, we are on the cusp of significant gains and that will drive markets.

Ahlsten: Leading-edge transistor chips have 100 billion to 200 billion transistors. They will have a trillion transistors by 2030. Exponential innovation will feed into what Henry is saying. It is pretty mind-boggling, and it is a deflationary force that will accelerate over time.

Desai: It doesn’t have to be deflationary. That assumes the pie remains the same. Before the iPhone was developed, there were no app developers. That opened up a whole world. We don’t know the limits of what we can do, or what the new economy will look like. AI may kill a lot of jobs, but that doesn’t mean there won’t be new jobs.

Ellenbogen: On the consumer side, customers are unlikely to see benefits from future improvements in the frontier foundational models. What is really interesting are the Chinese LLMs [large language models]. They aren’t the frontier but can do things for a tenth of the cost of U.S. models. Companies such as Duolingo and Airbnb are starting to use these low-cost LLMs. So, on the consumer side, costs will deflate.

That is very different from the enterprise side, where knowledge workers are using AI—in our case to do investment research—or look for novel drug targets, or improve productivity in coding. Enterprises will continue to pay a premium for better intelligence powered by frontier models, which continue to advance at a rapid rate.

Those who say capex is going to implode may be looking at consumer-oriented AI technology, which has become commoditized. They aren’t taking into account advances in intelligence that will drive advanced applications and scientific breakthroughs. Over the next 10 years, we may have 50 years of advances in medical science. Companies that climb the productivity curve first will be able to cut costs, reinvest in their customers, drive revenue growth, and reinvest capital to create enduring competitive moats.

Ellenbogen: Companies don’t all climb the curve at the same pace. I foresee an unequal playing field. The Mag Seven will do well, and a lot of smaller companies born in this era will climb the curve and unlock productivity gains.

Jain: I foresee disappointment. We talk to dozens of companies monthly and large consulting firms focused on the AI rollout. There is almost no evidence of profit-margin improvement. People use AI to summarize email and do ChatGPT-type searches. Ninety percent of ChatGPT use is outside the U.S.

An important MIT study came out over the summer that found that 95% of AI projects found no real use. In our view, Microsoft Copilot has been a total failure. Low-cost Chinese models are working well. DeepSeek offers API [Application Programming Interface] pricing at 1/30th of the cost of Gemini 3.0. GPU pricing is in free fall. Based on our research, Nvidia’s Blackwell chips can be rented for $4.00 an hour. Blackwell chips are already being rented at a discount versus just a few months ago. If demand was so strong, why have Blackwell rentals been collapsing?

There are 200 neocloud companies today. Depreciation rates are out of line with reality. H200 chips, for example, were selling at 50%-plus off within nine months of release. A few large enterprises mentioned to us that real economic life when used for training is barely 18 to 24 months.

Most of the growth at the cloud hyperscalers is coming from start-ups, and who is funding these start-ups? More than half of the $150 billion that start-ups invested in the cloud was funded by the large tech companies. This is a giant, circular trade. I agree with Henry that a lot of smaller companies will see productivity gains from AI, but margins are falling at the cloud providers. There is an incentive for semiconductor companies and other tech companies to talk up the benefits of AI, but there is little evidence of profit-margin improvement almost anywhere because of AI, except at companies selling shovels to the gold diggers.

Ellenbogen: I see a lot of the things that Sonal sees. The government is concerned about the midterm elections and will try to stimulate the economy further. Tariffs are going down from today’s levels. Not only will we have more stability on tariffs, but the rate of change is positive. The consumer has been resilient, especially at the high end. Unless we get a significant upside inflation scare or see increased tension with China, the market could see low-teens growth, in line with growth in earnings per share. Actually, our relationship with China seems to have improved lately.

Cohen: I want to pick up on Henry’s comments about companies’ differentiated success in implementing AI, and Rajiv’s citation of the MIT study indicating that many companies are just spending money without seeing value. As is often the case when there is a transition in the economy, there are winners off to the side, and one of those is now the investment banking industry.

Many small companies have benefited from private capital, which suggests there may be a pickup in the IPO market this year. In addition, there may be a significant increase in M&A [mergers and acquisitions] activity.

Mario Gabelli: When I speak to students, many are concerned about their jobs because of AI. Scott Black was a monk in 1450. He used to transcribe words by hand. Then Gutenberg came along with a press and Black was out of work. He had to re-engineer himself. The beauty of the American system is the ability to re-engineer and adjust.

Mario Gabelli, chairman and co-CEO, Gabelli Funds, Greenwich, Conn. (Photograph by Jake Chessum)

The International Monetary Fund puts the global economy at $123.6 trillion. The U.S. is 25.7% of that; the European Union is 18.3%, and China is 16.7%. Higher costs are impacting consumers, and even the tax bounty we foresee in the spring won’t have a significant impact on lower-income consumers.

U.S. real GDP will probably grow by 2.5% to 3% this year. Corporate revenue will rise because of the dollar’s weakness. About 30% to 40% of S&P 500 earnings come from outside the U.S. LIFO [last in, first out] accounting is crippling margins, however, reflecting the higher cost of inventory hitting the gross profit line. We will find out in a few weeks whether the Supreme Court rules against the Trump administration’s imposition of tariffs, although [Treasury Secretary] Scott Bessent may have alternatives to tariffs on imports from individual countries. Pretax profits should do well. Accelerated depreciation of 100% [a tax incentive] doesn’t help earnings; it helps cash flow.

Equity multiples are a function of confidence and interest rates. If GDP rises 2.5%, the 10-year yield may climb to 4.5% to 5%. But on the other side, confidence is phenomenal.

During 2025, U.S. mergers, acquisitions, and deal activity rebounded, with total deal value reaching approximately $2.3 trillion, a 49% increase from 2024. The year was characterized by a resurgence of megadeals [greater than $10 billion] and increased private-equity activity, particularly in the second half, driven by interest-rate cuts, regulatory relief, and strategic AI demand. Technology, healthcare, energy, utilities, and financial services were the key M&A sectors. The business community is going to do just what Abby said: engage in corporate lovemaking. We will see more financial engineering, spinoffs, split-ups, and other deals.

As for stocks, we had a similarly great economy about 40 years ago, in 1987. Everyone was bullish. A firm named Leland O’Brien Rubinstein, or LOR, sold put options to protect portfolios. Does anyone remember this?

Cohen: Portfolio insurance!

Gabelli: Well, the market dropped 23% in one day. Now I am concerned about prediction markets, which are unregulated, and private debt, also unregulated. Other market mechanics are also worrisome: leveraged ETFs [exchange-traded funds], high levels of margin debt, an influx of retail investors. If and when we have a market correction for whatever reason, these things will accelerate it significantly.

My worries and wild cards for the economy and stocks include a soft labor market, higher inflation, and a higher 10-year Treasury yield. A selloff in the Magnificent Seven and AI-related stocks looks reasonable to me. Also, there will be a new Fed chair and midterm elections; there could be a second government shutdown; and I am concerned about geopolitical challenges in the Middle East, Ukraine, and elsewhere. The imminent U.S. Supreme Court ruling on the administration’s use of the International Emergency Economic Powers Act to impose tariffs could invalidate these tariffs and force more than $100 billion in refunds to importers.

Put it all together, and what do you want to own? We hope every politician wants to spend money on advertising ahead of the midterm elections because we own shares in a lot of TV broadcasters. The government will stimulate the economy ahead of the election, as others have mentioned. But there could be investor fatigue thereafter, as the market may have discounted this stimulus. I expect stocks to end the year slightly higher, but it will be a choppy year.

Meryl Witmer: I am still staying focused on individual stocks. But given that I have only three picks this year and would categorize them all as special situations, I would say the market is on the pricey side.

Black: Standard & Poor’s is estimating $310.84 this year for bottom-up S&P 500 earnings. That represents an 18.1% increase year over year, which seems aggressive. I am estimating a 15% increase in earnings, to $302.

The S&P closed Friday [Jan. 2] at 6858.47. It is selling for 22.7 times my estimate of earnings. It is overpriced, considering the historical multiple is 16 or 17 times. The Nasdaq is trading for 25.6 times earnings. The Russell 2000 trades for 22.5 times, although 40% of the index has no earnings. Small-caps as an asset class aren’t cheap. With earnings growing 15%, however, the market can rally 10% to 12% this year, barring some sort of shock.

We have talked about market concentration, and I have calculated the numbers. At year end, the 10 largest-cap stocks accounted for 39.6% of the S&P 500 and 53.7% of the Nasdaq, respectively. Yet, only three of these companies have P/E ratios way out of bounds. Apple trades for 33 times this year’s estimated earnings. Broadcom has a P/E of 34, and Tesla trades for 200 times. The rest are high, but not outlandish.

Witmer: Well said, Scott.

Black: Thank you. Like you, we do a lot of mathematical screening. It is getting increasingly difficult to find good values, but most people aren’t in the value branch of investing these days.

Another area we haven’t touched on is the housing market, an important component of GDP. Housing is still moribund. The house price-to-income ratio is at an all-time high. There is pent-up demand for three or four million homes, but they aren’t going to be built. Then there is the K-shaped distribution of wealth in the U.S. The top 10% of the population accounted for 49.2% of consumption last year.

The average American is hurting. Income inequality in the U.S. is the greatest it has been since the 1920s. It affects political outcomes, as we saw with the recent election of Zohran Mamdani as New York’s new mayor. Another issue is that the interest on the federal debt is higher than the defense budget for the first time ever in this country. The defense budget for fiscal 2026 [ending Sept. 30] is $893 billion. The Congressional Budget Office puts the interest expense at $1.01 trillion. We are spending into oblivion and have lost control. But ceteris paribus [all things being equal], the stock market will do well this year.

David Giroux: We don’t spend a lot of time trying to predict S&P 500 one-year forward returns. Our team spends 99% of its time trying to find the 60 best risk/reward ideas in the S&P 500 for the next five years.

Having said that, we do an annual, bottom-up, internal-rate-of-return analysis for almost every S&P 500 company once a year. It allows us to create five-year IRRs for each. Right now, that analysis indicates a 6.8% internal rate of return for the market over the next five years. That isn’t great or disastrous. It doesn’t assume that AI productivity will drive incremental margin expansion, or a bad-outcome event. Interesting implications emerge from our micro analysis.

Giroux: Theoretically, there should be a strong relationship between a company’s algorithm, or earnings-per-share growth rate plus dividend yield, and its price/earnings multiple on next-12-months earnings. Historically, the market has awarded firms with a lower risk profile, or lower beta, a higher P/E for a given algo. In the past two years, however, there has been a steady erosion in the relationship between algorithms and P/E ratios across industries. Within financials, consumer discretionary, and industrials, companies with 8% to 11% algos trade at materially higher multiples than companies with a similar profile in other sectors. For the long-term investor, that creates cross-sector arbitrage opportunities.

This is a sign of speculative excess, and favors lower-risk stocks such as nonpharma healthcare, utilities, and software companies with low-to-mid-teens IRRs. Banks, industrials, and many consumer discretionary stocks look horrible. They have low- to mid-single-digit IRRs. Paying above-average multiples on above-trend earnings is the kiss of death for investors in cyclical businesses.

Now, let’s look at the Mag Six plus Broadcom and Tesla. Their valuations are reasonable, with the exception of Tesla, which is no longer a stock but a personality cult or a lottery ticket trading at probably six times an aggressive sum-of-the-parts analysis. Amazon trades for 29 times earnings, Microsoft for 27 times, and Meta Platforms for 23 times.

Alphabet might be a little ahead of itself at 28 times earnings, given positive sentiment about Google’s TPUs and Gemini AI applications, but the multiple isn’t crazy. Apple is expensive but is launching a high-price foldable phone this year and is the cheapest of the Mag Six on the basis of price to free cash flow. Nvidia trades for 24 times earnings estimates that it is likely to beat, and Broadcom, at 34 times earnings, looks expensive but should profit from TPU growth and custom chips, and is much less expensive on 2027 estimates.

Giroux: The most expensive parts of the market are the cyclical areas I just mentioned, high beta, and stocks including Walmart, at 39 times earnings, and Costco Wholesale, at 43 times.

My last point concerns AI. About 33% of the S&P 500 is currently highly correlated to artificial intelligence pure-plays such Nvidia. What is fascinating is how much has changed in the past year with regard to AI. OpenAI, which had the leading LLM from a performance perspective, was leapfrogged by Gemini. Anthropic seems to be making good progress on the business side. Meta’s latest version of Llama was a flop, and now it is in catch-up mode with a super team. Maybe the most important development is simply that we are seeing real competition within the GPU space, and it is likely that LLM companies and hyperscalers are going to have more than one option for GPUs.

Anthropic has basically proved that if you have enough engineering talent and time and willpower, you can do training and inference across multiple chip families, with an orchestration layer directing workloads to the best and most cost-effective solution. The emergence of GPU competition has the potential to redistribute rents within the AI ecosystem. That probably benefits Broadcom and Advanced Micro Devices at the expense of Nvidia, and it probably benefits cloud players such as Google, Amazon, and Microsoft.

Cohen: A few things happened. No. 1, the dollar fell sharply from an overvalued level. Inflation was also a concern. Many investors were looking for a hedge. Heading into the year, some people thought cryptocurrencies were an appropriate hedge, but that didn’t work out. Precious metals became attractive, and not just in the U.S., but also in India, China, and elsewhere.

Energy is the largest component of commodities indexes, and moved inversely to gold. It seems that money came out of crypto and energy and moved into precious and industrial metals. Some of the flow-of-funds data support that idea.

Gabelli: Our gold expert, Caesar Bryan, was a barrister. He sold his robe and wig, joined a sell-side firm in London, and has now worked for us for 30 years.

I’m the Chinese government. The U.S. and I are going to have a challenge somewhere. I don’t want to have dollars. I’m buying gold.

I’m in Dubai. I need a store of value, and crypto can get hacked. So, I am buying gold. Platinum, palladium, and copper are seeing the same dynamic. Gold has been a store of value for millennia. Governments have trust in it, and individual investors speculate in it.

Gabelli: His gold fund was up 167% last year. He was going to retire. Now he is sticking around.

Desai: The dollar still dominates global central bank holdings. It is the euro that has suffered. Gold has risen, substituting for the euro as the second-largest holding for central banks.

Rossbach: As a London-based investor, I’d like to give a global perspective and put some subjects on the record today about the investment backdrop. First, while AI is a major theme, another is the age of the public and private asset base, which is as old as it has been in the past 50 years in the U.S. and other large countries. We’re, like, in Eisenhower’s America. Everything built of concrete is crumbling, whether in the U.S., Europe, India, or China. There is a tremendous need for reinvestment. We’ve developed technologies to address the big challenges we are facing around climate, energy transition, capacity, and productivity, but we haven’t yet implemented them at scale.

Second, the Trump administration has kicked Europe into a position where it has to take greater charge of its own destiny. That means governments, particularly in Germany, have decided they must invest more, which is positive for European economies, European consumption, and global companies that do business in Europe. There is tremendous growth in India, driven in part by a lot of infrastructure investment. China is attempting to realign its economy away from investment and real estate ownership toward sustainable growth and consumption. There are signs of a resumption in China of growth and confidence. As a result, the global backdrop is much more constructive.

Third, there are a lot of companies outside the U.S. that are global leaders in what they do. Many are in Europe, and they are every bit as well positioned as large U.S. companies to take advantage of AI and the productivity that comes from it, including the ability to invest in it at scale and roll it out across their businesses. Some are among the cheapest stocks out there.

Ellenbogen: The U.S. has gone from 26% to 16% of global manufacturing in the past 25 years. We have had a wake-up call: We need to manufacture more here, especially in critical industries such as defense and aerospace. [JPMorgan Chase CEO] Jamie Dimon is leveraging the bank’s balance sheet and relationships to meet long-term threats in everything from manufacturing to submarines to our defense infrastructure relative to China. [JPMorgan has launched the Security and Resiliency Initiative, a $1.5 trillion, 10-year plan to facilitate, finance, and invest in industries critical to national economic security.]

Desai: There are 17 different types of tanks in Europe. By contrast, the U.S. has just one. I am excited that Europeans are taking greater charge of their own defense, but the pacing will be interesting given issues like this.

Rossbach: There has to be a realignment of the regulatory framework that has been stifling innovation, impeding competition, and putting many European companies at a disadvantage globally. The German government has barely been able to spend its defense allocation because it doesn’t have the companies with the scale to implement its goals. But the realization exists that it has to change.

Cohen: Quantum computing has been on the horizon for at least 30 years. Its commercialization is getting closer. It could have a significant impact on the cost of computation.

Demographics is another theme. There are few countries whose populations aren’t getting older. This has implications for the housing stock, the availability of labor, and the cost of supporting older people. With the curtailment of immigration in the U.S., the average age of American workers is rising and the Social Security trust fund is being drained more rapidly than we had expected. Other countries are also having problems funding their retirement systems.

Giroux: We see two interesting megatrends. GLP-1s are going to be a massive category, especially as prices come down due to biosimilars and additional branded GLP-1 launches. Globally, they will be the new statins. This has implications for food consumption and healthcare.

Related to that, we are going to have the mother of all generic and biosimilar drug cycles from 2026 to 2036. We could see $400 billion to $500 billion of branded pharmaceuticals [replaced by] generic or biosimilar competition over this time frame.

Black: I expect AI to raise the long-term secular growth rate of the U.S. economy. It will have the most salutary effect in the area of medical diagnostics and devices.

Rogers: People love experiences more than buying things. Whether it is cruise lines or entertainment companies, businesses that offer experiences will do well, as will companies that control intellectual property. I have just returned from Las Vegas. People say it is down and out, but it was packed. New York is doing well. If you look to the Middle East and Asia, tourism is up and people are flocking to places that are magical and special. I would be long the real estate in popular cities.

Jain: It appears that AI is already running into power issues. Projects are getting delayed. There is a massive need for infrastructure. We believe utilities will be winners globally. Power prices are up almost 20% in the U.S. They are rising in the U.K. and Germany. The infrastructure spend is a major trend.

Second, the notion that the semiconductor industry has been growing faster than other industries hasn’t been borne out by the facts. We believe the semiconductor industry is overearning. That trend is coming to end.

Third, there has been a rollback of the ESG [environmental, social, and governance] agenda. The ideological belief that we should all drive electric vehicles is out. Fossil fuels are back and internal combustion engines are in. General Motors is posting better results, as is BMW. Renewable energy projects are being rolled back in many countries.

Ahlsten: I’ll echo Scott’s comments about AI improving diagnostics. There will also be a wave of robotic innovation in healthcare that will ease bottlenecks caused by the lack of doctors and hospital space. It will help hospital economics and improve the efficiency of surgeons.

A second megatrend we’re following is precision agriculture. Farming has tough demographics, but autonomous vehicles, data, AI, and machine learning can help agricultural costs across the globe. It is the right way to execute on ESG, and will lead to a reduction in the use of fertilizers, pesticides, and water.

Ellenbogen: I don’t think you can overestimate the importance of the marginal cost of intelligence heading to zero, and the opportunity, agility, and efficiency it will create in service and knowledge work.

Much has been said about healthcare trends, and I would also highlight GLP-1s, whose use will broaden. When I think about my children, who are 8 and 12, it will be routine for people to live to 100 or 120 based on the rate of improvement in eliminating a lot of diseases that kill us today.

Then, global tension may be slowing down. China’s advances are a wake-up call to the U.S. to step up manufacturing in key industries—not only defense but early-stage biotech. That Jamie Dimon recruited Todd Combs from Berkshire Hathaway to lead the bank’s Strategic Investment Group is a big deal.

Rossbach: I’m thinking about three big long-term trends. The first is the energy transition. We are currently in the hardware phase, and will need fossil fuels for the foreseeable future. There is an essentially unlimited supply in the U.S. in the form of shale oil, significant reserves in the Middle East, and even more in Venezuela and Iran, which may be coming back onstream at some point. Solar and wind are transitional energy sources. They are the recycling problem of the future. The world isn’t going to be powered in the future by steel and aluminum windmills and silicon solar panels. The solution will be technology like fusion, and there are already significant breakthroughs.

Because we are going to have unlimited energy, it will transform a lot of equations around sustainability. We will be able to produce water and oxygen. That is why we are thinking about sustainability in terms of opportunity, not risk. In recent years the debate about sustainability has been channeled into overregulation, telling people what to do, and telling investors what to do with their money. Focusing on solutions and shifting the discussion toward opportunities is aligned with political and economic reality and generating positive returns.

Lastly, we are going to see a resumption of consumer spending. It is as if we have forgotten about the Covid-19 pandemic and the impact of the measures taken, rightly or wrongly, to sustain economies through it. Companies want to invest and consumers want to spend. As conditions continue to normalize, we will see a resumption of consumer spending across the board, and companies serving consumers will benefit.

Witmer: The megatrends I see are: No. 1, RNA treatments for cancer and genetic conditions coming to the forefront. A recent RNA vaccine for pancreatic cancer had great results in a clinical trial with over three years of durable efficacy for almost half of the patients so far. No. 2, a wave of manufacturing moving back to the U.S., particularly for anything related to national security. And No. 3, FSD, or full self-driving, becoming mainstream. Friends who use it view it as a required feature now.

Gabelli: I agree with John: Experiences are important. Many require airplanes. Aircraft deliveries are way behind. Robots are coming and will help with the labor shortage. Full self-driving vehicles are just one thing that is coming.

Desai: I agree with Chris that there will be increasing pragmatism in the realm of sustainability. Speaking as an economist, it is easy to see how politicians promise net-zero emissions when there seems to be no cost. But when fiscal deficits are larger and interest rates are higher, the population needs to start paying, and it doesn’t want this.

Second, the U.S. approach to AI is visionary. The Chinese approach is pragmatic. The Chinese are focused on using AI for robotics. In the U.S., we are focused on driving the marginal cost of intelligence to zero, as Henry put it. I expect to see the U.S. moving more broadly into robotics, which will increase productivity.

With that, let’s turn to your stock picks. John, you’re first today.

Rogers: I have three new ideas, and two prior recommendations that I’ll refresh. As I mentioned earlier, experiences matter. High-end spenders are really spending. We hear that when we talk to management teams from cruise lines to the entertainment world. People are paying extra for good seats at concerts. They are willing to dig deep.

My favorite stock is Madison Square Garden Entertainment. It is part of the Dolan family of companies, and the so-called Dolan discount has been a big deal. But this past year, all the companies controlled by Jim Dolan have done extremely well.

As Warren Buffett has said, you want to buy companies that have big moats. It would be very difficult for another company to compete with Madison Square Garden Entertainment. The company owns the world’s greatest arena and is well positioned for sports, entertainment, and artist residencies. It will announce a new residency this year to succeed Billy Joel, which could be a catalyst for the stock. The Knicks finally making it to the National Basketball Association finals would also be a catalyst, we hope.

The market cap is $2.5 billion. We think the stock is selling at a 25% discount to the value of its underlying assets. MSG Entertainment owns valuable real estate in Midtown Manhattan and the air rights above the Garden. Another catalyst is the 100th anniversary of the Rockettes at Radio City Music Hall. Ticket prices have been terrific at the Garden, Radio City, and the Beacon Theater, which the company owns.

Rogers: The other name I have discussed in the past is Adtalem Global Education, which runs the largest for-profit education system, focused on healthcare. There is a nursing shortage in the U.S. of at least 200,000 people. It is expected to grow to 400,000. Adtalem can take advantage of this. The company also operates medical schools in the Caribbean, and trains veterinarians.

Adtalem is selling at about a 30% discount to its private market value. The company has met expectations for six consecutive quarters, but one of its businesses had a hiccup in the latest quarter and the stock dropped 30%. But, as Warren has said, volatility should be your friend. We are taking advantage of this mispricing in the market.

Adtalem’s businesses are growing rapidly and the regulatory environment has improved. The company generates a lot of cash and recently announced a $750 million stock buyback. It has been a great allocator of capital in the past several years.

Rogers: Affiliated Managers Group is a money-management firm that takes ownership stakes in other money managers, including hedge funds. It tends to keep existing managers in place. If you believe in the future of money management, this is a smart investment. The management team is terrific. The company has been buying back a lot of stock.

Affiliated owns stakes in companies such as AQR, Pantheon Ventures, Parnassus—which is Todd’s firm—and Tweedy Browne. A conservative estimate is that about 15% of Ebitda [earnings before interest, taxes, depreciation, and amortization] comes from Pantheon, and 15% from AQR. The strength of these and other alternative-asset managers has compensated for some of the challenges among traditional long-only investment firms, which is why the stock has done well.

Still, Affiliated sells for about 10 times next year’s earnings, and at a discount of 17% to its private market value. The stock is a favorite of ours.

Next, Middleby is one of the largest commercial food-service equipment manufacturers in the U.S. and globally. It also has a food-processing business and a residential business. Garden Investments, founded by activist investor Ed Garden, bought a stake in the company and has put pressure on Middleby to increase shareholder value. It is now spinning off its food-processing business and selling part of its residential business.

Middleby has focused on the fast-food part of the restaurant industry. Once you get a customer like McDonald’s or Starbucks or Subway, you grow with them as they expand their footprint around the world. Middleby’s brands include TurboChef, Viking, and Taylor. If you believe in the future of restaurants, the companies that manufacture equipment are important. Middleby always wants to be No. 1 in its categories. The stock is selling at about a 25% discount to private market value, and for less than 15 times next year’s earnings. The company has about a $7.5 billion market cap.

My last pick, Prestige Consumer Healthcare, is the most boring story I have.

Rogers: There is a place in a portfolio for a good, solid, consumer-branded-goods company focused on healthcare. Prestige’s brands include Chloraseptic, Clear Eyes, and Dramamine. They are products people need. Generally, the company has been able to maintain market share.

Consumer-products companies recently haven’t been getting the kinds of price/earnings multiples they once enjoyed, and Prestige has had some manufacturing challenges with Clear Eyes, which caused it to lose some market share. But it has worked hard to fix the problem and taken on more of the manufacturing from third-party contractors. We believe private-label concerns are overblown.

Prestige is using its cash to pay down debt and buy back shares. We believe it will continue to introduce new products and brand extensions. The stock is selling for about a 35% discount to private market value and 13 times next year’s earnings. The market cap is about $3 billion.

We think all these companies are well positioned, and that small-cap value will come back after three difficult years. It is a great time to focus on the small-cap value sector. The quality of Wall Street research in the sector is the weakest we have seen. Most analysts spend time on large-cap growth stocks. We have been fishing in the same pond for 43 years, and it is a good time to be looking for bargains.

Thanks, John. Sonal, you’re next.

Desai: My macro views haven’t changed much since the 2025 Roundtable. I have adjusted my picks slightly. In the midyear Roundtable I recommended adding SPDR Gold Shares, and am sticking with it. As we discussed today, gold is a store of value. Central banks are pivoting toward more gold ownership, although there haven’t been large-scale outflows from dollar-denominated assets. I am not saying the gold price will increase another 66%, as it did last year, but there is sustained demand and the price is well supported.

Next, I am re-recommending two real estate investment trusts that I recommended last year: Annaly Capital Management and AGNC Investment. Annaly entered 2025 with the greatest economic leverage in more than a decade, while preserving substantial liquidity and a fairly disciplined hedging profile. It has continued to grow its agency mortgage-backed securities allocation relative to its substantial credit and mortgage-servicing rights.

Annaly has been emphasizing liquidity, balance-sheet resilience, and risk-adjusted returns at this point in the cycle. It is well managed, although it is volatile. The stock had a pronounced tariff-related selloff in the first half of 2025 but ended the year with a total return of 39.9%. Annaly could continue to outperform, even after that rally. The outlook for agency mortgage-backed securities is still favorable, and a steeper yield curve will be positive for the company. The income-flow dividend yield is around 12%.

Fixed-income fund inflows, by the way, have been 50% higher than average in the past few quarters. That is also supportive.

Desai: Yes. It is a more traditional mREIT [mortgage REIT], with a dividend yield of around 13.5%. If we get some modest funding relief this year, which seems probable, it will be attractive as a high-income, basis-sensitive asset. Annaly is higher octane, and AGNC is somewhat more steady.

Next, I am adding a shorter-duration investment-grade credit fund, Lord Abbett Income, or LAGVX. It offers diversified access to the corporate credit market and is focused on investment-grade securities, but its active management in high yield means it won’t deliver pure investment-grade, index-style returns. About 80% of the portfolio is investment grade, and about 18% has been below investment grade over the past 10 years. That has helped drive its performance.

This is a good time to mention that I am no longer recommending a floating-rate fund. I am pivoting to corporate credit, given where we are in the credit cycle.

Desai: Not this year. It may be a problem further out. The issuance we have seen so far is largely covered for the next few years, given strong balance sheets. Unlike the dot-com era, today’s tech hyperscalers are highly profitable and have large cash reserves and generally very strong credit ratings.

The Lord Abbett fund has been successful throughout its history in taking advantage of mispriced assets and overlooked opportunities. It is diversified across credit sectors, with a 15.5% allocation to high yield, an 8.3% allocation to collateralized loan obligations, and a 4.1% allocation to asset-backed securities. It has 6.3% in agency debt. We favor securitized sectors, which will be a recurring theme.

This investment-grade fund is a little less plain vanilla. It is focused on triple-B rated credits, at 49.4%, while 16% is invested in double-A and above.

I am sticking with the Franklin Dynamic Municipal Bond exchange-traded fund, or FLMI, which I recommended last year. This will be a good year for fixed income. I am not looking for massive yield compression. The fund had about a 4% 30-day SEC yield as of November. That is almost 7% on a tax-equivalent basis. Looking at muni fundamentals, states are entering the year in a strong position. They should show resiliency to rating downgrades and spread volatility.

Desai: The Franklin Income fund, or FRIAX, consistently delivers a steady but unexciting return. It is built for a somewhat uncertain market, and is a good option for investors lacking conviction on market direction. It can take advantage of periods of volatility.

I continue to recommend the Eaton Vance Emerging Markets Debt Opportunities fund, or EADOX. It remains one of the most compelling global fixed-income opportunities. It delivers a high real return, with a 9.8% SEC yield as of December, and provides diversification. The strong management team has delivered through multiple cycles. It has a good mix of hard-currency and local-currency bonds.

My last pick today is the Putnam Core Bond fund, PYTRX. Like my other multisector fund picks, it has a solid allocation to securitized debt. It is an evergreen building block for portfolios, providing high-quality exposure to the U.S. fixed-income market. It is a good option for anyone seeking active management in fixed income in this market.

In fixed income, active management has performed well relative to passive indexing.

Desai: It looked at year end like Kevin Hassett’s star was on the rise, but none of the names discussed frightens me. None of the former Fed governors raises red flags. These are all respected people. When people worry about Fed independence, keep in mind that the new chair will start a four-year term in May. Trump leaves office halfway through that term. Also, the chair has only one vote on the Federal Open Market Committee.

Thanks, Sonal.

While discussions over the sale of the telecom operator to the Orange–Bouygues Telecom–Free trio remain deadlocked, the billionaire is turning up the pressure by moving ahead with the sale of several subsidiaries.

Everyone is still sticking to their positions. Nearly three months after Orange, Bouygues Telecom and Free jointly offered, in mid-October 2025, to buy Patrick Drahi’s telecom operator SFR for €17 billion—an offer deemed insufficient by the billionaire and immediately rejected—talks between the parties remain at an impasse. But Altice France, the parent company of the red-square operator, does not intend to sit idle: since the trio refuses to revise its initial offer, Mr. Drahi is now threatening to accelerate his plan for an asset-by-asset sale.

In recent months, France’s second-largest telecom operator has received several bids for Netco, its fiber network in major cities, as well as for SFR Business, its corporate services division. According to our information, Altice plans to select bidders during the first quarter of 2026, with a view to possible disposals. As for Netco, Mr. Drahi has received a total of four offers valuing the asset between €4.5 billion and €5.8 billion. For SFR Business, Altice has received five bids: one from operator Altitude Infra valuing the subsidiary at €1.2 billion, and four others valuing it between €1.85 billion and €2.3 billion.

This is enough to put pressure on Orange, Bouygues Telecom and Free, which had included these two assets in their offer to acquire SFR. If Mr. Drahi were to agree to their sale, the three operators would mechanically be forced to revise the scope of their bid. This would seriously slow their ambition to absorb SFR, especially as they have already struggled to agree among themselves on how to divide up their common rival’s activities. In their proposal, Martin Bouygues’s operator is, in particular, supposed to take over the bulk of SFR Business. Asked for comment, Altice declined.

Such a move would merely be “posturing,” according to a source close to the buyers, who believes Mr. Drahi favors an outright sale of SFR. Other observers argue that by opting for a break-up sale, the Franco-Israeli billionaire could end up holding several assets that are difficult to sell.

While the three buyers have not lost their appetite for SFR—whose disappearance, synonymous with reduced competition, would boost their profits—negotiations “cannot go on indefinitely,” warned Christel Heydemann, CEO of Orange, on December 29 on Euronews. Moreover, even if the parties were to reach an agreement, they would still have to wait a long time to obtain—if at all—the green light from competition authorities. “Even if a case were submitted very quickly, it seems very unlikely that it could be concluded before the end of 2026,” said Benoît Cœuré, president of the French Competition Authority, on Friday January 9 in Les Echos.

In parallel, in 2026 Altice France plans to accelerate the sale of its crown jewel, XpFibre. For nearly two years, Patrick Drahi has received expressions of interest for this subsidiary, which provides fiber-optic connections to more than 7 million homes and businesses in rural areas and on the outskirts of major cities. This sale would, however, have no impact on a potential sale of SFR to competitors, since XpFibre is not included in the scope of their offer.

Among the interested parties, the names of investment funds KKR, Ardian and GIP regularly come up. XpFibre is highly sought after because fiber optics, which are now replacing the old ADSL network in France, have become the reference technology for Internet access and are expected to remain so for decades to come.

Under the agreement on the restructuring of Altice France’s debt, finalized on October 1, 2025, its valuation could stand between €9 billion and €10 billion. Altice is not the sole shareholder of XpFibre, however, as infrastructure funds from France’s Axa, Germany’s Allianz and Canada’s Omers own 49.99% of the capital.

Altice France’s management intends to use part of the proceeds to reduce the company’s debt. While this has already fallen from €24 billion to €15.5 billion, Mr. Drahi still aims to bring it down to what he considers a more manageable level of €13 billion. To reach this goal, the businessman recently sold Intelcia, the Moroccan call-center giant, as well as Infracos, his telecom tower subsidiary, which he owned jointly with Bouygues Telecom.

Alors que les discussions concernant une cession de l’opérateur de téléphonie au trio Orange-Bouygues Telecom-Free sont toujours dans l’impasse, le milliardaire met la pression en avançant sur les cessions de plusieurs filiales.

Chacun campe toujours sur ses positions. Près de trois mois après qu’Orange, Bouygues Telecom et Free ont proposé, mi-octobre 2025, à Patrick Drahi de lui racheter conjointement son opérateur de téléphonie SFR pour 17 milliards d’euros – une offre jugée insuffisante par le milliardaire, qui l’a d’emblée retoquée –, les discussions entre les acteurs demeurent dans l’impasse. Mais Altice France, la maison mère de l’opérateur au carré rouge, n’entend pas rester les bras croisés : puisque le trio refuse de réviser son offre initiale, M. Drahi menace aujourd’hui d’accélérer son projet de vente par appartement.

Ces derniers mois, le numéro deux français des télécoms a reçu plusieurs offres pour Netco, son réseau de fibre dans les grandes villes, comme pour SFR Business, sa branche consacrée aux entreprises. Selon nos informations, il entend procéder à la sélection des candidats dans le courant du premier trimestre 2026, en vue de possibles cessions. S’agissant de Netco, M. Drahi a reçu un total de quatre offres, valorisant cet actif entre 4,5 et 5,8 milliards d’euros. Pour SFR Business, Altice a réceptionné cinq propositions : une de l’opérateur Altitude Infra, qui valorise la filiale à 1,2 milliard d’euros, et quatre autres, la valorisant entre 1,85 et 2,3 milliards d’euros.

De quoi mettre la pression sur Orange, Bouygues Telecom et Free, qui ont intégré ces deux actifs dans leur proposition de rachat de SFR. Si M. Drahi donnait son accord à leur vente, les trois acteurs seraient mécaniquement contraints de revoir le périmètre de leur offre. Ce qui mettrait un sérieux coup de frein à leur rêve d’engloutir SFR, alors qu’ils ont eu toutes les peines du monde à se mettre d’accord sur un partage des activités de leur rival commun. Dans leur proposition, l’opérateur de Martin Bouygues est, en particulier, censé récupérer la majeure partie de SFR Business. Interrogé, Altice se refuse à tout commentaire.

Son initiative relèverait « de la posture », estime toutefois une source proche des acheteurs, considérant que M. Drahi privilégie davantage une vente globale de SFR. D’autres observateurs soutiennent qu’en optant pour une vente à la découpe, le milliardaire franco-israélien risquerait de se retrouver avec différents actifs difficiles à céder sur les bras.

XpFibre aussi à céder

Si les trois acheteurs n’ont pas perdu leur appétit pour SFR – dont la disparition, synonyme d’une moindre concurrence, permettrait de doper leurs profits –, les négociations « ne peuvent pas durer indéfiniment », a averti Christel Heydemann, la directrice générale d’Orange, le 29 décembre sur Euronews. D’autant que, si les acteurs finissaient par s’entendre, il leur faudrait encore patienter longtemps pour décrocher – ou pas – le feu vert des autorités de la concurrence. « Même si un dossier nous était présenté très rapidement, il me paraît très improbable qu’il puisse aboutir avant la fin de l’année 2026 », a prévenu Benoît Cœuré, le président de l’Autorité de la concurrence, vendredi 9 janvier, dans Les Echos.

En 2026, Altice France compte, en parallèle, accélérer sur la vente de sa pépite XpFibre. Cela fait près de deux ans que Patrick Drahi a reçu des marques d’intérêts pour cette filiale, qui équipe plus de 7 millions d’habitations et d’entreprises en fibre optique dans les campagnes et les périphéries des grandes agglomérations. Cette cession n’aurait, en revanche, aucun impact sur une vente de SFR à la concurrence, puisque XpFibre ne figure pas dans le périmètre de leur offre.

Lire le récit | Article réservé à nos abonnés Comment Patrick Drahi a rétréci SFR, devenu, en dix ans, la proie de ses concurrents

Parmi les acteurs intéressés, les noms des fonds d’investissement KKR, Ardian, ou encore GIP reviennent régulièrement. Si XpFibre attise les convoitises, c’est parce que la fibre optique, qui prend aujourd’hui le relais du vieux réseau ADSL dans l’Hexagone, constitue désormais la technologie de référence pour se connecter à Internet, et a vocation à le rester pour les décennies à venir.

Au regard de l’accord sur la restructuration de la dette d’Altice France, entériné le 1er octobre 2025, sa valorisation pourrait se situer entre 9 et 10 milliards d’euros. Le groupe de M. Drahi n’est toutefois pas le seul actionnaire de XpFibre, puisque les fonds d’infrastructures du français Axa, de l’allemand Allianz et du canadien Omers possèdent 49,99 % du capital.

L’état-major d’Altice France entend consacrer une partie de cette manne à la réduction de la dette de l’entreprise. Si celle-ci est passée de 24 à 15,5 milliards d’euros, M. Drahi compte toujours la ramener à un niveau, jugé plus supportable, de 13 milliards d’euros. C’est pour atteindre cet objectif que l’homme d’affaires a récemment cédé Intelcia, le géant marocain des centres d’appels, ainsi qu’Infracos, sa filiale de tours télécoms, qu’il possédait conjointement avec Bouygues Telecom.

Houston-based Citgo Petroleum is the last-remaining crown jewel of Venezuela’s international oil assets and it’s in the process of being sold to a refining startup backed by activist investor Paul Singer’s Elliott Investment Management, following a decade-long legal battle.

At the end of November, Elliott-backed Amber Energy won an oft-delayed and hotly contested court-ordered auction for Citgo at a discounted price of $5.9 billion. The company also has to pay more than $2 billion for holders of defaulted Venezuelan bonds. Legal appeals from Venezuela and other bidders remain pending, but the deal is still expected to close by the end of this year, according to energy analysts.

The auction victory for Elliott and Amber came just prior to the Trump administration deposing Venezuelan leader Nicolás Maduro on January 4. That move potentially positions Citgo and other U.S. refiners to receive more barrels of the heavy-grade Venezuelan crude oil desired by the Gulf Coast refineries.

Citgo has three U.S. refineries, plus pipeline and terminal assets. Its network refines 800,000-barrels a day at sites in Louisiana, Texas, and Illinois. It has branding and fuel marketing deals with 4,000 independently owned retail outlets throughout the East Coast, Midwest, and South.

Despite Citgo’s 115-year history, the company has been quietly and entirely owned by Venezuela and its state-owned oil company PDVSA since 1990. The company became a target in the legal fight to pay off creditors who lost oil assets, mining rights, and more when they were expropriated under Venezuela’s former socialist ruler, Hugo Chavez, almost 20 years ago.

Amber CEO Gregory Goff declined comment for this story.

The other primary beneficiary in the Citgo sale is oil giant ConocoPhillips, which holds more than half of the creditors’ roughly $20 billion in claims. The Chavez regime seized Conoco’s oil assets in 2007.

President Trump is pushing Conoco, Exxon Mobil, and others to return to Venezuela to rebuild the infrastructure and pump more oil, although there’s hesitancy in the industry because of the high costs, political uncertainty, and weak oil prices. Trump is schedule to meet with top oil executives today.

“ConocoPhillips is monitoring developments in Venezuela and their potential implications for global energy supply and stability. It would be premature to speculate on any future business activities or investments,” ConocoPhillips spokesman Dennis Nuss said in a statement.

“We will continue with our collection efforts, which are made in accordance with all applicable laws and regulations,” he added.

A long legal fight and a political minefield

The legal fight between Venezuela and its creditors had brewed for years until 2018 when a small, defunct Canadian mining company, Crystallex, won a federal court ruling saying it could pursue Citgo’s assets to collect more than $1 billion it allegedly lost when Venezuela expropriated foreign assets in 2011. Citgo formally cut operational ties with Venezuela in 2019. Crystallex and Conoco both support the ruling in favor of Elliott’s Amber.

Most Big Oil and refining players stayed out of the Citgo bidding because of all the legal and geopolitical complications, energy analysts said.

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Domestically, U.S. Rep. Thomas Massie, R-Kentucky, a frequent GOP critic of Trump, was quick to criticize the military actions in Venezuela and used the opportunity to slam Elliott. “Paul Singer, globalist Republican mega-donor who’s already spent [$1 million] to defeat me in the next election, stands to make billions of dollars on his distressed Citgo investment, now that this administration has taken over Venezuela,” Massie posted on social media.

Venezuela and its state oil company, PDVSA, still lay claim to Citgo. They regard the auction as a sham legal process in an enemy nation’s courtroom in Delaware.

It’s unclear if Maduro’s ouster will impact Venezuela’s and PDVSA’s longshot appeals to the federal Third Circuit Court of Appeals.

The sale also must be approved by the U.S. Treasury Department’s Office of Foreign Assets Control. The White House did not reply to requests for comment for this story.

Also appealing is Amber’s top bidding opponent, Gold Reserve. That company made a larger but potentially riskier offer for Citgo that wasn’t deemed as financially certain by the court. Gold Reserve, a smaller creditor impacted by expropriation, has bemoaned the apprehension of its lawyer in Venezuela, José Ignacio Moreno Suárez, who has been detained for more than two years and “subject to intense torture and deprivation.” He remains captive.

“We applaud the actions by the Trump Administration to bring Maduro to justice, and we look forward to doing our part to assist with a return to peace and prosperity in Venezuela and the expeditious release of … Suarez,” Gold Reserve Vice Chairman Paul Rivett said in a statement.

Chevron is ready to roll

A group of imprisoned U.S. Citgo executives were released in 2022 after five years in prison. The Houston-based executives—five U.S. citizens and one permanent resident dubbed the “Citgo Six”—were arrested in Venezuela for alleged embezzlement and accused of betraying the government. They were eventually released in a prisoner exchange.

While Citgo and other Gulf Coast refiners—Phillips 66, Valero Energy, PBF Energy—could stand to benefit from a larger influx of Venezuelan oil, arguably the biggest winner would be Chevron, the only American company to remain in Venezuela long term, according to Ajay Parmar, director of oil markets analytics for ICIS.

Currently operating under a special license, Chevron could potentially increase its Venezuelan operations, pumping out more oil and sending the barrels to its U.S. refineries, capturing the full value chain.

“Chevron has wanted to produce more [Venezuelan] oil for a long time. They’re the big winner here,” Parmar said. “It is still great; it is still good for [Citgo and other] U.S. refiners.”