S&P 500 Closes at Record High in Tech-Led Advance

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2:06Bloomberg Audio Studios. Podcasts. Radio. News. This is Bloomberg Business Week Daily. Reporting from the magazine that helps global leaders stay ahead. With insight on the people, companies, and trends shaping today's complex economy. Plus, global business, finance, and tech news as it happens. The Bloomberg Businessweek Daily Podcast with Carol Masser and Tim Stenevek on Bloomberg Radio. History has shown that stock analysts are famously bullish, right? This year is no different. They're forecasting on average a roughly 11 % gain for U.S. stocks next year. And that's despite things like inflation, like possibly rising unemployment.

2:50But guess what? All that optimism is actually putting some market watchers on edge. And Bloomberg's Alexandra Seminova wrote about this for the Bloomberg Terminal. And she joins us here in an interactive broker studio. Alexandra, great to see you. You would think, OK, look, people are feeling optimistic about next year. That should make market watchers happy. Why are they worried? Yeah, so it's this hearty annual ritual for Wall Street strategists to issue S &P 500 forecasts for the end of the year. And we all know that it's very hard to hit such a spurious level of precision, but it gives us a sense of whether they're bullish or bearish on the market.

3:24And if you look at the forecast for 2026, there's this resounding sense of optimism. The lowest target on Wall Street is 7 ,000. So that itself is already implying a modest gain, unlike years that we've seen in the past, where some were outliers and predicting some sort of loss. There were some bears, some contrarian calls. But this time around, even the lowest target on Wall Street is implying, again, the highest sees the index ending at 8 ,100. That's from Oppenheimer. So the gap between the lowest and the highest is actually the narrowest that it's been in nearly a decade. So they're bullish and they're clustered.

4:00And there's this sense that when everyone is on the same side of the boat, there is too much optimism baked into consensus. And it'll take very little to disappoint the market. And that's kind of the fear among some investors. I feel like this story, I loved it, by the way, because it was a fantastic story with a lot of nuggets. And you said such locked up views are generally considered a contrarian signal. Why is that? When some, if you take the other side, you would think, oh, there's consensus. It must be going this way indeed. Right. Well, sentiment is usually a contrarian indicator. And in this case, when everyone thinks that nothing can go wrong, it'll take very little to surprise to the downside.

4:35So it won't take a recession. It could take something as much as, you know, a miss on earnings expectations, any kind of little benign announcement from the Fed about them scaling back their expectations for monetary easing. And that is kind of the fear going into next year. When you think about it, there are still so many risks. We don't know when the next interest rate cut will be, despite a lot of investors hoping for another one. We don't know whether the AI story will continue the momentum that we've seen in recent years, given some of these circular financing deals. We don't know whether we'll get any more sporadic announcements from the president.

5:07Obviously, that spurred volatility this year. So any of those little things could be risks to markets. And it seems like Wall Street strategists aren't really accounting for them going into next year. But it's understandable because when you look back on the past three years, they have actually erred on being too cautious. And that has obviously proven wrong, given they underestimated the rally. So this time around, they don't want to underestimate the market strength. So the pendulum has swung. And of course, there are external shocks, right, and black swans that we can't foresee. What are these forecasters saying is going to push the market higher by double digits next year?

5:43So we're still seeing expectations for double-digit earnings growth. That has been time and time again the thing that has made the market so resilient. Corporate America has defied higher interest rate costs. It has defied tariffs, and it's still performed and grown profits. So that is expected to continue next year. The AI story largely is still intact for now, even though there are some concerns about how companies will monetize their investments for the most part. These hyperscalers have been delivering on their earnings. Economic growth is still solid. The labor market, although it is a little bit sluggish, it's still in a good spot.

6:21And there's this view that that will actually make the Fed ease policy. So that is probably going to lift the market higher. As someone who watches this space very, very closely, What do you make of this exercise of having year-end targets? Because this whole year, you have this story every year to set up the next year. But then during that year, you write so many things about sales side strategies, either revising upwards or downwards. And sometimes you've written about shops saying, no, we just won't put out targets at all because you're just prone to basically putting out something and then it being wrong.

6:52So is it still helpful? It's so funny. It's somewhat of a necessary evil. And actually, Ned Davis Research said that you kind of have to have a target to give investors a sense of how bullish you are, the magnitude of gains that you see. But at the same time, Cameron Christ actually did an analysis on this. The correlation between what the market does and what strategist targets are is actually zero. There's pretty much you almost never hit that exact number. And it's it feels like it's impossible to do. But at the same time, retail investors specifically are very interested in what these people have to say.

7:24Usually when I talk to these strategists, they say that their institutional clients don't care so much. They care about sector views and kind of tactical trade ideas. But retail clients, wealth managers do care how they're thinking about the market. And what are they saying about outside of equities? Because we've seen the run-up that commodities have had really across the board. Are forecasts for more bullishness there? Well, there's been a lot of talk this year about exploring opportunities outside of equities given how lofty valuations are. We've seen the S &P 500 return something like 80 % since the bull market began at the end of October.

8:00So you're seeing time and time again that some firms are recommending alternatives, diversifying into real assets, commodities. And that's likely to be a theme going into 2026. JP Morgan had in their outlook a 60-40 plus. Plus, I liked that. I was like, oh, that's catchy. Very quickly, who got it right this year? So it's funny, Chris Harvey, who Isabel and I broke the story that he left Wells Fargo to go to his new firm. He had a target of 7 ,007 going into this year. And during the trade war, he was one of the only people who didn't capitulate. A lot of strategists were slashing their outlooks.

8:37They were downwardly revising. And then they ultimately had to U-turn and go back to their original targets. And he stuck to his guns. And here we are. We're pretty close to his target. So he's one of the people who got it right. Mike Wilson and Morgan Stanley is also one of them. He had a 6 ,500 target on the S &P 500. We're obviously above that level. But he's also someone who maintained confidence in his call that stocks would recover into the second half of the year. But for the most part, we did see a lot of flip-flopping at Yardeny. Yardeny Research said that he's never had to change his target this many times ever in his career.

9:07I remember we talk sometimes when we collaborate with stories and you would say you would prefer and you would look up to someone more. Or even if he's so far from the consensus, but if he's stuck to his guns rather than people who just keep on revising. And whenever the market moves, you're just like, oh, OK, let me change my target. Exactly. It's almost somewhat paradoxical because as a strategist, you have to be nimble. You have to be aware of changing economic data and earnings and you have to be willing to change your views. But at the same time, conviction is so important. And obviously your credibility kind of diminishes once you're going back and forth.

9:40It's all at play. Bloomberg's Alexandra Seminova. But thanks so much for stopping by. Really interesting stuff. Great read on the Bloomberg Terminal. Stay with us. More from Bloomberg Businessweek Daily coming up after this. They told us to expect change. They warned us about the transition. But honestly, they forgot the best part. This is the chapter where we finally focus on us. Life MD delivers expert menopause and midlife care right from your home. From hormone health to holistic wellness, LifeMD helps you feel your best for the best years of your life. LifeMD, it's just getting good. Visit LifeMD.com slash goodlife.

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12:51Plus, Wise runs over 7 million daily checks to catch and prevent fraud. 15 million people already trust Wise to manage their money internationally. Be smart. Get Wise. Download the WISE app today or visit WISE.com. Terms and conditions apply. You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business App. Or watch us live on YouTube. The S &P 500 has broken through 6 ,900 in case you missed it. It's been a narrow tech-led advance. volume, though, not so great, right? 35 % below the average of the past month ahead of the Christmas holiday, but that's to be expected.

13:34So what are the themes in the new year? Where are the opportunities? We brought in David Chassler. He is here to lend his thoughts. He's head of multi-asset solutions at VanEck Funds. David, great to see you. Thank you so much for having me. So you say that the long game in 2026 has not changed. What is the long game in your view? So we are thematic investors. And let's be clear, what does a theme mean? A theme is a structural market driver. If you're a thematic investor, this is a target rich environment. There are a lot of opportunities. So I'm going to start with disruptive technology innovation.

14:06Yes, we're talking about AI. Yes, we're talking about AI automation. It's underhyped. Underhyped? Yes. It is going to drive more transformation, more productivity, more growth, and it's going to happen faster than people expect. So that's where we're at. It's underhyped. There's going to be a dislocation between expectations and reality, and I'd expect some bumpiness. So it doesn't mean it happens in 2026, a lot of competition there. But that's the first theme. The second theme is there's a stealth bull market in real assets. Real assets are performing extraordinarily well. As great as tech did last year in this year, as great as tech did in 2025, lots of segments of real assets actually outperformed.

14:45Not a lot of people talking about it. The new world doesn't happen without the old world building. So give us some examples of real world assets that you like. Energy. How are you going to build it, right? So we've been leaning into the energy that you have that's actually going to power things now, fossil fuels. Where are we going? What's proven? What's reliable? Nuclear energy. We've made a lot of money with that. So we're leaning into energy, but also the infrastructure build-out need to facilitate not only energy transition, but infrastructure development to support the technology. So that's the second theme.

15:15The third, how are we going to pay for it? We've been perpetually overspending for decades. We're in the period of accountability, financial accountability. Sorry, not sorry. Debt matters. Deficits matter. You can't just spend and spend and spend without repercussions. And now we're at the point where that is the case. Pre-2020, you could do whatever you wanted. Print, print, print. No inflation. That's not the world we're in now. We're in a world of financial accountability. So if we're going to pay for all the sins of the past with all that perpetual spending, and then start to think about what's on our plate.

15:49What's on our plate? You've got reshoring. You've got an infrastructure bill out. You've got a global tech race where losing is existential. And when you frame it that way, when you frame it that way, well, debt and deficits really don't matter as much. Losing is what matters. And how are we going to pay for it? You're going to pay for it with debasement. Why? Because you have no option. That's what happens when you perpetually overspend. So you need to own assets with embedded scarcity. You've got to own gold. You've got to own Bitcoin. Bitcoin struggled. We think it does really well later part of next year.

16:20So are we going to have another year where we see gold rally right along with stocks? I will be bold enough to frame it out. Give me a little bit of flexibility. So if we meet next year, give me a little bit of flexibility on this because I'm going to be very, very specific. OK. We like that. I think Bitcoin's a top performing asset next year. I'll frame out why. I think gold does well. I think real assets, broad-based real assets. How do you actually build it? How do you power it? Does better than gold, but gold does well. Technology stocks, a bit behind that, all four of those do well. That's how I framed that up.

16:54Here's the thing, right? Why will Bitcoin do so well in the later part of the year? We're not saying we're in a bad liquidity environment, but we're saying the liquidity environment is going to get a lot better. You're going to have a new Fed chair coming into office. Check that box. You've got a large portion of the public that's not participating. You've got a narrow growth market. You've got declining employment conditions. It's setting the backdrop for easing financial conditions. Bitcoin is the instrument that responds best to that. There's an emotional element to it and there's a liquidity element to it.

17:26If you're nervous, you're not going to lean into that. But if you get more exuberant and more confident, you're going to. If you've got Bitcoin, which has outperformed in almost every year of its existence, and now underperformed by 30 % relative to tech stocks last year, 75 % relative to gold last year, it's basically a coiled spring. We think it outperforms next year. So you oversee model portfolios in VanEck. How do you think of Bitcoin and gold when you put them in your model portfolios? Do you think they complement each other or do you think they're an either or? Because you say that Bitcoin will gain next year, will be the top performing asset.

18:03What is Bitcoin like to you? Because I feel like it still needs to mature. Some say it's like a risk asset. But the premise of Bitcoin is not to be like a risk asset. It's to be a hedge against inflation. it's definitely undergone an identity crisis over time it's matured over time it's it's a it's a teenager now and as it's continued to mature it's starting to act more mature its volatility profiles more muted the swings are less extreme and it's starting to kind of set in its saddle in regards to what it is and i think you could more correctly frame it and allocate to it so we own gold and bitcoin own a lot more gold than we do bitcoin if the market sells off i expect gold to be there for me.

18:44I expect Bitcoin to be a risk asset. The similarity, the core similarity is that they both have scarcity. And that's why they're both beneficiaries of financial excess. However, when they perform and how they perform are very, very different. Given the structural underperformance of Bitcoin over the last 12, 18 months, we think it's set up for our performance next year. Gold, we think, still does great, but it's going to breathe a little bit. It's going to be volatile. It's not going to be a straight line this way. The supply of gold is static. Incremental investment demand, given how small gold is relative to stocks and bonds, gold will become unhinged.

19:20It will become more volatile. People are going to be surprised how volatile it gets. That's the opportunity. It's a feature. It's not a flaw. And you have a 5 ,000 price target for gold too. What was that? He has a 5 ,000 price target for gold. We came out with that when gold was below$3 ,000. So I think it was around 2 ,800. We We said gold would go to$5 ,000. Thought it would happen by the end of this year. Missed that mark. We think it goes well above$5 ,000 in 2026. And just in about 20 seconds, what about Europe? Are they going to outperform us as much as they did this year? No. If you want to hedge, first off, you go where the growth is.

19:56Invest where the growth is. If you want to hedge the dollar, go to gold, go to Bitcoin. So extract the currency move out of European equities, and the picture looks different. All right. David Schastler. He is head of multi-asset solutions at VanEck Funds. Thank you for your predictions, some of them bold. Stay with us. More from Bloomberg Business Week Daily coming up after this.

20:24This is the Bloomberg Business Week Daily podcast. Listen live each weekday starting at 2 p.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa, play Bloomberg 1130. Artificial intelligence, we keep talking about it. We talk about how it touches almost every part of our lives. Well, guess what? It's also changing the way life sciences companies use real estate. And guess what? It's coming at a time when more than 60 million square feet of lab space is sitting vacant, vacant on U.S.

21:01markets. Those are just some of the findings in JLL's 2025 Life Sciences Real Estate Perspective and Cluster Analysis. I know that's a mouthful, but Travis McCready, he is head of industries and leading advisory at JLL, and he joins us now remotely. Travis, thanks so much for being with us. I found this report to be really fascinating. I love this kind of stuff, and I really love real estate. So this is sort of a different way into real estate. Look, there was a lot of overbuilding in the life science real estate industry. This we know. How does this set up landlords, tenants, and also those looking to invest in this area?

21:37How does that set us up for 2026? Indeed. The asymmetry between demand and supply right now and the effect of overbuilding, building way too much too soon in the life sciences really puts us at the bottom of a cycle heading into 2026. And that's the good news. As you mentioned, artificial intelligence is changing the way that we engage in research and development, hopefully making it more efficient, making it more efficacious. So on the horizon will be an uptick in entrepreneurship and hopefully an uptick in demand. But right now, heading into 2026, make no mistake, with 60 million square feet of vacancies that we need to digest across the United States, we have, as the saying goes, we have a lot of wood to chop in order to return to equilibrium from a lab standpoint in the United States.

22:37So we've seen more than$25 billion in new U.S. biomanufacturing commitments announced. Is this the start of a sustained reshoring cycle or is this more a tactical response to the current policy that the pressures we're seeing? I think it's a little bit of both those investments, that$25 billion worth of investment is both a reflection of policy change, making it more favorable to engage in pharmaceutical manufacturing on U.S. soil, U.S. and Puerto Rico. But it's also a function of the fact that we have more drugs that actually need to be manufactured. There's been an increase in pharma M &A activity, There's certainly going to be an increase in 2026 in revenues, about an 18 % increase in revenues from the top 10 drugs alone sold in the United States.

23:34So it's a combination of factors, both policy shifts and more drugs being on the market that's driving that investment. And Travis, I know Boston for sure, but also San Francisco, the Bay Area, San Diego, they're big markets for the biosciences, for life science, real estate. You think they're going to hold on to those positions in the new year? Where are some other opportunities or other markets that may be catching up? Yeah, those two markets are and will continue to be the leading life sciences markets in North America, the greater Boston area, inclusive of Cambridge and Boston, as well as the as the Bay Area.

24:15That's the major two. Rounding out the third, however, is San Diego. We've seen an enormous amount of activity over the past decade in terms of output and real estate in the Southern California, San Diego area. So that's the trilogy, the trinity of markets in the life sciences. After that, there's a great number, about a dozen of exciting markets across the U.S. on both coasts and a couple in the Midwest as well. One I'd point out is Indianapolis, a great market right now for pharmaceutical manufacturing, as well as animal and veterinary types of life sciences activity. North Carolina, which is perhaps our most vibrant pharma manufacturing state in the United States, as well as Philadelphia.

25:15Some really interesting things happening with massive urban reclamations in and around the Philadelphia area that are being backfilled with life sciences activity driven by Children's Hospital and UPenn. So there are lots of markets to watch. But in terms of what's going to drive the amount of American activity in terms of volume, Boston, San Diego, and San Francisco. And we know funding is tighter and investors are demanding more capital efficiency. But what does doing more with less space actually look like, for instance, inside a biotech facility? Yeah, a lot of the efficiency metrics that are being pushed by biotechs right now will shift the amount of wet lab space, the space where science is actually conducted, as well as increasing the amount of dry lab space in order to densify real estate, real estate environments.