Predicting 2026: Will Trump and Musk officially reunite?

0:01Good morning and a happy New Year's Eve from the Financial Times. Today is Wednesday, December 31st, and this is your FT News Briefing. Artificial intelligence may be coming for Europe's banking industry. Plus, our week of predictions rolls on today with a look at the spectacular fallout between Elon Musk and Donald Trump. So what will 2026 hold? It is in Musk's interests as the richest guy in the world who wants to become the first trillionaire to keep on side with Trump. I'm Victoria Craig, and here's the news you need to start your day.

0:44In keeping with our week-long theme of predictions, Morgan Stanley is out with new estimates that artificial intelligence could threaten more than 200 ,000 European banking jobs over the next five years. Analysts say that will come as lenders embrace AI and look for new ways to cut costs and boost profitability. The forecast says job losses are most likely to come from non-consumer facing roles, risk management and compliance positions. The change is expected to hit especially hard for consumer-focused lenders and in countries like France and Germany where investors worry expenses are high. Despite pressure to find savings, some leading European bankers have warned against rushing to integrate AI.

1:27They argue that could help protect people from losing an understanding of the basics and fundamentals of the banking industry.

1:41It was a political bromance that took Washington by storm this year. Well, I love the president. I just want to be clear about that. I think President Trump is a good man. And he's, you know... That's the way he said that, you know? There's something nice about him. It really is. That was tech billionaire Elon Musk and U.S. President Donald Trump in a joint interview on Fox News back in February. But just as quickly as they became allies, they swiftly turned foes. One person who did not forecast the friendship to fade was the FT's Edward Luce. He's our U.S. national editor and columnist, and he joins me now to analyze what went wrong with this unlikely alliance.

2:20Hi, Ed. Hi, how are you? I'm good. Thanks for being here. So for 2025, you predicted that although Trump is famously intolerant of competing egos, the benefit to Musk is too great to squander. What went wrong then so fast in this friendship? Yeah, I guess I underestimated Musk's emotional and mental volatility because he was given the keys to the castle. Quite literally. Pretty much literally. And, you know, Doge was given carte blanche to restructure, close down, overhaul Washington, D.C. And Musk was, you know, more than first buddy. He was almost sort of clung to by the president and talked about gushingly by Trump.

3:11Had his son in the Oval Office where he had his four-year-old ex in there with Trump. Ex, are you OK? This is X, and he's a great guy, high IQ. He's a high IQ individual. He had everything, really, and he crashed and burned. He disapproved of the big, beautiful bill, Trump's first budget. He said it was fiscally reckless. Just a week after President Trump gave Elon Musk a gold key to the White House, their relationship is on the rocks. Elon Musk fired off a series of social media posts slamming Trump. Now, two of those posts read, quote, without me, Trump would have lost the election. I'm very disappointed because Elon knew the inner workings of this bill better than almost anybody sitting here.

4:02Better than you people. He knew everything about it. He had no problem with it. All of a sudden he had a problem. It's an extraordinary, almost sort of fable of going from friendship to darkest enmity. And it really in the space of four months. And if we stay on Elon Musk for just a second, how big of a factor was his time, particularly how much of it he was spending cleaning out the bureaucracy in D.C. at Doge, the Department of Government Efficiency that he started, versus running his own companies? How did that factor into the relationship? Well, I think that must have been the gerbil wheel spinning in his head the whole time, which was that the popular backlash against this chainsaw role that he assigned himself at Doge included, you know, targeting Tesla showrooms, incidents where cyber trucks would just burst into flames.

4:56Once in front of the Trump Tower in Las Vegas, that went viral on his own site. And so the decline in sales was less sharp in the United States than it was, say, in Canada or in Europe. But it was clearly something that he began and, more importantly, shareholders began to see as a real cost to this public role that he had taken on. And so I think quite rightly, his businesses were perceived to have suffered from this very controversial role that he was playing. I guess for Elon Musk, in terms of his companies, it has, can we call it, a happy ending? because that criticism from the company is reversed by the end of the year, didn't it?

5:39When he decided to focus more time on the many firms that he was running. Yeah, I mean, we used to call it spending more time with your family. His real love is Tesla and SpaceX, I guess, and potentially the boring company. But Tesla first and foremost, and he's been awarded a trillion dollar in compensation if he meets certain Tesla sales targets. So that's clearly back to being his key focus. And his net worth, which had gone down from ridiculous numbers to slightly less ridiculous numbers, is now back up to ridiculous numbers. If we focus again on the Department of Government efficiency, that was due to wind down on July 4th, 2026.

6:24But it happened about eight months early. Does that tell us anything about the president's potentially changing view of the work that Musk started? There was always a competition between Elon Musk, who had a very, dare I say it, simplistic idea of startups and Silicon Valley and how enterprises work, trying to apply this philosophy to the vast federal range of institutions in Washington, D.C., and finding that they really didn't conform to the way he was used to doing things. The tension was between him and Russell Vogt, the head of the Office of Management and Budget, a sort of a key Trumpian, formerly at the Heritage Foundation.

7:07And there was always a tension between that, between the chainsaw and the scalpel. And I think Trump over time began to realize politically the Russell Vogt approach was the one he would prefer. OK, so they had a spectacular falling out. But in September, after the assassination of conservative commentator Charlie Kirk, President Trump and Elon Musk were then seen together at the memorial service. Mr. President, everyone's saying that Charlie brought you and Elon back together. Is that true? Well, Elon came over and said, well, no, it's nothing to do with that. I thought it was nice that he came over and had a little conversation.

7:48We had a very good relationship, but it was nice that he came over. So could a more formal reconciliation and sort of coming together again be on the cards for the pair in 2026? Yeah, I mean, I think there's already being basically a making up to some degree. And we're never going to go back to Trump trying to be a Tesla salesman on White House lawn, which was another incident. I love Tesla. Which one did you buy? Mr. President, which car are you going to buy? The one I like is that one. We're not going to go back to that cartoonish early period of Musk being first buddy. But we're back to a situation, and this is why I made that prediction, which is that it is in Musk's interests as the richest guy in the world who wants to become the first trillionaire to keep on side with Trump because so much of what his businesses are doing relies on federal benign regulatory stance and contracts.

8:49contracts, as in the case of SpaceX with NASA and Starlink with the Pentagon. And it's really critical that Musk gets along with the Trump administration. So the reason they fell out, we've been into, the reason they fell back in is the reason I made that, it turns out, inaccurate forecast in the first place, that they wouldn't fall out. So in a sense, Elon Musk sort of needs to stay on the right side of President Trump. But is the reverse true too? Because if we look at 2026, we've got the midterm elections, a really big deal for American politics. I guess given the slightly less frosty relationship between these two men, could we see him on the campaign trail with President Trump?

9:34Yeah. And remember, you know, another facet of their falling out was that Musk tried to launch a third party, the American part. Oh, I forgot about that. So it's not just that he fell out. He actually sort of tried to launch a party. Again, You know, in that sort of startup, let's start a company style that I think betrayed his lack of sophisticated grasp of how this more East Coast world works. But yes, Trump benefited a lot from Musk's funding, I think roughly$300 million worth in the 2024 presidential election. And he will undoubtedly be seeking more money in the build up to the 2026 midterms, probably Musk.

10:18If he's back to a less volatile frame of mind, he will see that it's a necessary small toll to pay for continued good access to the federal government. But, you know, Trump loves money, let's put it bluntly. And he loves rich people. And Musk is the richest person in the world. So Trump was always going to forgive the prodigal son. The politics of Washington relationships in a nutshell there. Ed Luce is the FT's U.S. national editor and columnist. Thanks so much, Ed, for your time. That's a real pleasure.

10:59Before we go, another installment of our series on FT predictions for the year that was and the year ahead is out tomorrow. My colleague, Sonia Hudson, sits down with the FT's Jillian Tett, a columnist and member of the editorial board. She predicted the Magnificent Seven group of tech stocks would essentially stall in 2025. So what's her call for 2026? There is the beginning of a much more discerning approach to working out which stocks are going to perform well and which aren't. Because history shows it's very unlikely that they're all going to be winners. Be sure to stay tuned to tomorrow's episode for that conversation.

11:39and also check out the free links in our show notes to refresh yourself on the FT's forecasting the world in 2025 predictions and an updated list for 2026. This has been your daily FT News Briefing. Check back tomorrow for the latest business news and a very happy new year from all of us at the Financial Times.

12:10Thank you.