Wall Street’s Wild Week to Start 2026

0:052026 started off hot on the market. Where do we go from here? Motley Fool money starts now.

0:25Everybody needs money. That's why they call it money. The best things in life are free. But you can give them to the birds and bees. From Fool Global Headquarters, this is Motley Fool Money. Welcome to Motley Fool Money. I'm Travis Hoyam, joined today by Jason Moser and Lou Whiteman. Guys, this is the first Friday recording that we've had in 2026. Last Friday, we had to record a little bit early because of New Year's. But I want to get your thoughts on where we are in the market to start the year. It seemed like everything was on fire the first couple of days of the year. I saw people post about how, you know, if this continues, I'm going to have 10 ,000 % returns for 2026.

1:06We've maybe slowed down a little bit from there. But Lou, in the absence of kind of news, we're getting a little bit of economic news, but the vibes seem pretty good in the market. So is that good news to start the year? Yeah, I hate to settle, but guys, I'll be honest, I'll take half of a 10 ,000 % return this year, wouldn't you? Not bad at all. So, you know, Travis, it's funny because I'm always wrong, but I was really curious how this week would go. And I was kind of worried. I was worried that there were a lot of positions leading into the end of the year that were window dressing. Because we've talked about all of these walls of worry.

1:39And I'm thinking that some of these money managers just want to have these hot companies in their portfolio on December 31st. And then there might be some trimming of the sails on January 5th. And boy, was I wrong. We just took off. I'll say, though, there's still a ton to worry about. There's always a lot to worry about. To me, the biggest thing I'm looking at for 2026 is there is this critical mass of spenders who are continuing to keep the economy going. I think things are still looking brighter on Wall Street. Do you mean that from a consumer standpoint, or are you talking about the AI spenders?

2:18No, no, no. AI spending is just kind of, in a way, is fueled by consumers. Because if any of these advertising companies just make all the money in the world off of advertising, if you really saw a pullback there, then they would have to rethink. But I'm talking about Main Street. I'm talking about the fact that just, you know, sales numbers keep coming in. There is, we talk about, you know, K-shaped or like as if it's two groups. Really, it's just there's everybody's kind of making decisions based on their own financial position. Right now, we have a critical mass of people who are business as usual.

2:52The question for me is, you know, will that critical mass erode? And if so, how much does it erode, how fast, and what that does to the economy. I think that over time, what's going on in the economy has to affect Wall Street, but there's still just enough right in the world to offset all of the things worried about. And so, hey, may it continue. Jason, how are you thinking about the year? Because there is some worry that didn't really seem to impact the markets in 2025, but could that be peaking its head out in 2026? It could be. And I mean, if you look back at 2025, and if you remember, we got off to a little bit of a rough start in March, going into April, we were all having the conversation of like, oh, man, this year can shape up to be a tough one.

3:37All of the tariff talk, we were trying to make sense of exactly how that was going to flow through the economy. And then, lo and behold, the rest of the year turned out quite nicely. And the markets had a great 2025 tariffs notwithstanding. Now, I think we have a couple of things coming down the pipe here in the front half of the year that I think will probably dictate to some degree sort of how things play out in the back half of the year. Now, we heard today that the Supreme Court is not yet going to rule on the way that, you know, the legality regarding how the tariffs are being implemented.

4:08That probably comes out by June. So that'll be an interesting decision there. I think the going money right now is based on some of the opinions that we've heard is that they likely will rule against the way the tariffs are being implemented. So that can have an interesting impact. And then obviously we have a new Fed chief coming in May, I believe it is. And that Fed chief is coming in on a more or less a mandate to try to figure out how to bring rates down. Now, right, Fed chief can't just do that on his or her own. There is a democratic process in play there within the Fed, but they can carry a lot of sway in how those votes ultimately go.

4:43So if we start to see rates come back down in the back half of the year, maybe that loosens up the housing market a little bit. Maybe that gets consumers feeling a little bit better about things, and maybe the good times continue. Well, we also heard that President Trump has, I think, instructed Fannie and Freddie to buy$200 billion worth of mortgage-backed securities. with the idea that that should bring rates down. But Jason, is that the kind of, this is always, seems like a hard question. We all want more affordable housing. We all want lower rates, but markets work the way that markets work for a reason.

5:20And these long mortgage rates in particular, and those are driven largely by the 10-year, are not necessarily responding to what politicians want. They're responding to what are the risks in the market? What's going on with currencies? What's going on with the economy? And those rates have, the 10-year in particular, has not come down at the rate that I think that a lot of people anticipated late in 2025. I mean, you could even make a scenario where they would go up even if short-term rates go down. How do you think about this mixed bag of rhetoric and then markets that ultimately are going to drive what's going to go on with our investments?

5:57Well, I think that's a very good observation. And you're right. I mean, just because the Fed brings interest rates down doesn't mean that mortgage rates will follow. Mortgage rates are going to respond more to market forces than anything else. And we saw that play out a little bit toward the end of the year where, you know, rates started to come down and mortgage rates didn't really budge and kind of went up in some cases. And so, I mean, that is sort of an interesting dynamic to it. That kind of remains to be seen how ultimately, number one, how quickly the Fed tries to move. And then, number two, how that shapes all of the other market forces at play here.

6:28That's why, I mean, like you can figure the market is probably baking in a little bit of that at some point right now, but probably not a lot because there's just still so much hanging out there right now. Yeah, the idea of buying mortgage bonds to bring down rates sounds good. And even in the$200,$400 billion number they're talking about, that's back in the envelope, that's maybe good for a quarter percentage point. I don't think, I mean, that's great if it comes down, but I don't think that would be how homebuyers are holding out for a 25 basis point drop in mortgage. prices. So, you know, you know, there's only so much you can do.

7:02Like you said, Travis, I think short term rates, especially the topic we'll get to later, but, you know, maybe increasing government spending and what it means to the budget, that's going to impact long term rates a lot more than anything the Fed tries to do. All of this, it's great in theory, it's hard to pull off in practice. And the good news is, is that inertia sometimes works to your favor. You know, again, as long as we can just have enough people feeling good enough to carry on, that will drive the economy. It's just making sure whatever that enough people number is that we keep it over that critical mass or else we've seen what happened.

7:41It's called a recession. Yeah, Lou, you mentioned it. The spending is apparently going to go up and defense was really the topic this week. President Trump said that he wants to increase defense spending from about a trillion dollars to a trillion and a half dollars. That seems phenomenal for defense stocks. The challenge is, on the flip side, he also said that he was going to be restricting buybacks and paying dividends and also even how much executives could be paid, quote, until such a time problems are rectified. He gave some examples of what those problems are. But, Lou, what in the world is going on?

8:18What is heads? What's tails in the defense space? Because this seems like it's incredibly complicated to follow right now. Yeah, yeah. What's going on, if only anyone knew? I mean, I think it's important to the focus on what we do know. It's a big difference between making declaration and setting policy. I am skeptical of both that$1.5 trillion number and some of the things we're talking about, like holding back the restrictions in terms of just as blanket statements. I do think if you filter it all out, what I hear is defense spending is going to increase. And that should be long-term bullish for the sector.

8:56I'll note that a couple of things like that. That$1.5 trillion number, so much of the Pentagon budget is soldier salaries, healthcare, support services. Don't just do a like-for-like. Also, on big programs, it could take five, 10 years for it to hit the coffers. So, I'm always nervous when these stocks like go to the moon on numbers like this. But yeah, there's - And this follows increased spending in some countries in Europe as well. This is not just a US story. Yeah, yeah. And that's kind of the funny thing about the restrictions, you know, like how you would do that. And also the biggest problem the Pentagon faces right now is having, we let the industry consolidate after the Cold War ended.

9:35And right now the Pentagon is struggling to get enough qualified bidders for their big programs to make sure they have innovation, competition, all those things we love. If you ratchet up the risk, especially in speculative forward-looking programs where cost overruns seem to happen, I don't know if you're going to increase the number of bidders that are going in for this. It's to be careful what you wish for. My bet, as someone who has a lot of defense stocks, is that the bark will be a lot worse than the bite on that. That$1.5 trillion number won't really translate the way we hoped it did, But directionally, we are moving in a way that should be bullish for the whole sector.

10:19Jason, what do you think? Yeah, well, I feel like we could amend that old saying, right? Death and taxes. It could be death, taxes, and defense spending, because defense spending is as sure as the sun's coming up. And I certainly understand that. And I wonder, in regard to limiting buybacks and dividends, I mean, I'm no lawyer, but I'm not even sure to what extent he can actually go through with that. Now, if he's talking about doing it by saying, well, if you don't do this, then we'll take away your business. I don't know. Good luck with that. Those contracts are set pretty solidly. And there's not like this huge pool of providers that can just go in there and take that place.

10:56But it's also, it's not like these companies are spending absurd amounts on buybacks, for example. I mean, I'm looking at just over the last, right, since 2020, Raytheon repurchased maybe$20 billion in shares. Share count's at 11%. Lockheed has repurchased more than that. Share count's down about 17%. We saw General Dynamics, they've repurchased around$7.5 billion. Count's down 5.5%. Northrop, a bit over 10 billion. Their count is down just over 14%. So that's good stuff, right? We like to see when companies are repurchasing shares that the share count is actually coming down. These are massive businesses that make a lot of money.

11:33So if he's just trying to stoke them a little bit to say like, hey, we want you to do more and do it faster. I mean, listen, you know, I'm sure that there could be probably some efficiency squeezed out of that process. But I would imagine, like Lou said, probably the bark is a bit more worse than the bite in this case. You know, it's funny. You can write this as narrow as you want, so maybe they can do it. But you know who is a huge Pentagon contractor? Alphabet. Amazon. Yeah. United Healthcare gets about 40 % of their revenue from the government. Now, a lot of that, a big part of that is Medicare.

12:07But TRICARE, which is what our military uses for healthcare, runs through private providers. There's just a quagmire here if you really tried to go here. And again, just to say, I'm watching it. I do think it's definitely gotten the attention, I think, of defense contractors, and they're watching closely. But if it happens, I think it's a short-term thing. and I do worry about the ramifications for just bidding on future projects, innovations, all those things you're trying to solve for. My hunch is you figure out pretty quickly that the unintended consequences might be worse than whatever you solve by, I don't know, lighting a fire under them to work harder.

12:53Yes. Sometimes these short-term discounts based on posts online are ultimately buying opportunities for investors. We'll see how this one plays out. But when we come back, we're going to talk about Alphabet becoming the second most valuable company in the world. You're listening to Motley Fullman. Hey, ich bin der Sparfuchs von Sparsim.de. Du bist verliebt in dein Smartphone, aber dein aktueller Handy-Tarif ist eher so toxische Beziehung? Dann hab ich was für dich. 60 GB 5G im Vodafone-Netz für nur 9 ,99 Euro im Monat. Mit 50 Euro Wechselbonus surfst du umgerechnet 5 Monate lang gratis. Green Flag Alarm.

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14:00company? What are you thinking? I think it's something in the sense that for a few years now, Alphabet was kind of, you know, taking it on the chin in regard to what they were doing in AI and like chat GPT and open AI basically taking over the market there. And lo and behold, it turns out that Alphabet was investing all along and is actually utilizing AI to make their business better. And if you look at the performance of Alphabet versus Apple, for example, just over the last one, three, and five years. Alphabet's outperformance is just kind of breathtaking, honestly. But why is that, right? I think it's for a number of reasons.

14:36I mean, it's the global mobile operating system of choice, right? The dominance on a global scale. Cloud hit the inflection point. They've got clear leadership in the AI opportunity to date. Remember, Apple is going to be leaning on Alphabet's AI technology, right? We haven't heard really anything from Apple other than Apple AI. And I have an iPhone, Travis, I don't even I know what that means, man. But I think it is, you know, one thing that really stands out to me also is you look at the leadership part of the equation here. Sergey coming back to play a big role within the company at Alphabet.

15:10And you've got - The interviews about that, by the way, were fascinating. That he was just kind of bored. Is that even spiraling? Just found this so fascinating from an intellectual perspective that that may have been a trillion dollar boredom in a coffee shop. Very well could have been. And I mean, I think getting him back and active is encouraging. And by the same token, you know, we're hearing more and more talk about Tim Cook and how much longer he's going to be serving his role at Apple. And then, of course, if he steps aside and he's done a tremendous job, make no mistake, I have all the respect in the world for him.

15:44But that is a big leadership boy that they're going to need to fill. Whereas there's just a lot more certainty regarding Alphabet today. The other thing to just bring into this, because I always find Apple's numbers fascinating to look at. Over the past year, they have$109 billion in services revenue,$112 billion in net income. So that services revenue, very, very high margin. A lot of that services revenue, somewhere between$20 and$30 billion of basically pure profit, comes from Alphabet. So Alphabet is also feeding the company that it just passed. But, Lou, what do you think? Is NVIDIA next?

16:23Is this going to be a run that continues for Alphabet? Because, like Jason said, they do seem to have a lot of momentum right now. Gosh, is NVIDIA next? Who knows? I mean, we were talking about this with Emily the other day. We don't tend to have too long where one company is on top, so maybe. But looking at Apple and Alphabet, the comparison, as investors, obviously, what we care about most is what from here. And as Jason said, the leadership is more stable at Alphabet, just with rumors. I feel like if we were doing strengths and weaknesses on the two companies, it would almost be mirror images of each other.

17:04At Apple, they have this solid core, pardon the pun. They have that installed base that is going to buy from them and is going to refresh over time. But the question over and over again, whether it's the car or the TV or whatever else, is what from here? What should we be excited about that's forward and wow? On Alphabet, the question is about the core. It's still about what AI will do to search and how they adjust to that. But there is just so much potential from Waymo to AI to so many other things of just what the future could be. It almost feels like a value stock and a growth stock, maybe.

17:45I mean, I hate to do that to Apple, but it does feel like that these are just two companies that are almost mirror opposites of each other in terms of we're from here based on what we know. Yeah. The other thing that's interesting with Alphabet is they have such a big investment arm that when you look at some of these hot companies, not OpenAI, but Anthropic, SpaceX, who's the biggest shareholder or one of the biggest shareholders? It almost always ends up being Alphabet. it. Yeah. Yeah. I mean, I think that's a great point. And you know, the luxury that Alphabet has over something like an open AI, let's not forget just massive profitability, massive profit.

18:22I mean, open AI, it's just not clear, right? Exactly how, how well they're going to be able to monetize that, that business in the coming years. Well, there you get to it. The business model too, seems much clearer as we look at everything that's going on in artificial intelligence. If you have to start to ask yourself, how much are we going to charge for this? Right. There's I mean, maybe somebody values it at five hundred dollars a month, but the next person values it at zero because I'm just playing around and doing things with my kids. Whereas, you know, Alphabet can build this ad model around this.

18:54Yeah, I think the I think the prices that these companies are going to be able to charge for their A.I. offerings for consumers is race. It's a race not to the bottom, but it's a race going lower. right? And I mean, Alphabet right now, like, Gemini is terrific. I don't pay for Gemini, but I use it frequently. And I mean, you know, I don't pay a penny for it. Apple over the years has gotten so much credit for their ability to build based on the closed garden. And it's almost like a mindset of the company. But Travis, as you talk about like Google spreading its wings and everything they do, wouldn't it be weird if in the long run, what really mattered was like spreading out actually for the win?

19:30We'll be back in a moment. You're listening to Motley Fool Monday. With you tonight, I'll take you on a moonlight. Every Sunday, we get together to talk about the week's tech news on This Week in Tech. Hi, this is Leo Laporte. I hope you'll join us for this week's Twit. We're covering CES. It was an amazing show. Jennifer Pattison-Tui covers home automation for The Verge. Jason Heiner covers AI for The Deep View. And Father Robert Ballasier, the digital Jesuit, has his top five picks. Plus, watch out for falling robots. There were a few of them. I tried to reach, as it came towards me, my instinct was to try and help it, you know, and stop it.

20:13And I put my hand out. Oh my God. It's heavy. You're a humanoidist, because if that was not a humanoid robot, you wouldn't have tried to catch it. This week, it's TWIT and our CES coverage. You'll find it on our website, twit.tv, or wherever you get your podcasts. Fly me to the moon. Let me play among the stars Welcome back to Motley Fool Money. In this segment, we usually like to have a little bit of fun, and I want to talk about some of the hot topics and big opportunities that we have to, maybe these are 100x, at least 10x opportunities for investors over the next 10, 20, 30 years. These are hopefully the things that we're going to be talking about as my kids get a little bit older.

20:57That's moonshots and moon flops. I want to know what Jason and Lou think about some of these new industries and companies. And Lou, let's start with EV tolls. First of all, for people who are not familiar, can you just give us an elevator pitch on what these companies are and who the leaders are, what we should look for in 2026? So they want to call them flying cars. But if you watch the Jetsons, you're going to be really disappointed. These are basically sort of airplane helicopter hybrids. They can take a vertical takeoff landing like helicopters, but they have the stability of airplanes. So it's kind of the total addressable market, at least for now, is everything a helicopter would do if helicopters were safer.

21:37Joby and Archer Aviation are both going to win certification this year. So these are the big names to watch. Do we have a timeline on that, by the way? I'm going to say maybe we'll hear something first quarter, if not first half from one of them. Probably Joby first. In terms of moonshots or moonflops, I do think that as a design, this is going to revolutionize what we use helicopters for. But, Travis, helicopters are a pretty small industry, and the stocks are very excited. I fear we're going to have a hard lesson on when there's actually revenues, expenses, manufacturing, when you find out that it actually costs money to build aircraft, too.

22:18I am more excited about, I think, the technology and the use cases than I am the stocks going to the moon from here. What do you think the right business model is going to be for these companies? We've talked a lot about air taxis plugging into networks like Uber. Is that going to be ultimately what they do is they own these aircraft and then fly them around and make$20,$50,$100 per person per flight? or are they just going to end up selling these to a bunch of other companies who end up operating? Well, the answer is both. And depending on the company, what they're planning on doing. Look, traditionally, Boeing doesn't.

22:59In fact, by law, Boeing can't run an airline. Very long story, but Boeing started United Airlines and then had to break it up. So, we don't normally have that model. This is somewhere in the middle. I think most of the market is going to be third-party operators over time, but there is at least some of them are attempting to run their own services. Jason, are you excited to potentially fly in an EV toll, let's say, later this decade? Not particularly, but maybe. Not an early adopter. Well, I'm an early adopter when it comes to things that aren't really putting my life at risk. And this technology certainly exists.

23:39I think it's really cool. I think it's hard to see it probably gaining widespread adoption in the near term. But like you said, we watch as our kids grow up, all of the things that change as they get older. And I could see this becoming a market. And I think more of an Uber-style market would make sense to me in that regard. I think it was just interesting to note Archer played its hand very well at CES this year, They're announcing a new partnership with NVIDIA to integrate the IGX Thor platform into its aircraft. So anytime, you know, the companies are just champing at the bit to announce a partnership with NVIDIA.

24:16And so Archer got that done this year. That's encouraging news for sure. If any of these companies want us to do a live show and do some demos, I don't know. Maybe I could get Lou to go to that one. I don't know if Jason... It's right around the corner from me. Archer's building. I'll just watch and smile politely. let's talk a little bit about space because this has gotten a lot of attention over the past year you have rocket lab you have ast space mobile you potentially have the ipo of spacex lou what's a what's a moonshot worth paying attention to what is potentially a moon flop i i'm grumpy i'm a grumpy old man about all of this and because of one thing it's a concept called latency and latency is basically the idea that if you're sending a signal from space versus ascending it from a tower around the corner, you are never going to win in space.