A mix of geopolitical uncertainty, inflation risks and stretched valuations could weigh on equity performance in 2026, as markets grapple with slowing momentum and concentrated leadership in large technology stocks. Trade tensions and policy uncertainty are also adding to investor caution heading into the new year.
BNN Bloomberg spoke with Lyle Stein, president of Forvest Global Wealth Management, about the biggest risks facing equities in 2026 and how shifts in AI leadership, tariffs and economic growth could shape returns.
- Geopolitical tensions and unresolved global conflicts remain a major overhang for equities, adding uncertainty around trade, policy and economic stability in 2026.
- Inflation is expected to ease later in the year, but tariffs and pricing decisions tied to policy outcomes could delay progress and pressure markets.
- Equity leadership is heavily concentrated in AI-related megacap stocks, increasing the risk of broader market weakness if momentum fades.
- Elevated valuations leave U.S. equities vulnerable to multiple compression, particularly if economic growth or earnings expectations soften.
- Trade and tariff uncertainty, especially around the USMCA and court decisions in the U.S., remains a key risk for Canadian-linked assets.
Read the full transcript below:
ANDREW: Let’s take a look now at 2026 in the markets. We’re joined by Lyle Stein, president of Forvest Global Wealth Management. Lyle, thanks very much for joining us. It’s great to see you, as ever. What are the big themes going to be in 2026, do you think?
LYLE: Well, it’s really interesting, Andy. This past week, instead of reading all the usual research reports, we used our AI tools and asked what the biggest risks to the market are in 2026. The elements that came up at the top of the list were inflation concerns, geopolitical concerns around the world, and then the usual issues like market valuations.
The interesting thing is, when we look at 2026, forecasting markets increasingly means forecasting what’s happening in the world. And that fits into the idea of a K-shaped economy. Those who are doing well are doing really well, while a large portion of people are on the downward slope of that K. The economic recovery has been milquetoast and driven by high earners and asset owners, while there’s still a lot of pain among those who aren’t participating — people without assets, without homes, and those worried about their jobs. All of that is in the mix for 2026.
ANDREW: I suppose richer people tend to own stocks, and they’re feeling rich with markets near record highs.
LYLE: That’s exactly it. The AI boom has been very important for the U.S. economy. We know it’s accounted for about half of economic growth in 2025. But the wealth created by the AI boom has been particularly beneficial for people who own stocks.
If we lose momentum in AI-related stocks — and Nvidia is the poster child there — that could impact consumer spending, which in turn affects the economy. It could also have an impact on ETFs that own Nvidia and other large hyperscalers.
ANDREW: We’ve heard for years that there could be a flight from index funds, which could turn into a self-fulfilling cycle, because index fund redemptions would force selling of those big tech stocks.
LYLE: That could very well be the case. We’re also coming to the end of tax-loss selling. Nobody sold those stocks this year because they didn’t want to crystallize gains. But through 2026, could that hit the market? It’s tough to call.
We can’t forecast whether it will show up through ETF redemptions, but we could see a slow drip out of them. That would be consistent with a general multiple decline in the market, which could be exacerbated by fears of an economic slowdown.
ANDREW: What do portfolio managers tend to do at this time of year? We hear about window dressing. What are the main goals?
LYLE: The number one goal is simply to finish the year on a good note. Window dressing — wanting portfolios to look more like the index and reflect the year’s winners — has been somewhat diminished with the rise of ETF investing. But active managers still don’t want to be too far offside if they’re judged on relative performance.
At our firm, we focus more on absolute performance than relative performance, so we don’t mind taking positions in certain areas of the market and avoiding others. Window dressing mainly applies to index huggers, not active managers focused on total return.
ANDREW: There’s a sense of safety in numbers, a herd instinct among portfolio managers, with many holding the same large stocks.
LYLE: That’s a big risk. The person who’s ahead of the crowd is the one who does best. Once the first seller hits the button, everyone else piles on, and that’s when things get difficult.
When we look at the next one to three years, there’s a clear consensus view. The real question is where that consensus is wrong. Sometimes it’s better to look at the analysts with the highest and lowest estimates on a stock rather than focusing on the consensus number.
ANDREW: What about trade and tariffs? We’re heading into a renegotiation of the North American trade agreement next year, which matters a lot for Canada.
LYLE: It’s particularly important for Canada. We’re already dealing with high tariffs, and if we lose the USMCA, we could face further increases. Canadian-U.S. relations aren’t especially strong right now.
More importantly, we’re expecting a major decision — possibly this year or early next year — from the U.S. Supreme Court on tariffs. Some companies are holding off on raising prices until they get clarity. If tariffs are rolled back, that would likely be a second-half story next year. The uncertainty around tariffs remains very high, and investors need to consider how it affects the specific securities they own, not just broad ETFs.
ANDREW: Canada has avoided the worst of it so far, since goods covered under the USMCA haven’t been tariffed.
LYLE: That’s right, and that’s the risk if the USMCA is torn up. If that happens, Canada could face additional pain. But we should get clarity from the Supreme Court, and the Trump administration has also been signalling what it might do if it loses that case.
ANDREW: Lyle, we’ll leave it there. Lyle Stein, president of Forvest Global Wealth Management. Thanks very much.
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This BNN Bloomberg summary and transcript of the Dec. 17, 2025 interview with Lyle Stein are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
