What we think will happen with Nvidia, Alphabet, small caps, oil prices and the direction equities will take
This year I tried to hide from my editor, as I knew she would be looking for my annual predictions column. You see, after going five-for-five in my 2024 predictions, I knew a follow-up was going to be tough. But my worry was not really justified. With a bit of “semantics,” we at 5i Research did OK on our 2025 predictions. Before moving to 2026 guesses (because that’s what any prediction really is), let’s review 2025’s performance.
In our December 11, 2024, column, we predicted that a) United States President Donald Trump will be good for the stock market; b) small caps will do “better;” c) the Canadian dollar will lag the U.S. dollar; d) the artificial intelligence sector will stay strong and the U.S. will lead; e) bitcoin will do well and hit a new high.
We are going to give ourselves 3.25 out of five this year, with some nuances giving us a small advantage in scoring.
First, on Trump, love him or hate him, the U.S. market, as measured by the S&P 500 index, has done well, and has risen by about 16 per cent this year. Barring a complete collapse in the last stretch of the year, we get a point here.
On our small cap prediction, we said last year small caps would do “better.” It may be close, but in 2024 the U.S. Russell 2000 small cap index rose 10.02 per cent. Right now, it’s up about 13 per cent. However, small caps in 2025 once again lagged the large caps, and our prediction last year really thought they would beat large caps, but “better” is still “better.” We will give ourselves just three-quarters of a point here, due to semantics.
Third, we get a total zero on our 2025 Canadian dollar prediction. Our dollar so far this year is up about four per cent versus the U.S. dollar.
Fourth, we get a point on our AI call. Despite year-end gyrations, AI did very well this year, and most observers would agree that the U.S. continues to lead the sector.
Finally, on our bitcoin call, semantics gets us a half point. Bitcoin is down about seven per cent this year, but we specifically called for a new high in 2025, and bitcoin hit its all-time high of US$126,296 in early October.
So, with trepidation, as we know predictions are a mug’s game, let’s move to our 2026 calls.
Alphabet will surpass Nvidia as the world’s largest company
We are not calling for the demise of Nvidia Corp., the current AI star. However Alphabet Inc. has exposure to AI, but also to many other high-growth areas such as cloud computing, quantum computing, YouTube, Waymo, SpaceX and so on. Nvidia, despite its attractions, is still essentially tied completely to AI. Alphabet shares rose about 60 per cent so far this year and Nvidia is up about 25-30 per cent. Nvidia’s market cap is about US$4.3 trillion, and Alphabet is at about US$3.7 trillion. Alphabet has the momentum, and it won’t take much to close this gap. Apple, currently at about US$4.0 trillion market capitalization, and up about 10 per cent this year, could mess up this prediction if it does well. But we are going to stick with Alphabet ending 2026 in first place.
Gold will continue to move higher
What a year 2025 was for gold and gold stocks. The TSX materials sector is up about 93 per cent so far this year. Gold itself is up about 66 per cent. We believe in momentum, and as interest rates fall globally and worldwide currency debasement continues, gold has the potential to keep moving. Gold is a relatively small asset class, so it doesn’t take much of a money shift to see it move higher. We would not expect the same degree of returns as this year, but we still think gold will move higher in 2026.
Stock markets will do well, but not as well as this year
After three straight years of gains, and with gains in five of the past six years, this is probably our scariest guess. But we are actually taking a contrarian view here. “Everyone,” it seems, is worried about a market correction. Talk of an AI bubble is everywhere. Investors worry about deficits, high margin debt, valuations, war, job numbers, housing — you name it. But if we look at the two things that really count, being corporate earnings and interest rates, things look better. Corporate earnings are rising, and the London Stock Exchange Group (LSEG ) estimates 14.1 per cent S&P 500 earnings growth next year. Interest rates have already started to decline and more declines (at least one) are expected in 2026. This combination should be good for the stock market in both Canada and the U.S. (fingers crossed).
Small caps will do better, and beat large caps
What the heck, we are going to be more specific for our 2026 prediction. But come on, one day small caps will shine. Small cap stocks, by some estimates, have underperformed large cap stocks for about 14 years. Over the past decade, the S&P 500 has outperformed the Russell 2000 by about 150 percentage points, with large caps continuing to lead through 2025, as noted. This prediction will be somewhat dependent on the prediction above, though, as it will be tough for small caps to perform if the overall market is weak. So, this is a bit of a double-down guess and if I hide from my editor for longer next year, you’ll know why.
Oil prices will decline
Oil stocks could still rise, but our guess is that the commodity heads a bit lower. With considerations including Trump’s exhortation to “drill, baby, drill,” a possible end to the Ukraine War, possible Venezuelan intervention, a possible economic slowdown, OPEC continuing to increase production and other factors, it is hard to paint a scenario where oil prices would spike up. Some analysts are calling for US$30 a barrel. We know better than to predict an exact price, but our guess is that oil ends the year lower than where it started. Frankly, this one is essentially a coin flip but any prediction, as my 25-year old says about adulting, is “hard.”
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