Tag: AI

Investing in Hype: Understanding Market Volatility in 2026

This June, Facebook (now officially Meta) will shut down Horizon Worlds. You’d be forgiven for not recognizing the name, but it was meant to be the flagship social platform of the “Metaverse” — Mark Zuckerberg’s much-heralded pivot into virtual reality, announced in October 2021 alongside the company’s rebrand.

The original announcement video is still on YouTube. In retrospect, three things stand out about that grand vision of a future that looked suspiciously like Ready Player One:

  1. Nobody came. The Metaverse was a dead mall — sparse, empty, and largely ignored.
  2. It cost $88 billion. In inflation-adjusted terms, more than the Saturn V rocket program, and nearly a third of Apollo.
  3. Financial experts were astonishingly credulous about its prospects.

Consider McKinsey, which estimated the Metaverse could generate up to $5 trillion in value by 2030. This wasn’t an offhand remark — it was supported by a 60-page report laying out the case in detail. They were hardly alone. Companies like Gucci and Disney lined up to invest, eager to establish a virtual brand presence.

Under normal conditions, being this wrong — a roughly 6,350% reversal of value — might prompt some reflection on how we evaluate technological hype. But there has been no reckoning. No serious questioning of the institutions that promoted it, nor any meaningful reassessment of Meta’s valuation, which still hovers around $1.6 trillion.

Instead, the cycle continues. In 2026, we are preparing for a wave of mega IPOs: SpaceX, expected to be valued between $1 trillion and $2 trillion; OpenAI; Anthropic — each priced at levels that assume enormous future success.

At the same time, investors are being asked to absorb the volatility generated by Trump’s war with Iran. Now in its seventh week, the conflict sits in a fragile ceasefire, with peace talks already having broken down. Markets have been repeatedly jolted by pre-market announcements from Trump, aimed at calming investors or pushing down oil prices. They work briefly — until reality reasserts itself and volatility returns.

And beneath it all, the line between investing and gambling continues to blur. You can now bet on almost anything: sports, elections, military strikes, even market movements. If you prefer your speculation dressed up as investment, there are cryptocurrencies — from meme coins promoted by social media personalities to those endorsed by political leaders.

Meanwhile, the Artemis II mission has just returned from the far side of the moon — the closest humans have come since the 1970s. It is a genuine technological achievement, built on decades of expertise and engineering discipline. Yet even here, the narrative is distorted. Elon Musk has publicly dismissed the program, despite ongoing struggles to safely launch his own super-heavy rocket. His public persona is built on compressing timelines, dismissing constraints, and projecting certainty where experts see complexity.

SpaceX, for all its accomplishments, is profitable primarily because of Starlink. Its core rocket business is not, nor are its adjacent ventures in AI, reportedly losing close to $1 billion per month. And yet, it is among the companies expected to command a trillion-dollar valuation.

This is the environment we are operating in: one of extraordinary hype. The current focal point is artificial intelligence — a technology with real promise, and real risks, that is increasingly being framed not as a tool, but as a wholesale replacement for human labor.

In practice, the results are far more mixed. AI systems are being deployed widely, and while there are genuine successes, they often fall short in complex, real-world applications. Signs are emerging that progress at the frontier may be slowing, and that integration into everyday workflows is proving more difficult than expected.

At the same time, the risks are becoming harder to ignore. Reports suggest that a recent Anthropic model was able to contact its researcher despite being tested in isolation, and identified tens of thousands of software vulnerabilities, prompting emergency responses across major institutions. Elsewhere, an AI system in China reportedly began mining cryptocurrency without explicit instruction — an example of emergent behaviour that remains poorly understood.

From a risk-reward perspective, the disconnect is striking. Investors are being asked to discount meaningful downside — including the possibility of systems behaving unpredictably — while accepting highly optimistic assumptions about their ability to replace large portions of the workforce. Structural issues, such as hallucinations, remain unresolved and may limit the technology’s long-term utility.

And yet the dominant narrative persists: spend aggressively, build relentlessly, and assume the future will justify the cost.

It’s no surprise that many people feel uneasy about the pace of change. Not long ago, the internet was slow and confined to desktops. Smartphones only became widespread after 2008, and within a few years had been refined into engines of constant engagement, capturing attention through endless notifications. Today, we are immersed in a media environment optimized for immediacy, amplification, and emotional response.

For investors, this creates a dangerous dynamic. The fear of missing out is immediate and visceral; the benefits of skepticism are slow and often invisible. But they are no less real.

2026 will likely bring a steady stream of dramatic headlines — each demanding attention, each tempting reaction. The discipline required is simple, but not easy: remain calm, examine the facts, and resist the urge to act on noise.

We are living in an era of exceptional credulity, reinforced by opaque flows of capital and influence. The responsibility, then, falls on investors themselves — to think critically, to question confidently, and to resist the pull of narratives designed to benefit from their belief.

Aligned Capital Partners Inc. (“ACPI”) is a full-service investment dealer and a member of the Canadian Investor Protection Fund (“CIPF”) and the Canadian Investment Regulatory Organization (“CIRO”).  Investment services are provided through Walker Wealth Management, an approved trade name of ACPI.  Only investment-related products and services are offered through ACPI/Walker Wealth Management and covered by the CIPF. Financial planning services are provided through Walker Wealth Management. Walker Wealth Management is an independent company separate and distinct from ACPI/Walker Wealth Management.

by The Walker Report of Walker Wealth Management and Aligned Capital Partners Inc

A Watched Pot With A Frog In It

Back in the spring, markets reeled after Trump announced a new round of unilateral tariffs. The April 2nd announcement triggered a week of panic selling until the administration promised a temporary 90-day pause to pursue trade negotiations. Nine months later, the U.S. now has the highest tariff levels in over a century, economic data is showing signs of weakening, and discussions of a market bubble are widespread. Why, then, is the stock market still so high?

The most immediate reason is the concentration of market leadership. The “Magnificent Seven” tech giants now account for more than 35% of the S&P 500, while the top ten companies make up nearly 40%. The gap between the S&P 500 and its equal-weighted equivalent is just shy of 10%, while the Magnificent Seven themselves have delivered a combined return of roughly 27.6% year-to-date. The comparison to the dot-com era is easy to make, but the fundamental difference is profitability: Apple, Google, Microsoft, Amazon, Meta and others continue to generate substantial earnings and hold enormous balance-sheet reserves. This profitability has helped anchor market confidence.

Figure 1 Growth of the Magnificent Seven as a part of  the S&P 500

Another factor is the lag in how economic data reflects policy changes. Despite the risks tariffs pose, the full impact has not yet shown up in backward-looking data like GDP or employment reports. Investors expecting an immediate shock instead found resilient quarterly numbers, reinforcing confidence rather than shaking it.

Figure 2 Effective tariff rates over time, from the Yale Budget Lab

There is also a deeper structural issue: the increasing concentration of economic power and spending. As wealth inequality widens, a large share of U.S. households are contributing less to measured economic activity. Recent consumer expenditure data suggests that the top 10% of households now account for roughly 50% of all consumer spending, while the bottom 60% contribute less than 20%. This means that economic stress among the majority of households may not meaningfully register in the headline data that markets rely on. Meanwhile, AI-related capital investment makes up a growing share of the remainder of measured economic activity.

Figure 3 Widening wealth disparities between households and consumer spending

This combination — delayed data effects, high concentration of consumption, and sustained AI investment — has helped keep investor sentiment resilient, even as negative signals accumulate beneath the surface. It has also masked the risks of allowing speculative dynamics to develop largely unchecked.

Figure 4 Growth of Personal Consumption as a percentage of GDP

Concerns about an AI bubble are growing. Estimates of total AI investment now exceed $3 trillion when considering capital expenditures, valuations, and related infrastructure spending. Commercial use cases outside of a few sectors remain limited. Some firms have begun participating in “circular funding arrangements,” where they invest in each other’s AI initiatives to reinforce perceived valuations. Even industry leaders acknowledge the speculative environment: Sam Altman, the CEO of Open AI has said there is likely a bubble, while Jeff Bezos has called this a “good bubble” that will still produce transformative breakthroughs.

History suggests that speculative cycles are remarkably resistant to logic. They often convert skeptics into participants, including professional money managers who join in under client pressure. Market bubbles resemble the proverbial frog in a pot: the danger rises slowly enough to dull caution.

Yet they also resemble the “watched pot” that never seems to boil. As long as new capital continues to flow into AI-linked investments, momentum can persist. Predicting the end of a bubble is famously difficult — markets can remain irrational longer than investors can remain solvent.

So what should investors do? Awareness of rising risk is the starting point. We may not be able to time the end of the AI boom, but we can examine investor behavior for signs of speculative excess.

Consider Tesla. After the election, the stock surged nearly 98% in six weeks on enthusiasm linked to political alignment and narrative momentum. Since then, sales have weakened, profitability has declined, and competition has intensified — yet the stock remains 10% above its level on inauguration day and has more than doubled off its lows. Tesla’s valuation continues to reflect belief in future breakthroughs rather than current operational performance. It is a clear illustration of narrative overpowering fundamentals — a hallmark of speculative markets.

Figure 6 Tesla stock performance from November 4, 2024 to November 4, 2025

If this environment feels uncomfortable, it may be time to review portfolio risk exposure. Reducing equity risk comes with trade-offs — especially missing out on momentum-driven gains — but clarity on long-term goals can help prevent emotionally driven decision making.

Market manias are difficult to avoid and even harder to detach from when others are benefiting. The antidote is a disciplined investment plan that emphasizes long-term objectives over short-term excitement. In a world where the water may be warming around us, it is better to be a watcher than the frog.

by The Walker Report of Walker Wealth Management and Aligned Capital Partners Inc