OCTOBER 26 2025 | By Steven Wieting & David Bailin

Worries, Real Worries, and When to Worry

As we approach the end of 2025, talk of an AI bubble and overvalued equity market have overshadowed the positive outlook for 2026.   S&P 500 year-to-date performance of 15.7% has exacerbated these concerns. Investors wonder: “How long can the good times last?” 

SUMMARY
  • The critical message of the late 1990s and other boom periods (ex. housing in 2007, oil in 2014) is that fundamental weakness sparked eventual collapse.
  • Today’s profitable and unprofitable AI infrastructure equities would fall sharply if AI spending falls. Our assumption is such a drop is not just ahead in 2026.
  • After years of tight lending standards, banks are beginning to ease again. But even with robust “shadow bank lending,” total US business debt has grown just 2.1% in the past year.
  • Signs of excess – even fraud - in narrow parts of the economy does not suggest broad vulnerability.
  • It’s possible that Fed easing, as in 1998, helps drive more reckless risk taking and future economic pain. But even if this doesn’t occur, investors today would benefit from buckets of diversification away from today’s boom assets.
Download in PDF
Insights for the Week Ahead
OUTLOOK 2026

UNPRECEDENTED TIME, EXCEPTIONAL PORTFOLIOS

CIO Group believes recent regional bank selloffs overreact to isolated credit losses—not a systemic collapse. Our Outlook 2026 sees potential for earnings growth ahead. We explore why quality, diversification, and forward-looking positioning matter now more than chasing past performance.

LEARN MORE
CIO_LINKEDIN_Business_Banner_1584x396-px_D
Insight #1

2026 EXPECTATIONS AND PORTFOLIO DESIGN

 

LEARN MORE
Insight #2

IS AI LIKELY TO LEAD TO A REPEAT OF 1999?

 

LEARN MORE
Insight #3

NO BANKING CRISIS – QUITE THE OPPOSITE NOW

LEARN MORE
Insight #4

WHAT TO WORRY ABOUT

 

 

LEARN MORE
Perspective

SELECTIVITY AND DIVERSIFICATION NOW ARE CRITICAL

In our just released Outlook for 2026 we discussed why CIO Group would rarely invest in regional banks or automakers.  Only post-recessionary periods would favor such shares. 

Conversely, we favor sustained investment in technology and its beneficiaries, especially in areas like software and services where the biggest benefits of AI lie ahead and heavy capital investment isn’t a drag on cashflow.  While the Fed easing to address modest weakness in the US labor market could contribute to “irrational exuberance”, our view is that “sustained enthusiasm” is more likely to prevail.

In all circumstances of course, we will be watching for what to worry about in the months and years ahead.

 

Source: Haver Analytics CIO Capital Group LLC is an SEC-registered investment adviser. This material is for informational purposes only and does not constitute investment advice or recommendations. All investing involves risk, including potential loss of principal. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially. Past performance is not indicative of future results. For additional information about CIO Capital Group LLC, see our Form ADV Part 2A at www.adviserinfo.sec.gov.