Revenue vs depreciation problem for hyperscalers

In this episode of Excess Returns, Jack Forehand and Matt Zeigler dig into forecast season by reviewing and synthesizing insights from 22 major Wall Street and institutional market outlooks. Rather than treating year-end forecasts as precise predictions, the conversation uses them as a framework for understanding consensus views, hidden assumptions, and where the real risks and surprises for 2026 may lie. The discussion spans macroeconomic conditions, AI-driven growth, earnings expectations, valuation risks, and the growing divergence beneath headline market performance, helping investors think more clearly about the range of outcomes ahead.

Main topics covered
• Why year-end market forecasts are still useful despite being consistently wrong on exact targets
• What consensus forecasts reveal about expectations for economic growth in 2026
• The role of artificial intelligence in driving earnings, productivity, and capital spending
• Reacceleration versus late-cycle slowdown and how forecasters are split on the outlook
• Inflation expectations, interest rates, and the likelihood of fewer Fed cuts than expected
• Fiscal policy, deficits, and the growing role of government stimulus
• Energy constraints, data centers, and the physical limits of the AI buildout
• Profit margin expansion versus revenue growth and why this matters for valuations
• S&P 500 price targets, earnings assumptions, and where optimism and caution diverge
• The dominance of the Magnificent Seven and the debate over market and earnings broadening
• Risks beneath the surface, including margin compression, valuation resets, and sector rotation
• What investors can learn by comparing the most bullish and most bearish forecasts

Timestamps
00:00 Forecast season and why reading outlooks still matters
03:00 Why precise market targets are misleading but informative
05:30 Using consensus forecasts to identify risks and surprises
08:30 AI, economic reacceleration, and productivity expectations
13:00 Recession risks, stagflation fears, and late-cycle dynamics
17:00 Inflation outlook and why it may reemerge later in the year
22:00 Fed policy, rate cuts, and rising internal dissent
26:00 Fiscal stimulus, deficits, and long-term consequences
28:00 AI infrastructure, energy constraints, and data centers
35:00 AI diffusion and real-world productivity gains
39:00 S&P 500 targets, earnings growth, and valuation assumptions
43:00 Profit margins, mean reversion, and long-term risks
47:00 Magnificent Seven earnings versus the rest of the market
52:00 Market broadening, international stocks, and diversification
56:00 Key takeaways for investors heading into 2026