| DAILY ISSUE My #1 2026 Call: The Mag 7 Trade Breaks VIEW IN BROWSER Hello, Reader. It’s true that the future is inherently unknowable, but that doesn’t mean the past can’t serve as a time-honored teacher. This fact becomes especially relevant every January when I conceive my outlook for the year ahead. Last year serves as a textbook example. In 2025, the markets were shaken by a long list of factors, notably the spring “Liberation Day” and tumultuous trade war… Which caused the S&P 500 to plunge 6%, the Nasdaq Composite to drop 5.8%, and the Dow Jones Industrial Average to plummet 2,231 points in early April – the worst selloff since the start of the Covid-19 pandemic. But then there were also the leaps made in tech and AI, and thanks to these, among other factors, the indices ended the year up 16%, 20%, and 13%, respectively. In short, we are entering 2026 with the knowledge that anything can happen… but I believe there are ample ways to prepare. So, in today’s Smart Money, I’m sharing: - Two of my predictions for the New Year,
- The types of stocks that can protect your portfolio in uncertain times,
- And how to get my full-year outlook.
Let’s jump in… Forecast No. 1: The Magnificent Seven Stocks Will Lose Ground One year ago, I had a cautious outlook for the Mag 7 stocks and thought they would underperform the S&P 500 Index. This rested on two factors: valuation gravity and the rising cost of artificial intelligence leadership. Nevertheless, the Mag 7 were still expanding margins, generating robust free cash flow, and dazzling investors with their AI dominance and grand ambitions. Since then, the storyline has not changed significantly, but it has aged and shifted into a new phase. The combined net cash position of Amazon.com Inc. (AMZN), Microsoft Corp. (MSFT), Apple Inc. (AAPL), Meta Platforms Inc. (META), and Alphabet Inc. ( GOOG) has collapsed from roughly $300 billion in 2017 to less than zero today. On top of that, the five leading “hyperscaler” data center operators – Amazon, Alphabet, Microsoft, Meta, and Oracle Corp. (ORCL) – have invested an astounding $1.5 trillion during the last five years in research and development, plus property, plant, and equipment (i.e., data centers). And the pace of spending is only increasing. 
In other words, the cost of creating competitive AI infrastructure is massive and rising, while the ultimate payoff is becoming less certain and immediate. To be sure, the Mag 7 companies remain dominant, but their valuations amply reflect that dominance. In 2026, the most crowded trade in the market does not need a collapse, a recession, or a crisis to lose money. It merely needs valuations to adjust to a world where the Mag 7 stocks do not produce robust cash flow and fat profit margins as reliably as they did in the past. That world has arrived. Forecast No. 2: The S&P 500 Will Downshift My second forecast for 2026 dovetails with the first one. The S&P 500 will not deliver a fourth straight year of double-digit total returns. Breaking a three-year streak of double-digit returns does not require a bear market. It only requires that the largest stocks stop carrying the rest. If the Mag 7 delivers a flat or losing year — as Forecast No. 1 suggests — the S&P 500 is likely to follow suit. Fortunately, a subpar year for the S&P 500 would not automatically poison the entire investment landscape. Sometimes, when stock market darlings falter, overlooked stocks begin to shine. In other words, capital rotates. From 2000 through 2004, for example, the S&P 500 fell more than 45% peak-to-trough. Yet, during that same period, sectors like energy, insurance, base metals, and precious metals generated double- or triple-digit gains. I’m expecting a similar scenario to begin unfolding in 2026. Now that I’ve shared a few of my forecasts, let’s take a look at how to invest accordingly… How to Invest in 2026 To repeat myself, the future is unknowable, and I share my forecasts for 2026 with that caveat in mind. However, as Mag 7 and other Big Tech companies continue to finance expensive developments in AI, they create a risky investment for those playing the market, especially given the power and influence these stocks hold. So, don’t invite more risk to your portfolio this year. Focus on reward, instead. Before you invest a dime in another overhyped AI stock, I want to tell you about the stocks I call “AI Survivors.” Now, I fully admit that AI Survivors won’t change the world like AI promises to do, but they could change your financial future dramatically. That’s because these are stocks that have proven, successful business models and deliver actual earnings – not promises. They also have human-centric values – not algorithms. In short, AI Survivors are “future-proof” companies, or enterprises that produce physical products or services immune to AI’s destructive power. For example, agriculture or energy companies. Similarly, companies that produce natural resource products like copper, aluminum, or timber should be able to survive the growth of AI technologies… at least for a long time. Our Fry’s Investment Report portfolio is loaded with a variety of these stocks, helping and protecting investors from AI’s disruption, which is only becoming more powerful. If you’re interested in learning more about the potential for tremendous gains in these stocks this year and the specific sectors to follow, click here. And to access my additional 2026 forecasts, learn how to join Fry’s Investment Report today. Regards, | 
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