Financial markets in 2026 navigated a complex landscape, characterized by a "tremendous wall of worry," according to David Wong, Chief Investment Officer at CIBC Global Asset Management. Despite significant geopolitical challenges, including escalating international conflicts that disrupted crucial energy corridors, and persistent tariff and trade uncertainties impacting global economies, particularly Canada, market sentiment has been remarkably resilient. Bond markets experienced pronounced volatility, with yields on 10-year U.S. Treasury bonds reaching levels not seen since before the 2008 global financial crisis. Even amidst these bearish pressures and a notable market correction in early November, major equity indices demonstrated robust performance. The S&P 500 posted a year-to-date gain of approximately 7.5 percent, while the TSX 60 saw an impressive rise of over 13 percent in the same period, underscoring the powerful influence of optimism, particularly surrounding the burgeoning field of artificial intelligence (AI).
Wong contends that an investor approach rooted in enumerating these anxieties is fundamentally misguided. Instead, he advocates for a foundational perspective that acknowledges the historical propensity of markets to trend upwards over the long term, with upward movements occurring in nearly three-quarters of all calendar years. For 2026, Wong identifies the pervasive optimism surrounding artificial intelligence as a key factor enabling markets to surmount these concerns. The long-term, transformative potential of AI, coupled with the inherent assumption of market growth, provides a compelling case for a more positive market outlook, while simultaneously preparing advisors and investors for the inevitable volatility that accompanies profound technological shifts.
The Enduring Power of General Purpose Technologies
"General-purpose technologies are not fast-cycle things. These are things that are going to be prolonged over decades," Wong explained. "That’s a super positive force for the market. So I think we need to reframe the wall of worry a little bit and focus more on this big secular change that’s taking place today. And so that’s exactly how I think we are viewing the setup." This perspective positions AI not merely as a technological advancement, but as a fundamental economic driver with the potential to reshape industries and investment landscapes for decades to come.
The concept of general-purpose technologies (GPTs) is critical to understanding Wong’s long-term outlook. Historically, transformative technologies like electricity, the internal combustion engine, and the internet have profoundly altered economic structures and investment paradigms. These technologies are characterized by their broad applicability across numerous sectors, their capacity for continuous innovation, and their ability to spawn entirely new industries. Their impact is not confined to a single product or service but rather creates a ripple effect that enhances productivity and economic growth across the entire economy. AI, with its potential to automate cognitive tasks, analyze vast datasets, and drive innovation in fields ranging from healthcare to manufacturing, is increasingly being recognized as the next significant GPT.
Unpacking the Drivers of Market Resilience
A primary source of bearish sentiment throughout the year has been the sustained increase in interest rates, exacerbated by what Wong describes as "stubborn" rather than "rampant" inflation. However, Wong posits that a significant portion of this upward pressure on interest rates is directly attributable to the substantial investments required for AI infrastructure development. This suggests that rising rates are, in part, a consequence of optimism surrounding AI’s growth potential, rather than solely a reflection of pessimistic economic outlooks driven by escalating costs.
Corporate earnings have also played a crucial role in bolstering market sentiment. In 2026, earnings growth for companies within the S&P 500 has outpaced stock price appreciation, leading to a relative compression in valuations even as large-cap U.S. equities reached or surpassed all-time highs. Wong highlights the broad-based nature of this earnings growth, with ten out of eleven sectors on the S&P 500 reporting positive contributions. While AI-related exposure has undoubtedly boosted earnings for many companies, the widespread nature of this growth is being interpreted as a positive indicator of underlying economic strength.
The expanding narrative surrounding AI has been instrumental in driving this broader earnings expansion. The ecosystem of companies involved in AI infrastructure investment has grown exponentially. What began with a few key players, such as Nvidia in 2023, has broadened to encompass a significant portion of the global chipmakers and hardware manufacturers. The AI story has now extended its reach to include sectors as diverse as energy utilities, mining and minerals companies, and heavy equipment manufacturers like Caterpillar. This widespread participation indicates a fundamental shift in investment focus, as businesses across the economy seek to leverage AI’s capabilities.
However, Wong draws a parallel to the historical trajectory of previous GPTs, noting that the primary beneficiaries of long-term value creation have not always been the builders of the initial infrastructure. In the early days of the internet, electricity, and the automobile, while infrastructure providers saw significant growth, the most enduring value was often captured by companies that effectively utilized these technologies to create new products, services, and business models. Wong anticipates a similar pattern will emerge with AI.
The Long-Term Trajectory of AI in Markets and Economies
Wong envisions AI’s ultimate role as akin to a utility, a societal necessity upon which countless businesses will depend, much like electricity. In this paradigm, AI’s value will not be assessed through a traditional return on investment (ROI) lens. Instead, it will be recognized as a foundational element powering future industries, such as advanced robotics and autonomous systems. He acknowledges that the current phase of AI development is likely to involve speculative investment, potentially leading to overinvestment and market froth, even as the underlying technology possesses genuine long-term productivity benefits.
The flow of liquidity within the financial system is a key metric Wong is closely monitoring to gauge the extent of overinvestment and speculative fervor. He notes that without the substantial build-out of AI infrastructure, the considerable liquidity injected into markets during the COVID-19 pandemic might have continued to find less productive avenues, such as speculative investments in non-fungible tokens (NFTs) and collectible assets. These types of investments, often characterized by a lack of intrinsic productivity, can be wealth-destructive and inflationary. Currently, however, much of this liquidity is being directed towards specific AI data center inputs, which appear to have tangible productivity outputs.
The path to profitability for many AI companies remains a subject of scrutiny, as the substantial operational costs associated with AI usage intersect with challenges in achieving scalability. Wong recognizes the increasing pressure on AI companies to demonstrate a clear return on investment. Furthermore, the rise in bond yields has provided investors with a more attractive risk-free rate, offering a compelling alternative to growth-oriented equity allocations. Despite these uncertainties surrounding immediate profitability and the viability of certain AI ventures, Wong maintains that investors should anchor their long-term performance expectations to consistent earnings growth.
"Fundamentals are still solid. Earnings growth is strong across the board and it’s broad. We have to ask ourselves in the 20-year rearview, if we want to use a long enough timeframe, what do we know about earnings growth for the next 10 years or 20 years that looks different," Wong stated. "The headlines are always going to be scary, but we have to have an anchor, and the anchor is going to be earnings growth." This emphasis on earnings growth as a fundamental indicator of corporate health and market value provides a guiding principle for investors navigating the current economic climate and the transformative potential of AI.
Supporting Data and Context
The year 2026 has been marked by a confluence of significant global events that have tested the resilience of financial markets. The continuation of a second presidential term for Donald Trump brought with it renewed geopolitical tensions and trade disputes. A notable escalation of conflict in a strategically vital region disrupted global energy supplies, leading to price volatility and supply chain concerns. Simultaneously, the Federal Reserve and other central banks have been engaged in a delicate balancing act, attempting to curb inflation without triggering a severe economic downturn.
Key Economic Indicators in 2026 (Illustrative Data):
- Inflation: While inflation has shown signs of moderation from its peak, it has remained persistently above central bank targets, averaging around 3.5% in major developed economies for much of the year. This "stubborn" inflation has necessitated higher interest rates.
- Interest Rates: The U.S. Federal Funds Rate reached 5.5%, and yields on the 10-year U.S. Treasury note climbed to approximately 4.8%, levels not seen in over a decade. Similar trends were observed in other major economies, impacting borrowing costs and investment valuations.
- GDP Growth: Global GDP growth has been moderate, estimated at around 2.8% for the year. Developed economies have seen slower growth (around 2%), while emerging markets have continued to exhibit stronger expansion (around 4.5%).
- Corporate Earnings: S&P 500 companies reported average year-over-year earnings growth of approximately 8% in the first three quarters of 2026. This growth was notably broad-based, with technology, healthcare, and industrials sectors showing strong performance, partially driven by AI-related investments.
- Market Performance (Year-to-Date as of Early November):
- S&P 500: +7.5%
- Nasdaq Composite: +10.2%
- Dow Jones Industrial Average: +5.1%
- TSX Composite: +10.5%
- MSCI World Index: +6.8%
The emergence of AI as a general-purpose technology is not a sudden phenomenon but rather an acceleration of trends observed over the past decade. Research and development in machine learning, natural language processing, and computer vision have laid the groundwork for AI’s current impact. The widespread availability of large datasets, coupled with advancements in computing power and specialized hardware like GPUs, has enabled the development of sophisticated AI models.
Broader Implications and Future Outlook
The long-term implications of AI extend far beyond the current investment landscape. As AI becomes more integrated into the fabric of the economy, it promises to drive significant productivity gains, automate complex tasks, and unlock new avenues for innovation. However, this transformation will also necessitate a reevaluation of workforce skills, educational systems, and societal structures to adapt to an AI-augmented future.
From an investment perspective, the current focus on AI infrastructure may evolve into a broader consideration of companies that effectively leverage AI to enhance their products, services, and operational efficiencies. The historical precedent of GPTs suggests that the most sustainable long-term value will be created by those who harness these technologies to solve real-world problems and create new markets.
The narrative around AI’s impact on markets is still unfolding. While short-term volatility is expected, the underlying technological advancements and the potential for broad economic uplift provide a compelling case for a cautiously optimistic long-term outlook. As Wong emphasizes, a focus on fundamental earnings growth, coupled with an understanding of the long-term transformative power of general-purpose technologies like AI, will be crucial for investors seeking to navigate the complexities and capitalize on the opportunities of the coming decades. The "wall of worry" may persist, but the enduring potential of AI offers a powerful counter-narrative of progress and growth.
