AI, Rates, Housing, and Markets! Tom Ellsworth’s Top Predictions for 2026

10 Predictions for 2026 – A Detailed Analysis

Key Concepts: AI Growth & ROI, Labor Market Reskilling, Federal Reserve Policy, Housing Market, S&P 500 Performance, EV Market Shift, Media Consolidation, Podcast Landscape, Power Constraints for AI, Economic Adjustment/Calibration.

1. AI Growth Slowing – The Power Wall

Tom Ellsworth predicts a slowdown in AI growth in 2026, not due to technological limitations (chips or servers), but due to a “power wall.” This bottleneck stems from the immense power demands of AI data centers. Building these centers requires permits, which are increasingly difficult to obtain, particularly in rural areas concerned about increased energy costs for local consumers. The fundamental issue is a mismatch between energy supply and the rapidly increasing demand from AI, leading to price increases regulated, but still impactful, even with oversight from state energy groups and the Department of Energy. Building new power infrastructure takes time, creating a constraint on AI expansion.

2. The ROI on AI – Corporate Scrutiny

The initial enthusiasm surrounding AI is expected to give way to a demand for demonstrable Return on Investment (ROI). Boards of directors, previously focused on simply using AI, will now require concrete evidence of its benefits. This shift will lead to increased scrutiny of AI projects and headlines questioning the value of AI investments. The focus will move from adoption to tangible results.

3. The Labor Market – Worse Than We Think

Ellsworth anticipates a more challenging labor market than current unemployment figures suggest. The issue isn’t simply a lack of jobs, but a “geographic surplus” and “geographic shortage” of labor coupled with a skills gap. Automation (robots in warehouses, autonomous trucks/delivery) will necessitate “reskilling” initiatives. Headlines will focus on “labor adjustment” and “labor calibration,” particularly in the South where demand for energy workers will increase. While jobs will be available, they will be located in different areas and require different skills than those currently possessed by the workforce.

4. The Federal Reserve – Two Rate Cuts Before June 15th

A new Federal Reserve chair, potentially aligned with Scott Besson and Donald Trump, is expected to respond to the labor market challenges with two interest rate cuts before June 15th, 2026. This response is driven by concerns about inflation (inherited from the Biden administration) and a desire to stimulate economic activity. However, Ellsworth emphasizes that the labor market issue is not solely about unemployment, but about reskilling and geographic mismatches. Jerome Powell is predicted to retire.

5. Interest Rates Don’t Save the Day

Despite potential rate cuts, Ellsworth believes that businesses with weak balance sheets and high debt will not be significantly helped. Banks will remain hesitant to lend to these companies. Mortgage rates are predicted to fall to around 5.75% for borrowers with a 750 credit score and no points paid. Paying “points” (upfront fees) to lower the rate will result in a larger overall mortgage amount.

6. Housing Prices – Flat to 1% Up, Regional Variations

Nationally, housing prices are expected to remain relatively flat, increasing by up to 1%. However, significant regional variations are anticipated. The Florida Gulf Coast, impacted by recent hurricanes and rising insurance costs, could see a 10% decrease in home prices due to increased supply and decreased demand. This presents potential opportunities for buyers from areas like New York.

7. S&P 500 – 7600 by Year-End

Ellsworth predicts the S&P 500 will reach 7600 by the end of 2026, representing a 10% increase (approximately 700 points). He attributes this growth to a combination of factors, including a reasonable labor market, Fed policy, and a potential boost from energy stocks due to policy changes in Venezuela. However, he acknowledges headwinds from AI and potential profit-taking. The “Magnificent 7” is becoming the “Magnificent 5” suggesting a narrowing of market leadership.

8. EV Market – Shakeout Year & Hybrid Comeback

The Electric Vehicle (EV) market is predicted to experience a “shakeout” year, with companies like Fisker already failing and Lucid facing challenges. Tesla will encounter increased competition, particularly from BYD (China), with allegations of artificial price subsidies. Investment will shift towards improving charging infrastructure, battery technology, and replacement batteries. Crucially, hybrid vehicles are expected to regain market share, driven by consumer preferences for range and refueling convenience. GM and Ford have already scaled back their all-electric plans, recognizing the profitability of hybrids.

9. Media – Post-Sale Reality & Personality-Driven Content

A major media consolidation (WBD/Netflix or Paramount) is predicted, leading to a “post-sale reality” where legacy linear cable channels face significant challenges. MTV’s recent shutdown of all-music channels in Europe is cited as an example. The focus will shift towards personality-driven content (podcasts, individual series like Game of Thrones) rather than thematic linear channels (Animal Planet, Discovery).

10. Podcasts – Shiny Objects & Independent Success

Podcasts will become “media shiny objects,” attracting investment from legacy media companies. However, Ellsworth predicts that podcasts acquired and managed like linear channels will likely fail. Independent podcasts, operating as their own production companies, are more likely to succeed. Legacy media will overpay for podcasts, leading to future regrets.

Notable Quotes:

• “It’s not going to be chips. It’s not going to be servers and data centers. It’s going to be power that slows down AI a little bit in 2026.” – Tom Ellsworth
• “Show me the ROI on AI or you are no longer our guy.” – (Attributed to Boards of Directors)
• “The labor market is worse than we think.” – Tom Ellsworth
• “Interest rates don’t save the day.” – Tom Ellsworth
• “Hybrids go a long time. Plus, it's got gas, so you don't worry about running out.” – Tom Ellsworth

Technical Terms:

• ROI (Return on Investment): A performance measure used to evaluate the profitability of an investment.
• Reskilling: The process of learning new skills to adapt to changing job market demands.
• Permits: Official documents allowing construction or operation of facilities, often subject to regulatory review.
• Magnificent 7: A group of large-cap technology stocks (originally Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla, and Meta) that drove significant market gains.
• Points (Mortgage): Upfront fees paid to a lender to reduce the interest rate on a mortgage.
• PE/VC (Private Equity/Venture Capital): Investment firms that provide funding to companies.
• Linear Channels: Traditional television channels that broadcast content on a fixed schedule.
• Hybrid Vehicles: Vehicles that combine an internal combustion engine with an electric motor.

Logical Connections:

The predictions are interconnected. The power wall (prediction 1) impacts AI growth (prediction 2), which influences the labor market (prediction 3) and subsequently the Fed’s response (prediction 4). The Fed’s actions affect interest rates (prediction 5) and the housing market (prediction 6). The overall economic climate impacts the S&P 500 (prediction 7) and the EV market (prediction 8). Finally, shifts in the media landscape (prediction 9) and podcasting (prediction 10) reflect broader economic and technological trends.

Data & Statistics:

• S&P 500 prediction: 7600 by end of 2026 (10% increase).
• Mortgage rate prediction: 5.75% for borrowers with 750 credit score and no points.
• Florida Gulf Coast housing price prediction: 10% decrease.
• 2025 S&P 500 prediction accuracy: 6600 (previous year’s prediction).

Conclusion:

Ellsworth’s 2026 predictions paint a picture of economic adjustment and calibration. While AI remains a significant force, its growth will be constrained by practical limitations. The labor market will face challenges requiring reskilling and geographic realignment. The Federal Reserve will attempt to navigate these challenges with rate cuts, but their effectiveness will be limited. The media and automotive industries are poised for significant disruption, with a shift towards more focused, personality-driven content and a resurgence of hybrid vehicles. The overarching theme is a move away from unbridled enthusiasm towards a more pragmatic assessment of ROI and sustainable growth.