3 U.S. Equity Factors Loom This Year

A new year has dawned, and with it come the myriad outlook updates from asset managers. American Century Investment has added its own views to this year’s crop. Its U.S. equities-focused insights point to three notable factors for investors to monitor in the year ahead.

3 Issues to Dominate Market Narratives in Q1 2026 Outlook

American Century Investments co-CIO Keith Lee pointed to three important U.S. equities storylines for investors to watch this year. “Three main issues” loom over U.S. stocks this year, Lee wrote. Specifically, he pointed to questions about stock valuations, the sustainability of AI spending, and the potential for further rate cuts at the Fed. 

“None of these has a simple, straightforward answer,” Lee explained. “We expect volatility to continue, but this shouldn’t obscure significant opportunities.”

Concentration Risk, Valuations, and Investors

Valuations are high compared to historical averages, growth stocks continue to dominate value, and market concentration is high. The risk of a correction to a market dominated by a handful of names and red hot AI valuations, he wrote, does concern. 

“However, it’s also true that corporate earnings growth has been strong, and forecasts for 2026 are even better,” he said. “If companies can meet or surpass their 2026 forecasts, that would be a positive sign for valuations and the market.”

What’s Ahead for AI and the Fed

Lee wrote that his team does not see “excessive” debt financing for AI spending at companies like Meta (META) and Amazon (AMZN). Specifically, he pointed to bubbles’ tendency towards excessive debt or capacity as a counterpoint to claims that the current AI push constitutes a bubble.

“Indeed, the main takeaway from their third-quarter earnings reports is that AI spending is expected to be significantly higher in 2026 than in 2025,” he wrote. “It’s hard to believe, given the bubble narrative, but there’s arguably upside risk in AI spending.”

Finally, Lee argued that multiple Fed cuts may be unlikely, as past cuts continue to impact markets and tax refunds from recent Federal legislation have an affect.

American Century Investments offers a variety of ETFs for investors to consider to engage with the year’s trends. For equity strategies with active and passive solutions in light of a curious 2026 outlook, the shop’s suite may intrigue.

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