"ALL ROADS LEAD TO INFLATION" - 2026 Predictions, Semis/Banks Still Strong

 

📊 Market Sector Tracker - Gary Kaltbaum's "Investor's Edge"

Tracking leading/lagging sectors, top stocks, and market positioning

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📅 Monday, December 22, 2025

"ALL ROADS LEAD TO INFLATION" - 2026 Predictions, Semis/Banks Still Strong

Market Action

• All big indices back above 50-day after Wednesday crash
• Advanced declines "pretty good"
• Small/mid-caps: Better relative strength, broadening
• "Wide and loose" - way up, way down action

Gary's 2026 Predictions 🔮

#1 PREDICTION: INFLATION COMING "All roads lead to inflation. Simple as that. All roads lead to inflation."

Why?

• Averaging $250B deficits/month = $3T annual pace
• Easier money coming (Fed cuts)
• Weakening dollar

The Evidence Already Here:

• Platinum (PPLT): Vertical, major bull market
• Palladium: Vertical, major bull market
• Silver: Almost vertical, major bull market
• Gold: Major bull market
• Steel, copper, beef: All up

DEFLATION SIDE:

• Housing prices will "continue to come down, continue to come down, continue to come down"
• Why? "Inventory is skyrocketing. Cause and effect."

OTHER PREDICTIONS:

• Big IPOs coming this year
• Some crushed IPOs from 2025 will be "big winners" in 2026
• Fed will cut rates "as much as possible"
• "Market is up in the trees by any measurement" BUT "does not have to mean trouble lies ahead"

Leading Sectors/Stocks 🟢

FINANCIALS - "NO CHANCE OF BEAR MARKET"

• Charles Schwab: Breaks out of range
• Citigroup: New high
• Morgan Stanley: Almost at highs
• JP Morgan: Right back up near highs
• European banks: Strong despite Europe "in dire straits"

Gary: "There is no chance of a bear market in stocks if financials are in good stead. No chance. Never seen one. Ever. Ever."

SEMICONDUCTORS - #1 GROUP

• Micron: Up $10 to close (was up $10 early, down to +$3, finished +$10)
• "Good semiconductor day, though off the highs"
• Back above 50-day after breaking it Wednesday
• "Wide and loose" trading - way up, way down

Gary: "Semiconductors to us is the leading group. And they look like twice in the last month they were goners. And just poof. Poof."

"There is absolutely no chance of bear markets overall if the semis and if the banks/financials are just okay."

CRUISE LINES:

• Norwegian Cruise: 19→24.25 after insider buying (see below)
• Carnival: Good numbers, lifted sector
• "Cruise lines are now acting better"

DEFENSE: Very strong day (Venezuela/war talk)

OIL: Up $1.40 (Venezuela/war talk)

ROCKET STOCKS: Another strong day (SpaceX valuation talk)

Lagging Sectors/Stocks 📉

CRYPTO - SEPARATED FROM NASDAQ

• "Crypto has been smoked and can hardly bounce off of its lows"
• Decoupling: "They have separated. Like ET when ET separated from the young boy."
• Gary: "What if the NASDAQ goes into a bear market?"
• Investment banks now engaged "because there's money to make off of it"

MARIJUANA: "Sell the news... came right back down to earth"

HOUSING: "Remains in a bear market"

PAYROLL: "Remains in a bear market"

CONSUMER STAPLES: "Bounced a little but nothing great"

RESTAURANTS: "Bouncing but nothing great"

BAD RELATIVE STRENGTH TECH:

• Oracle, Meta: Bouncing but "you want to stick with strength of the strength"
• CRDO (Credo): Opened 214, closed 190, dropped to 130-something despite "gargantuan" earnings prediction - "remains in bear market"

Insider Buying 💰

SALESFORCE.COM (CRM):

• Mason Morfitt (Value Act Capital partner): Bought $25M worth at $260.50
• Stock closed $264.60 (96,000 shares)
• Director since 2023
• "Been bottoming... looks like trying to move above initial range"
• Key level: Break above $267.90 = moves above range from Oct 21

NORWEGIAN CRUISE:

• Previously reported, stock 19→24.25

Gary: "Insiders just haven't been buying stock. But when it shows up, we acknowledge."

Gary's Key Points

On Bear Markets: "How do we know when we're going to a bear market? Well, when you finally get some follow-through to those ugly, ugly days that look like we were toast. And then poof. The pixie dust."

On Semiconductors: "Broke the 50-day moving average badly last Wednesday. Gapped up Thursday. Gapped up Friday. Gapped up today. Not at highs. Trading more wide and loose... But back above the 50-day."

On Tax Loss Selling: "The worst stocks last week had the best moves. We think that has to do with tax loss selling being over."

On No-Sales Froth: "$31 billion market cap. $15 million in sales. That's not a joke. That's what's happening out there."

"One quantum stock: $11 billion market cap with no sales and lose money... just dropped from 46 down to 20" - up 20% today on CES announcement

"At the end of the road... no sales companies will all go back to where they came from."

"At the end of a bull market, it's imperative for you to know exactly what you have or else."

On Bear Market Destruction: "Bear markets rip down the curtains. They expose. Money losers and no sales. Take out the machete. Don't cut at the knees. Don't cut at the hips. Way up there they cut. And a lot of times in the 90s."

On Wednesday's Action: "On Wednesday they look like crap. And they finished at the low of the day on Wednesday which usually leads to lower prices. And they gapped it right back up on Thursday."

"We're also being told that had to do with easier money to talk. Don't know. Don't care. To us, it's not the news. It's how things react to the news."

On Predictions: "We're here to let you know, none of them know what's going to happen in 2026. There's no way of knowing all these variables."

"Did anybody know there would be that deep-seek? Remember deep-seek? That crashed the AI stocks early in the year... Did anybody know about the Liberation Day tariffs? There's no way of knowing."

On Debt/Deficits: "In the last two months, we've averaged $250 billion deficits. You extrapolate out for a year, that's $3 trillion deficit the next year."

"We tape the Sunday political shows... they never mention the debt and the deficits."

"We think this is haunting the markets... All roads lead to inflation."

On Housing: "Go look up PPLT, which is platinum. Vertical... Palladium. Vertical... Silver. Almost vertical... Gold. Almost, well, a little less vertical..."

"Prices for houses are gonna continue to come down. Because inventory is skyrocketing. Cause and effect."

On Mortgage Rates: "Nearly 30 million households, 54% of primary mortgage holders have mortgage rates at or below 4%. I hear the 30 year is about 6.3 now. So it's getting closer."

On California Immigrants: "California is now cutting back on immigrant healthcare... I've always said. When they know they're going to be treated better than our own citizens. Why not?"

"If you take away the incentives to come here illegally... You ain't getting squat. And you're going to be arrested. Once they know that. What a concept."

Personal Note: "In the last year, my family lost... my father and my mom. And boy oh boy, the mix of feelings... I was worried people would be pissed off. Instead, I received a bazillion emails saying, went through the same thing."

Schedule Note

Gary on tomorrow (Dec 23), then gone rest of week. No show Wed/Fri.