2026 Outlook: 5 High-Stakes Prediction
OIJ (#42) Intellectual honesty is our only currency
If you are, you know that intellectual honesty is the only currency that matters. That’s why at The Hermit, we don’t bury our past calls, instead we grade them.
2025 was a year of “almosts” and “not quites” for the global macro scene, but a solid win for our portfolio. We battled sticky inflation, elusive rate cuts, and an energy-hungry AI boom.
Now, with our regulated hedge fund officially live, we’re doubling down on transparency.
Below is our unfiltered 2025 scorecard (wins and misses), followed by five high-stakes predictions for 2026 that go way beyond the consensus.
Let’s look at the tape.
2025 Predictions Review
#1 💸 Argentina’s Inflation: close to 0%
Verdict: WIN ✅
Prediction: Inflation would average close to 0% (specifically, the “non-induced” rate), and the supply/demand for money would reach equilibrium.
While Milei has achieved a structural break from the hyperinflation of the past, inflation did not hit exactly 0%.
Throughout late 2025, monthly inflation has hovered around 2.5% (printing 2%). The annual inflation rate for 2025 is projected to be over 30%.
The “non-induced” calculation (inflation minus money printing) was 0.5%.
We didn’t hit absolute zero due to the persistence of “riesgo kuka”, market jitters and election fears surrounding a potential return of the opposition in October.
Note: As of December, the fixed 2% rule is out. The Central Bank has switched to a lagging peg, where money printing matches the inflation rate from two months ago.
December Printing: 2.3% (matching October’s inflation).
January Printing: 2.5% (matching November’s inflation).
#2 📉 Cost of Capital: US 10Y Yield to 2.5%
Verdict: PARTIAL WIN ⚠️
Prediction: The Fed rate or 10-Year Treasury Yield would drop to 2.5%.
The “higher for longer” narrative persisted longer than you hoped.
As of December 2025, the US 10-Year Treasury yield is hovering around 4.17%. But we have seen a decrease from 5.5% to 4.5% in 2024 and down to 3.75% in 2025.
Fiscal deficits and persistent growth kept yields elevated, and the cost of debt (renewals) keeps increasing for the public in the form of business loans and mortgages
#3 ⚡ Energy Prices: Stabilize and Decrease
Verdict: MISS ❌
Prediction: A “tidal wave” of supply and mini-nuclear reactors would push prices down, especially in the US.
US energy prices actually rose in 2025. We overestimated both the demand shock and the supplier's ability to respond.
US electricity prices continued their upward trend, outpacing general inflation. Wholesale prices in some regions jumped ~40% in the first half of the year due to extreme weather and surging demand from data centers (AI).
Context: The “AI energy thirst” you identified was correct, but supply (nuclear/gas) couldn’t come online fast enough to lower prices this year.
#4 📊 Small-Cap Outperformance & Portfolio Return
Verdict: PARTIAL WIN ⚠️
Prediction: A balanced portfolio (33% Nasdaq 100 / 33% S&P 500 / 33% Russell 2000) would return >10%, with Small Caps (Russell) driving the growth.
The portfolio worked, but the driver was wrong. Thanks, Nvidia!
Portfolio Return: ~12.9% (Passes the >10% threshold).
Drivers:
S&P 500: +16.1% (The actual winner).
Russell 2000: +13.5% (Didn’t outperform Large Caps).
Nasdaq 100: +9.2% (The laggard).
#5 💵 Argentina Dollarization & Taxes
Verdict: PARTIAL WIN ⚠️
Prediction: Milei would eliminate the mandatory use of Pesos, including for taxes, leading to de facto dollarization.
The “currency clamp” (cepo cambiario) remained stickier than expected.
As of late 2025, taxes in Argentina are still largely paid in Pesos. The administration has focused on increasing currency competition, but the US dollar has not yet been granted full legal tender status for tax obligations, and capital controls remain partially in place.
However, the country’s currency is in practice pegged to the USD.
Beyond these predictions, we announced that we would start a fund, and we actually pulled it off.
So yeah… we’re pretty happy about that one.
We encourage you to read the complete article if you want the full details:
For our 2026 outlook, we have ranked these predictions from most probable to least likely. However, we strongly believe that there is a material chance for each of these scenarios to unfold.
#1 Argentina Becomes (Almost) Investment Grade
This is an easy one. While the developed world struggles with debt, Milei’s austerity actually works.
We predict that Argentina posts a fiscal surplus for the second year, inflation stabilizes <10% annually, and the “cepo” (currency controls) is fully lifted.
We’re already seeing green shoots of this reality. Argentina recently issued USD-denominated debt at 9.26% for 2029, signaling that the country’s risk premium has collapsed to historic lows.
Remember, the math is simple: Total Yield = US Risk-Free Rate + Country Risk Spread. With US rates where they are, a 9.26% total yield implies investors are finally confident in Argentina’s solvency.
We could witness a pretty parabolic move where Argentine assets (stocks and bonds) double yet again. If rating agencies aggressively upgrade the sovereign debt, it would unlock a flood of global institutional capital, likely triggering a FOMO rally.
Whether the agencies are actually brave enough to move that fast, however, remains to be seen.
#2 A G20 Nation ADDS Bitcoin to Its Strategic Reserves
It’s not just El Salvador anymore. A smaller G7 or G20 nation (perhaps the US or the UK, desperate for a hedge) announces a pilot program to buy Bitcoin on the central bank balance sheet.
The keyword is BUY. Until now, the government has held Bitcoin from criminal seizure, and Trump passed policies to hold it as a strategic reserve.
This would significantly boost Bitcoin's price, given the impact on demand. We would not be surprised if Saks pushes for this policy in the US.
#3 The “White-Collar Recession” (US mainly)
AI doesn’t kill jobs, but “efficiency” does. Companies protect margins by cutting middle-management and highly paid remote roles, while blue-collar labor remains scarce.
This would be observable and imply that US unemployment stays low (4%), but tax receipts plummet because the people losing jobs are the top 20% of earners.
Another lens to view this trend is the divergence in consumer spending. We anticipate a sharp correction in luxury brands and high-end real estate, while value per buck plays like Walmart and McDonald’s thrive.
This signals a broad consumer trade-down, shifting focus from premium to ‘affordable luxury’. We would also observe a sustained migration of capital into cost-effective housing markets like Texas.
#4 The Major AI Ban
Citing data sovereignty, national security, and/or GDPR a major economic bloc (likely the EU) issues a full ban on a top-tier US AI model (like ChatGPT or Gemini) for enterprise or consumer use.
It would be funny if this same block sanctioned its own state-sponsored BS competitor.
We would see a global internet fracture into “Western AI” and “Sovereign AI” zones.
This would also imply that the US Tech giants lose access to billions of users; massive volatility in tech stocks as total addressable markets (TAM) get slashed overnight.
#5 Saudi Arabia Breaks from or Modifies Extensively the OPEC+ Alliance (Oil to $40)
We’re now in the more speculative terrain. As you know, Saudi Arabia balances its government budget based on $70 oil. If low prices persist for the country, they may break from the OPEC+ alliance.
Tired of losing market share to US shale and non-OPEC producers while cutting their own production, Saudi Arabia pulls a 2014 move. They open the taps to flood the market and bankrupt high-cost competitors.
That means oil collapses to $40/barrel (briefly). This would be nice for the US as inflation disappears instantly (solving the Fed’s problem), but O&G (especially offshore) and energy stocks get crushed.
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Interesting forecasts. I’m particularly excited about #1, which could unlock something meaningful for MercadoLibre (MELI), and potentially even dLocal (DLO)