Wealth management
Wealth CIO Q&A: Exploring opportunities and risks from an AI-driven economy
While AI innovation drives markets higher, tech borrowing and a K-shaped economy have created new volatility—here’s what TIAA Wealth Management’s chief investment officer says investors need to watch in 2026.
Summary
- Tech companies now account for 30% of U.S. debt issuance to fund AI infrastructure, creating vulnerability as investors are now looking for measurable returns.
- The economy’s K-shaped growth is accelerating—wealthy consumers and big tech are thriving while manufacturing slides and lower-income households take on more debt.
- The 10-year Treasury yield is expected to trade between 3.5% and 4.25% in 2026, though fiscal concerns could push it higher amid continued inflation and rate volatility.
The AI bull market is here—where does it go next?
Back in 2023, Niladri “Neel” Mukherjee, TIAA Wealth Management’s chief investment officer, predicted that artificial intelligence (AI) and other innovations could spur America’s “next great bull market.” His forecast now looks prescient—perhaps too much so. “Markets are pricing in these transformative changes more quickly than we had anticipated,” says Mukherjee. His concern boils down to elevated price levels: Because large-cap tech stocks are pricey, they’re more prone to sell-offs should earnings disappoint.
Mukherjee recently sat down with Clarity to discuss his team’s newly published
CLARITY: You write in your 2026 Outlook that AI and innovation will be key drivers for the U.S. economy. At the same time, you preach caution when it comes to investing in AI—why?
MUKHERJEE: Innovation comes in waves, and not everything goes up in a straight line when major technology transformations happen. With AI, there are two main concerns right now. Number one, tech companies—which till recently had been funding infrastructure buildouts mainly through cash flows— have begun to tap the credit market to fund their AI ambitions. AI-related borrowing now accounts for 30% of total U.S. debt issuance, and the market is becoming more concerned about that. Second, AI investors have become more discerning. They’re saying, “Show me the ROI.” They want to see actual return on investment instead of simply high potential for it.
CLARITY: You mentioned AI and innovation will be key drivers. What are other areas we should be watching?
MUKHERJEE: The Federal Reserve and the labor market. The labor market is cooling off, and it’s one of the concerns we have about the economy and low-income consumers. That will have implications for how the Fed views the path forward for monetary policy. The Fed has a dual mandate—full employment and stable prices—and there could be a clash between those two if prices are still moving higher. That will create some volatility in the markets.
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CLARITY: You’ve highlighted concerns about the “K-shaped” nature of the economy. What specifically worries you about that?
The upward trending part of the K represents wealthy consumers and big tech. The downward part is the lower-income consumer and other industries that are not doing as well. Fact is, AI has papered over some other concerns percolating through the economy— manufacturing in recession, a stalled housing market, lower-income consumers taking on more credit card debt, more subprime lending, and rising loan delinquencies. The concern is that when a narrow band of consumers and industries are driving the economy, investors face the risk if these key drivers slow or deteriorate.
CLARITY: What about the bond market? How should investors be positioned there?
MUKHERJEE: We expect more inflation volatility and more interest rate volatility in 2026. A slowing labor market, any significant changes around trade policy, and uncertainty around the Federal Reserve’s path for setting interest rates could all drive volatility. We see the 10-year Treasury yield trading in a 3.5% to 4.25% range—though renewed concerns about U.S. fiscal sustainability could nudge it higher. [The United States is expected to borrow more than $2 trillion in 2026.]
Credit spreads are tight right now, which means the extra yield you get from investing in lower-rated bonds is low. So, we’re keeping our bias to high-quality credits and maintaining a neutral duration bias because of potential volatility when it comes to inflation and rates.
Dive deeper into TIAA’s 2026 Outlook
Our chief investment officer explores AI infrastructure risks, labor market shifts, and Fed policy in depth, plus strategies to position your portfolio for what’s ahead. Read the full
For further insights on how these factors might affect the market and your long-term financial plan, talk to your TIAA Wealth Management advisor. Don’t yet have an advisor?
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