2026: Why This Year Could Finally Deliver the Rally 2025 Couldn't

Prominent analyst Lark Davis recently shared a contrarian perspective on crypto’s extended sideways period, suggesting that 2026 may represent the real inflection point the market has been waiting for. The reasoning isn’t that the bull run failed—rather, it was postponed by structural economic headwinds that are now showing signs of easing.

The 2025 Economic Drag

The analyst traces crypto’s subdued performance throughout 2025 to weakness in U.S. manufacturing—a sector that still represents 10%-11% of national GDP and provides roughly 13 million jobs. Manufacturing contraction deepened significantly, with the ISM manufacturing PMI hitting 48.2 in November, now marking nine straight months of decline. The picture grew grimmer when examining components: new orders slipped into the mid-47 range, while employment metrics fell near 44. Most revealing, approximately two-thirds of manufacturers focused on maintaining headcount rather than expanding it.

Even the ISM’s own analysis confirmed that more than half of manufacturing-related output remained in contraction throughout the year, demonstrating that despite the visible artificial intelligence boom, the broader economy largely stalled in 2025.

2026’s Structural Advantages

However, Davis points to several converging forces that could create a materially different environment moving forward. First, artificial intelligence capital spending is expected to accelerate sharply. U.S. data center expenditure surpassed $400 billion in 2025, with projections suggesting roughly $600 billion in 2026 and exceeding $700 billion by 2027. This wave encompasses far more than software—it extends into physical infrastructure including advanced semiconductors, power generation systems, server hardware, and major construction projects.

Globally, the picture expands further. The industry anticipates over 2,000 additional data centers before 2030, driving total infrastructure investment near $7 trillion across the five-year period.

Monetary Tailwinds Ahead

Complementing this spending cycle, monetary conditions are poised to shift meaningfully. The Federal Reserve is expected to conclude its quantitative tightening program and resume active balance sheet expansion at approximately $40 billion monthly. Simultaneously, equity market projections indicate roughly 14% earnings growth for the S&P 500 in 2026.

These combined developments—robust capital expenditure, renewed liquidity, and expanding corporate profits—create what Davis characterizes as a fundamentally stronger setup than existed during 2025. Manufacturing recovery coupled with easier financial conditions positions 2026 as a plausible catalyst for sustained market momentum.