As 2026 gets underway, markets don't feel euphoric — but they're far from cheap. And according to Danny Moses, that leaves investors with very little room for error. In an exclusive interview with Benzinga, Moses described a market in an uneasy balance—one where even a modest shock could trigger something bigger.
"There are definitely many moving parts as we begin 2026," he said. Valuations may not be "priced to perfection," but the market is also not offering much margin for safety.
From Growth To Value: A Painful But Healthy Shift
Moses warned it "would not take much" to spark a correction—or a rotation out of growth, particularly technology, and into more value-oriented sectors like Consumer Staples and Energy.
That shift, he said, would be healthy over the long term. The problem is timing.
Given how heavily major indices are weighted toward a small group of mega-cap tech stocks, even a partial rotation could cause near-term "dislocation and indigestion." To avoid that outcome, Moses said markets will need to see continued earnings growth and margin expansion — especially from the names carrying the most weight.
The Credit Market Blind Spot Returns
As with The Big Short, Moses believes the real blind spot isn't obvious. This time, it's credit.
"There are clearly no systemic issues at the moment," he said — but recent bankruptcies showed how quickly stress can ripple through credit markets. That matters because a massive amount of optimism, particularly around AI, is "predicated on access to debt."
If AI supply and demand move closer to equilibrium, or if power and energy constraints begin to cap growth, Moses expects the impact to reverberate well beyond tech.
AI Is Real — But The Economics Are Coming
Moses is clear: AI is a genuine secular growth story, comparable to the internet boom of the late 1990s. But that doesn't mean every company wins.
"There will be a period of time when the economics begin to matter," he said.
How much will consumers pay for AI subscriptions? Can Nvidia Corp (NASDAQ:NVDA) sustain mid-70% gross margins as competition rises? Is there enough power to meet projected demand?
Those questions, Moses warned, will shape the next phase of the AI trade — and could ultimately determine whether today's growth darlings stay leaders, or become casualties of the great rotation.
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