What Could be the Black Swan Event in 2026?

Entering a new year, who wants some bold predictions? While the debate is raging on regarding AI’s trajectory and which industry will be awarded or punished by Agentic AI, geopolitical risks and economic uncertainty in the US, EU, and China can lead to significant turbulence in the stock market. Here are my 5 likely Black Swan events in 2026 that can shock the market and drive investor confidence into the ground. By nature, Black Swan events’ probability is low, yet, if any of these five ones happened, the impact will be felt by the market.

1. A major data fudging scandal for LLM models. There are so many AI startups vying for their breakthrough moments and economic gains that they are willing to risk it all in order to get ahead. So it would be no surprise if some startups try to cut corners. Not that. I am talking about a major LLM provider that conceded they cooked their numbers by inflating results or gaming the algorithms to yield the needed results that meet their benchmarks. That type of twist, along with slower adoption of AI at the application level, can wreak havoc on investor confidence in AI’s transformation efforts. Any early telltale signs? Just read the Meta story about how Mark Zuckerberg lost confidence in his AI team that he had to buy an AI startup (Scale.AI) and install an outsider to lead his Llama dream.
   

2. Whistle-Blow on politicized reporting of US economic activities: US economic data have a huge impact on Fed policies, which in turn, have a huge impact on the stock market. For all these years, although economists have different views on how labor, inflation, or productivity data are collected and evaluated, no one has ever challenged the US government's authority and authenticity on the reporting of these data. However, because this administration is so politically staffed and influenced, the chance of artificially inflated or deflated numbers to influence the Fed’s policies is not impossible. It would take only one credible whistle blower to significantly undermine this administration’s credibility behind these essential economic data about the health of the US economy. The Fed, depending on who actually would lead after Powell steps down in June, can either try to sweep this scandal under its bed, or can come clean to restore long term market confidence. But short-term volatility can be severe.

   
   

3. An AI-guided cyberattack paralyzes the best cybersecurity defense for an extended period of time: Yes, we may face such an event instead of watching it in a movie. Of course, not at Cybernet-type of scale. But the ironic part could be that the attack originated from one of the top cybersecurity firms where they use AI to create a superbug for testing purposes, but somehow the bug is exploited by hackers or disgruntled employees. We may eventually put the genie back in the bottle, but the damage can be a bit severe to drive economic productivity to a ground stall for a week or longer. So far, the most severe cyber damage is regional, scattered, or can be fixed within 24-72 hours. But this super bug can be more widespread and last longer than any known attacks. The short term shock to the market can be substantial.

4. A major geopolitical conflict breaks out: You may wonder why the now 4-year old Ukraine/Russia war, or the brutal Israeli-Hamas conflict, has no major impact on the stock market. That’s because neither took place in an area where global economic activities concentrate. In other words, they were not taking place at the chokepoints of global economic lifelines. But what if a military conflict breaks out on these chokepoints? One example is a limited-scale military operation from China on Taiwan that limits the export of the world’s largest silicon fab TSMC. I don’t expect China to launch a full scale military campaign to take back Taiwan in 2026, but a show of strength is likely to occur because the pro-independent party in Taiwan went too far, or the US became too unhinged on Taiwan issue that China is forced to act more aggressively to “teach a lesson” via more than the diplomatic or economic channels. The conflict can be short-lived but the short term shock to the global economy and impact can be felt broadly. The uncertainty associated with how this event would unfold can kill the market appetite for high-tech risks.

5. Donald Trump leaves his presidency abruptly due to illness, accident, or in the least possible scenario, assassination. Given his presidency’s importance to the MAGA movement, his absence can create a power vacuum that disrupts domestic agenda and foreign policies. The economic consequences can be direct, although temporal. Nevertheless, the power battle within GOP can take time to settle, during which, economic activities can slow down substantially to cause short term volatility in the stock market.