The 2026 Transition: A Fiduciary’s Perspective on Market Liquidity and AI Displacement

The Steady Hand: Navigating the 2026 Capital Transition

By Gary P. McKae, CIMA®

If you notice a change in the direction of this newsletter, it is purposeful. As I transition McKae Properties into McKae Capital Management, Inc., my focus has shifted from property transactions to the broader stewardship of multi-asset portfolios and fiduciary oversight.

As we move into 2026, the investor market is clarifying enough to begin making critical strategy decisions, rebalancing portfolios, and reviewing complex debt structures.

The Macro View: A Consumer Mixed Bag

The current landscape reveals a stark divide. While government data shows a lack of vigorous consumer confidence, corporate profits suggest that the consumer remains active when affordability is prioritized.

The Real Estate Liquidity Trap: Current reports on owning vs. renting indicate a stagnant sales market. We are seeing a significant "buoyancy" in the rental sector, but for the wrong reasons. Many new rentals were once single-family residences with no prior rental history. This is a dangerous indicator: owners who cannot achieve their desired exit price are choosing to rent instead.

In my 50 years of navigating market cycles, I have seen this before. It is the real estate equivalent of an unexecuted limit order in the stock market. When "Limit Orders" remain above market value, action is frozen until panic hits. Real estate lacks the liquidity of equities; price cuts are often delayed until fear drives a "bottom spike."

Commercial Reckoning and the California Climate

In the commercial sector, owners are facing a "perfect storm" of leverage issues and deferred maintenance. Mortgages that were not wisely structured—specifically those with adjustable rates—are now working against the borrower.

In California, these issues are compounded by a legislative environment that increasingly favors renters over owners. Eviction is no longer a simple solution; it is a significant legal expense that depletes Net Operating Income (NOI). For those in the Triple Net market, the risks are now tied to corporate volatility. We see this with Rite Aid—bankruptcy hits, and the property owner is left with a vacant building and a vanishing income stream.

The AI Shift and the Global Transition

Artificial Intelligence is no longer a future threat; it is currently hitting junior and middle management. This structural shift is forcing a long look at career retraining or relocation. This directly affects residential markets where home prices were overstretched.

The U.S. economy is in a profound transition. We have historically supported a "social paradise" fed by an ever-increasing income from technologically oriented taxpayers. As that "food source" shifts due to AI and debt pressure, drastic measures will be required for capital preservation.

The "Steady Hand" Perspective

On the positive side, the stock and bond markets offer significant opportunities for those who can distinguish between market noise and systemic risk. A market of positive returns and declining bond coupons favors value increases, but speculation will create extreme volatility.  In my five decades of navigating capital cycles, the current divergence between US Debt and technological displacement is unprecedented

This volatility will thin the ranks, leaving a professional core of investors and advisors who understand how to prosper in uncertainty. As a Wharton-educated CIMA® and former Mayor, I believe that "Perspective" is the most valuable asset an advisor can provide.

The "Steady Hand" Philosophy:

"I consider age not a marker of retirement, but a marker of Judgment. Having managed capital through the 1974 recession, the 1987 crash, the 2000 tech bubble, and the 2008 financial crisis, I provide the perspective that ultra-high-net-worth families require to stabilize and grow their legacy".

I look forward to hearing your thoughts on this new direction.

Gary P. McKae, CIMA® Senior Investment Strategist | Fiduciary Leader | Former Mayor of Woodside 

📍 McKae Capital Management, Inc. 📧 gmkae@sbcglobal.net 📞 (650) 743-7249 🏢 655 Oak Grove Ave. #1346, Menlo Park, CA 94025 DRE# 01452438