Market Commentary
Mixed Signals
Overview- 2025 was a good year for risk assets. The market moved into a choppy range bound trade during the 4th Quarter, as concerns over valuation in the AI space put a lid on the rally for the year. Our outlook for 2026, based on current expected earnings forecast and underlying fundamental strength in the economy, is a continuation of higher equity prices. The consensus outlook by Wall Street heading into the year calls for a reacceleration in the real economy — propelled by tax-based stimulus and an administration desperate to “run it hot” — which has quickly been reflected in market leadership. The Fed has been easing since late 2024, and it is expected to ease a couple more times in 2026. Trump is expected to pick a “dove” to lead the Fed after current Chair Jerome Powell leaves in May. Fiscal policy is on a path that will widen the deficit but can only be characterized as stimulative, which would obviously be positive for the economy. The US economy continues to muddle along in a “K” economy where the top wage earners and savers are doing much better than the rest of the population, pinching spending power for the lower K. However, even that may have a silver lining as the current administration considers more stimulative actions to drive prices of goods, and food and services lower (not a surprise in a mid-term election year). Earnings are expected to be up again in 2026 as the economy continues [...]