2026 Stock Market Predictions

Speaker 1: (00:00)
A new year is upon us, and that means more people are out making their stock market predictions for 2026. Well, today, we are going to talk about those predictions for 2026, but as always, we're gonna go back and we're gonna look at the same predictions for 2025 and to see how those fared. And once again, as this is the sixth year we've done this type of episode, once again, hopefully you, the viewers, will see how futile an exercise it is to try and predict the stock market. I'm also gonna be joined today by my colleague, Jay Waters, to talk through all of these predictions, so stay tuned. Welcome everyone to the Retirement Power Hour. My name is Joe Allaria. This is episode 41. Jay Waters is joining me. Jay, welcome back to the show. Thanks for joining me today.

Speaker 2: (00:56)
Thanks for having me, Joe. This is, uh, one of the favorite podcasts that we do together.

Speaker 1: (01:01)
Yep. It's become an annual, uh, tradition here. This is the sixth episode of its kind where we look at predictions for the upcoming stock market year. And we also like to go back and look at the prior year's predictions because Jay, spoiler alert, they're never right. You know, one year we did have a viewer reach out, which was thankful for the feedback. We always like to get better. He said we were waited way too long to go over the predictions for the coming years. So we wanna do that first. But I, I have to say this, and the whole reason we, we lied, we like to build up to that is if you're on this video hoping to get some predictions that you can go and implement in your own portfolio, just stop. This is not the, the purpose or the point of the video.

Speaker 1: (01:45)
The whole point of the video is to, yes, we can communicate what people are thinking out there, but the point of the video is nobody knows what the future holds. So if your plan is, is based around what these people are thinking, it's not a good plan, in our opinion. Your portfolio should be based around your financial plan and your objectives and your goals. And likely that has to do with how long until you retire, how much risk do you wanna take? And then choose an allocation and maintain that allocation. But Jay, with no further ado, let's talk about 2026. And I'll be quite honest, the predictions for 2026 are very good and that makes me a little bit scared because of, again, how inaccurate the past predictions have been, Jay. But we have about 20 different analysts and companies and financial institutions that we track.

Speaker 1: (02:37)
And not one of them is predicting a negative year in 2026, Jay.

Speaker 2: (02:42)
Yeah. All of them, I, I was looking at that. All of them are, are optimistic, which I love being optimistic just as much as the next person, but you're right. It, it's a little worrisome when, uh, you know, year after year we've seen that, uh, usually whatever people say is wrong.

Speaker 1: (02:58)
Not a single person thinks it'd be a negative market year, Jay, which I think is the first time we've actually seen this in the last, you know, six years of doing this kind of show. Highlights of these predictions, Oppenheimer thinks the market will go up over 18%. They were the highest or the most bullish institution that we tracked. And Deutsche Bank, not far behind them. Morgan Stanley. When you talk about, you know, the 10 to 14% range, you see names like Stifel, Goldman Sachs, Citi, RBC, Morgan Stanley, kind of in that 10 to 14% range. And then in the five to 10% range, almost everyone else, Wells Fargo, BMO, JP Morgan, HSBC, you know, and then at the bottom we have Bank of America and another research outlet, Ned Davis Research. They see the S&P going up 3.7% this year. Now, uh, again, we don't, we don't take this as gospel.

Speaker 1: (03:58)
The average prediction across the board is a positive 11% year for the S&P 500. So a lot of times what we'll see is that average hovering more around six to 8%, which is more in line with maybe an average market return over a longer period of time. So you've got some positives, you've got some negatives. Jay, that's really the biggest highlight of this year. And some of that really stands out because when you go look at last year, and that's the most important thing, you know, not to call any of these places out, they publish their own predictions. You can go look at them. But you look at, you know, Stifel, for example, who was predicting this year a 10% gain in the market. However, last year they were predicting a six and a half percent decline in the market. So they were wrong by about 23% last year, given that the S&P went up 16.4%, and that's not including dividends, Jay.

Speaker 1: (04:55)
So we had a strong year in the S&P 500, definitely above average. And you have a company like Stifel last year thinking it's gonna go down. Now all of a sudden they think, "Hey, the market's gonna go up 10%." And you wonder how much of that is just, "Hey, things are good. And so obviously we think things will continue to be good." It almost mimics to me, Jay, the kind of typical uneducated investor who thinks, "Times are good. Let's put more, more money in. Times are bad. Let's take my money out."

Speaker 2: (05:26)
Yeah, Joe, I, I completely agree. It's the opposite way of what people should think or invest is, again, it's, it's one of those where when the market's going good, people think they just put more money in because it's just gonna keep going up. Yeah. And again, like you said, when, when things are bad, a lot of pe - times people think it's time to jump out, which again is the opposite of what you should do.

Speaker 1: (05:45)
We're, again, we're not here saying we think the market's gonna go down. We've had a good three-year stretch as we sit here today, but what I see on these predictions to me mimics typical consumer sentiment after an extended good period or an extended bad period. And along that same line, the market has gone up about 100% in the current bull cycle where the average bull market goes up a total of 343%. So yes, it's been a good three years. Yes, the market has gone up 15 plus percent three years in a row, which is only the eighth time in history that's ever happened. Yes, we get that. We understand that. It doesn't appear to affect any of these analyst opinions or their sentiment. We would say keep it in perspective, but again, never jump in and out of the market based on what somebody thinks or based on the unknowns of the future that what you think might happen because you don't know what's gonna happen and we don't know either.

Speaker 1: (06:43)
The best plan of attack is to understand your personal plan and, and create an allocation that fits that plan and understand time horizon, understand when you might need to withdraw money. And that's all part of a customized financial plan that if you haven't done, again, you can go to our website, you can go to retirementpowerhourpodcast.com. We'll show you exactly how that works and create an allocation that works for you. But Jay, let's talk about more recommendations for 2026. I'm just gonna read through some of these and then we can kinda move on and, and look at last year. But Morgan Stanley expects another 50 basis point cut in 2026. They're also predicting mortgage rates to drop to around 5.75%. JP Morgan expects year-over-year inflation to rise from 2.8 to 3.5% before drifting back down to 2.8% by the fourth quarter of 2026. Very specific. And I like very specific predictions because then we can very specifically fact check those after the year is over.

Speaker 1: (07:44)
That directly contradicts the prediction from Preston Caldwell of Morningstar who says he thinks inflation will trend downward along with the Fed cutting rates by 125 basis points. Jay, I wanna let you comment on this one. Ken Speights of the Motley Fool thinks single digit gains for the S&P 500, small and mid-cap stocks will take the torch and, uh, no A bu - no AI bubble bursting, but more of a shift from hype to harvest. He thinks renewables, the renewable energy stocks will continue to rebound. And once the midterms are over in 2026, volatility will disappear as stocks move higher. That's a lot of, lot to digest there, Jay.

Speaker 2: (08:25)
And like you said, very specific assumptions, right? Which again, we love because we can very specifically tell them that they're probably wrong. Hopefully come 2027, we do this again. Um, again, it's also in here, it's stating that while volatile disappears while stocks move higher after the terms are over, which again is them predicting and saying that there's gonna be a lot of volatility here in the first half of 2026 until the, uh, midterms take place again.

Speaker 1: (08:55)
We've done shows in the past, Jay, too, around elections and, and I think investors give too much thought to elections and the impact they have on the stock market. We've did one in the last presidential election, you know, a- and so some people will tell you, well, it depends on the results of the election that will determine the volatility of the stock market. But I could go back election after election and just in my own career and see that, you know, that's not exactly, that's not at all what happened. So I think that would be a mistake for an investor to make a decision, again, based on something like an election, which is out of their control as well. Investing.com, Andrew Rocco from Zach's Investment Research predicts the S&P will suffer a correction of 10% or more during 2026, and GDP will soar above 3%.

Speaker 1: (09:43)
Just a couple more. We have stock analyst Mark Chakin predicting a bear market in 2026, and the average market loss of being 20%, saying many stocks could see even sharper drops. Well, a bear market is, is a bigger prediction, but to predict the broad market, as we talked about previously, to predict the broad market declining 10%, that happens, Jay, about every year from top to bottom, from peak to trough, you see a 10% decline. So some of this stuff, you pull it up, you see headlines, and it, it sounds important and sounds big, but when you get the right data and perspective on it, you realize that happens all the time. It's not even headline worthy, really, if you, if you understand the, the facts and understand the data.

Speaker 2: (10:30)
Yes, you know, some of those points like that, like you said, that are, may seem like big ticket, big news items actually occur a lot more frequently than what people think, and it'd be almost like shooting fish in a barrel. It's, it's bound to happen just based off history. So sometimes people like to make a bigger deal out of things than, than what they should be, especially when it comes to the news.

Speaker 1: (10:52)
Another prediction about US versus international stocks. International had a great year in 2025.

Speaker 2: (10:59)
Yeah, Joe, some, some of the additional predictions would be like Fidelity's Denise Chisholm, you know, why US stocks will perform international in 2026, also avoiding energy sectors. She says, "Rick Reeder from BlackRock, inflation is no longer a problem." And then David Secura at Morningstar 2026 would be more volatile than 2025, both in an upward and downward direction.

Speaker 1: (11:23)
Yeah. And, you know, again, the beauty of it, we, we don't know. Like I said, international stocks had a great year in 2025. A lot of analysts see, uh, the, the US is overvalued. Currently, you know, high PE ratios across the board, very expensive, but. So you've got some saying US is still gonna outperform international stocks. Others saying, "I don't see how that's possible. It's, it's very expensive right now to buy US stocks." At the same time, US stocks have outperformed international. Go back the last 10, 15 years, most of the time you've seen US stocks performing well. It sure looks like small caps are due for a rebound at some point, but again, you never know the timing. So, you know, I think the most interesting part of this show is to look back at past predictions, Jay, and we can see how some of these have played out, and we can just bounce these off each other, Jay, but I'll take the first one here.

Speaker 1: (12:16)
Ameriprise last year, partially correct on this one, talked about real GDP growth decreasing to 2% from 3% in 2025 and inflation decelerating along with the Fed gradually cutting rates over the course of the year. So I had all three of these partially correct. GDP was at 2.3, so very close to 2%. Inflation cooled to 2.7 from 3%, seemed accurate. And the Fed did cut rates not as much gradually throughout the year, but mostly all at the end of the year. So that one was partially correct. And another correct, I would say, just flat out correct on volatility, which I love this because you got a fifty fifty chance on volatility, Jay. So if you're gonna make a prediction, I think volatility is one of the best ones you can make, is it's either gonna be volatile or it's not gonna be volatile. But Stephen Liu and Jeffrey Schultz, what, what do you think they said?

Speaker 1: (13:05)
It's gonna be a volatile year. And, and really, I see that prediction, everybody makes that prediction every year. I mean, it might not be the same person, but someone is gonna make that prediction every single year. And if you measure, uh, volatility, especially in the first half, there were eight trading days where the S&P moved more than 2% alone in, in April, just in April, eight trading days. And the VIX hit 52.3 on April 8th, a mark it hadn't seen since 2020 when it hit 82.7. And before that, it was 2008, uh, the last time it was above 50. And in 2008, the VIX hit 80.9, the VIX being, uh, the volatility index. So really only 13 days throughout the year traded more or less than 2%, but you had so much volatility in a short amount of time. Really after April, things smoothed out quite a bit because if you look back at, you know, 2022, for example, you had over 40 days, a move of 2% or more up or down.

Speaker 1: (14:05)
So depending how you measure volatility, you could argue it wasn't that volatile of a year, but based on where the VIX got, I had to give him credit. Jeffrey Schultz, Head of Economic and Market Strategy at Clearbridge and Stephen Wu, founder, managing partner of Carthage Capital Management, had to give them credit because I, I'd say it was a volatile year.

Speaker 2: (14:23)
We, we just did a, another video on this where, you know, we spoke a little bit about the volatility that we had last year where, you know, like they stated, most of the volatility came in the first half of the year where, you know, one of the s - most surprising things I saw in that was of all the volatility that happened afterwards from June to December, there was only one day, one trading day that traded at 2% up or down. So again, all that volatility was in the front half of the year.

Speaker 1: (14:50)
So fair enough. We'll give him credit for it, Jay. Uh, but let's get into some other predictions, Jay. Goldman Sachs says, this is for 2025, this is when he says, "A massive 30% correction is coming." Massive, Jay. Well, we did not see a 30% correction. We saw a 20% decline from February to April, but ended up recovering. And as we stated, the S&P was up 16.4% on the year, and, uh, that's when you don't include dividends. So it's, it's those type of pre- predictions that get people in trouble because if you were waiting for the 30% and all we ever got was 20, and you're still waiting today, well, don't beat yourself up, first of all. I mean, I feel bad that you missed the, the run up there. Don't beat yourself up. Uh, but let's move forward. Let's figure out the best plan going forward from here.

Speaker 1: (15:36)
And again, don't try to time these movements. Also, BCA research strategist Peter Berezen said he expects global economic growth to slow sharply in 2025. Uh, well, global economic growth was about 3.2% compared to 3.3% in 2024. So I, I wouldn't call that a sharp slowdown in, in global growth. I'd say it was pretty consistent. Uh, also, he predicted a major global trade war due to the incoming Trump administration. Well, there was no major global trade war. Uh, there was some volatility around tariffs, which subsided. Barizen also called for a recession, which we did not hit, and consumer spending to decline, which it did not. Uh, albeit consumer spending saw a, saw growth, but in a K-shaped fashion, Jay. So you had higher income people spending more, but middle and lower income people ended up spending less. Now, the net result, consumer spending was up. But again, we wanna be fair.

Speaker 1: (16:41)
We're not out here saying everybody's wrong, but he was wrong on most fronts and he was wrong on consumer spending.

Speaker 2: (16:47)
Two other ones, Joe. Two big ones was Motley Fool, which they've got something to say every year. Um, they got one piece right, which was they said at some point in 2025, we would see a 20% correction back in the early part of last year, around April. But we saw the market rebound from that. Other sectors though that they were wrong in, they said that the healthcare, um, would be the top performer, consumer cyclicals would struggle, um, where healthcare was not the top sector. Um, it was outpaced by technology, uh, financials, industrials, utilities, communication services, many, many sectors that - Yeah, a lot of them. Involved the healthcare sector. Yes, lots of them. Right. Another part that was wrong was they said the Mag seven would underperform the S&P 500. Right. Um, the Mag seven outperformed the market 25% to 16.4%. Right. Which is quite an interesting statement in and of itself since the Mag seven anymore makes so much up of the S&P 500.

Speaker 2: (17:49)
Yep. Um, so interesting for them to try to, uh, make a prediction on that anyways, because that's, that would be difficult. Um, and then lastly, wrong again, Microsoft closes the year as the largest public company. Microsoft did not close the year as the largest public company as of about when we're recording this. It was number four on the

Speaker 1: (18:10)
List. And Bank of America stating that equal weighted S&P 500 will outperform the S&P 500, which the equal weighted S&P returned 10.8% and the S&P returned 16.4. That's another way of saying, Jay, that the Mag seven will underperform the rest of the S&P 500 stocks. And again, it could happen someday, but, you know, when you look through all those predictions, again, just prediction after prediction was, was not accurate. When you look back, and this is the, the thing that, uh, we've still got this streak going. Jay, the market was up 16.4% in 2025. How many predictors or financial institutions out there predicted that the market would be 16, would be up 16.4%?

Speaker 2: (18:57)
Yeah, none of them.

Speaker 1: (18:58)
Absolutely zero. Uh, absolutely zero. Since we've started doing this episode, we probably had the closest round of predictions in 2025 as any other year that we've done this. But again, you got, um, a company like Stifel, I think is a good company. I think it's a reputable company, but they were 23 or 22.9% off on their prediction of what the market was gonna do. So the danger in all of this as we bring this episode to a close is we run back to these people every year to try and get their take. And clients ask me, people ask me, what do I think the market's gonna do? I appreciate that because it, it tells me that whoever's asking values my opinion and, and trusts my opinion, but you just have to understand that no one can determine or really know what the market will do because you have non-financial events in the world like COVID or like a geopolitical war that, that have a financial impact.

Speaker 1: (19:57)
And so, you know, we can talk about interest rates, which you can't exactly predict that. We can talk about trade and headwinds and tailwinds that the US might have or international stocks, but that's all in the financial sector. You can't predict that subset of factors, let alone all of the other factors in the world. And when you tell people in any other walk of life, "Well, you know, you can't tell the future, you can't predict the future. There's no such thing as a fortune teller." Everyone pretty much says, "Yeah, obviously, right?" But in finance, for some reason, some investors think, "No, you should be able to predict just because you're an investment advisor, been in the industry for 15 years, you have CFP behind your name." They think, "Yeah, well, you probably have a better ability to do that." And our message here to you today is it's just not true.

Speaker 1: (20:48)
So what do you do? Well, number one, if you don't know what to do, go to retirementpowerhourpodcast.com. Click work with me. We can get on a phone call, you can talk to me, you can talk to Jay. We can try to help you build an actual financial plan and an investment, uh, allocation that aligns with that financial plan, because that's the only right allocation. It's one that supports your objectives and your goals. So we can help you build that, help you get more confident in your investment decisions, help you answer any other questions you might have about retirement, taxes, investments. And so again, go to retirementpowerhourpodcast.com, click work with me. Leave us a review if you're watching this on YouTube, listening on Spotify, listening on Apple, we appreciate any reviews. And with that, we'll be back shortly to talk about more topics, more financial topics.

Speaker 1: (21:39)
So make sure to tune into our next episode on the Retirement Power Hour, where we help listeners invest wiser and retire better. Jay, thanks for joining. Everyone else, take care.

Speaker 3: (21:50)
Thank you for listening to the Retirement Power Hour Podcast. All material discussed on this podcast is for educational purposes only and should not be construed as individual tax, legal, or investment advice. Investing involves risk of loss and investors should be prepared to bear potential losses. Past performance may not be indicative of future results. Joe Allaria is an investment advisor representative of Carson Allaria Wealth Management, a registered investment advisory firm. Information discussed on this podcast may be derived from third parties that are believed to be reliable, but CarsonAllaria Wealth Management does not control or guarantee the accuracy or timeliness of such information and disclaims all liability for damages resulting from such sources. Any references to third parties are provided as a convenience and do not constitute an endorsement.