2026 Market Outlook: Positive Year, Rougher Road
Venezuela Is Noise, Not a Trend
The U.S. arrest of Venezuela’s president and his wife grabbed headlines this weekend and briefly shook markets. It shouldn’t last. Venezuela’s actual contribution to global oil supply is small, and global energy markets have plenty of slack.
Geopolitical shocks tend to spark short-term volatility, not long-term market damage. This one is no exception. Markets will move on quickly and refocus where they always do: earnings, rates, and growth.
Earnings Still Matter — And They’re Solid
Fourth-quarter 2025 earnings are coming in strong. Consumers kept spending, margins held up, and companies continued to execute despite higher rates and geopolitical noise.
First-quarter 2026 should be fine, not spectacular, but supported by tax season. Higher refunds will put extra cash into the system. Some will go to savings or debt reduction, but enough will be spent to keep earnings on track.
Bottom line: earnings remain a stabilizing force. That matters more than headlines.
“Sell in May” May Actually Fit This Year
The old saying “sell in May and go away” could carry real weight in 2026. Midterm election years are historically more volatile, and markets hate political uncertainty.
Policy debates, fiscal negotiations, and campaign rhetoric tend to peak in the spring and summer. That creates choppier trading and sharper pullbacks than investors have grown used to in 2025.
Volatility does not mean disaster. It means discomfort. Historically, markets often weaken before midterms and recover once the uncertainty clears.
After the Midterms, the Picture Improves
Once elections are over, fundamentals should reassert themselves. The consumer remains in fairly good shape. Spending may slow, but employment is steady and incomes are holding up.
Unemployment is likely to stay relatively stable, even as job growth weakens. That’s consistent with a late-cycle economy, not a recession. Slower hiring helps keep inflation contained and gives the Federal Reserve room to stay supportive.
As visibility improves, the back half of 2026 should benefit.
TL, DR:
I expect 2026 to be a positive year for stocks — but not an easy one. The path will be bumpier than 2025, with real volatility around midyear and the midterm elections.
Earnings growth, a resilient consumer, stable employment, and cooling inflation argue against a major downturn. After the dust settles, I expect the market to finish 2026 on stronger footing.
Tomorrow:
We’ll feature one of our top picks for 2026.