FINANCIAL BLOG

The melt‑up in the metals market that defined 2025 has extended its strength into the early weeks of the new year, reinforcing the commodity sector’s position as one of the leading asset classes across global markets. To the surprise of most, gold outperformed the broader equity market for a third consecutive year, surging roughly 65% in 2025 and far exceeding the S&P 500’s gains.

Fourth quarter earnings season unofficially kicks off this week with a dozen banks and asset managers in the S&P 500 slated to report. Results will come from some big names, including JPMorgan Chase (JPM) on Tuesday; Bank of America (BAC), Wells Fargo (WFC) and Citigroup (C) on Wednesday; and Blackrock (BLK), Goldman Sachs (GS), and Morgan Stanley (MS) on Thursday.

With 2025 behind us, it’s a good time to celebrate some of our better forecasts from last year while also reviewing some misses we can learn from. In our view, we got more right than wrong last year, but there were some misses among our tactical asset allocation recommendations.

There have been plenty of catalysts supporting the broader market’s recovery from the correction lows set last month. Oversold conditions fueled by indiscriminate selling left the S&P 500 with washed-out market breadth and a hard reset of its lofty valuation. First quarter earnings season came in much better than feared, and most companies unexpectedly did not pull forward guidance.

Our 2026 fixed income outlook calls for a rangebound rate environment, cautious Fed policy, and a modest increase in spreads within corporate credit markets. Markets expect the Fed to lower the fed funds rate to around 3%, likely keeping the 10-year Treasury yield between 3.75% and 4.25%. Inflation remains above target, limiting aggressive cuts, so returns may be income-driven.

The bull market appears poised to extend its run in 2026, fueled by ongoing enthusiasm around AI and further easing of monetary policy from the Fed. However, with valuations running high and midterm election years often bringing more volatility, gains may be more tempered in 2026.

In our Weekly Market Commentary on November 17, we previewed our Outlook 2026 publication, due out on December 9. We highlighted several keys for markets next year, covering the U.S. economy, stocks, and bonds. This week, we broaden our preview and tease some other factors investors will want to consider when thinking about investing in 2026.

Third quarter earnings season winds down over the next couple of weeks and has once again met Wall Street’s high expectations. After tariff-muddled first quarter results, companies did a good job adjusting to tariffs in the second quarter and continued to do so last quarter.

In a year that could easily be defined by a few different words — including but not limited to tariffs, technology, or more broadly, uncertainty — capital markets have plugged along splendidly. Despite a near-bear market correction in April, the S&P 500 and U.S. stocks more broadly have powered higher, hurdling obstacles nearly without interruption.

Artificial intelligence (AI) makes daily headlines, and investors are questioning if businesses’ AI-related investment can continue at this pace. The money spent on data centers, software, and other AI-related investments reveal the structural shifts occurring in the economy.

There was no shortage of headlines on both the micro and macro levels last week. Earnings season ramped up as nearly half of the S&P 500’s market cap reported third quarter (Q3) results, including a handful of mega cap companies.

With the stock market in record-high territory and up about 35% off the April lows, market participants clearly haven’t been too scared lately. But that doesn’t mean there aren’t plenty of things to worry about.

In corporate credit markets, early indicators of stress often emerge subtly — not through dramatic dislocations, but through nuanced shifts in borrower behavior and market dynamics. Much like canaries in coal mines once signaled invisible threats, and Jamie Dimon’s warning about “cockroaches” in credit markets hinted at more credit events to come, recent developments in the leveraged credit space suggest areas of vulnerability are worth monitoring.

Sunday, October 12 marked the third anniversary of this bull market. Three years ago, the S&P 500 closed at 3,577 as investors feared inflation would become entrenched after wholesale prices unexpectedly accelerated. After a sharp sell-off that morning, stocks rallied and closed nicely higher that day.

We believe corporate America will follow up an outstanding second quarter earnings season with another good one in the third quarter. Support from a resilient economy, tariff mitigation measures, artificial intelligence (AI) investment, and currency should offset increasing tariff costs.

U.S. equity markets have bucked the weak September seasonality trend (thus far) and rallied to fresh highs this month, with the S&P 500 holding onto a 2.7% monthly gain as of September 26. The melt-up has been underpinned by the Federal Reserve (Fed) delivering on rate cut expectations without any hawkish surprises, earnings optimism, and continued support of the artificial intelligence (AI) secular growth theme.

During last week’s press conference after the Federal Reserve’s (Fed) rate decision, Chairman Jerome Powell warned his audience there is no risk-free path for interest rates right now. Inflation is above target and growth appears resilient. We think that the soft labor market will eventually weaken inflation pressures, so the Fed is making the right call even though it may not look right from all angles.

Global bond markets have sold off recently due to uncertainty surrounding key political changes most notably in France and Japan. Japan’s Prime Minister, Shigeru Ishiba, resigned last week, which adds a potential shift in fiscal policy to concerns about slowing monetary policy normalization.

Some of you reading this title might think this commentary is about September seasonality. Sure, seasonality is part of our playbook and is getting a lot of attention right now. We would not be surprised if volatility were to pick up some this month — even though seasonality isn’t as much of a concern during positively trending markets.

The winning streak for stocks continued in August, as the S&P 500 posted its fourth consecutive month of gains. It was an informative month for investors, as we learned that the labor market may not be as solid as expected, tariffs have had a minimal impact on inflation and margins thus far, corporate America and the consumer remain resilient, and the Federal Reserve (Fed) is likely ready to cut rates later this month.