Regarding inflation and growth, it appears that inflation is starting to cool off slightly. That should help. And then, of course, fiscal and tax policies, which most of the fiscal and tax policies that you’ll see out of DC will be pro-business at least for most of the year. And then we do, of course, have the midterm elections at the end of the year. That could change things, but that is a wild card that we don’t have to deal with until late in the year.
There are geopolitical risks, and that goes back more or less to the trade war type of situation. Nonetheless, this is a very healthy-looking market. My suspicion is that Dow Jones 30 will be well above 50,000 next year at one point or another. That doesn’t mean we get there in a straight line, but I think it does suggest that we just continue to see this overall bullish pressure here.
S&P 500 Continues to Look to the 7k Level and Beyond
And finally, let’s take a look at the S&P 500. It’s a little noisy going into the later part of December as well, but this is mainly because the S&P 500 has been hijacked by the same handful of stocks that the NASDAQ 100 has. They’ve basically rotated the Magnificent 7 into the S&P 500, thereby making it difficult for it to fall. That right there is your big clue.
Now, as I record this, it looks like we could be struggling a bit near the 6,900 level, but there’s really nothing there other than psychology that comes into the picture to offer resistance. Quite frankly, I think a break above 7,000 makes quite a bit of sense, especially if the US economy outperforms in 2026, which, quite frankly, most leading indicators do suggest.
With that being the case, and the fact that more foreign money comes into the S&P 500 than any other index around the world, and it’s not even close, I think you continue to see buyers of dips. It’s really not until we break down below the 6,200 level that I think you would have to worry about a serious breakdown. And even then, the S&P 500 has taught us over time that if you get something like a 30 or 40% correction, that is a buying opportunity.
I don’t see anything being any different here, unless of course something catastrophic happens. Geopolitics will be the big wild card here as well. And again, when you think geopolitics, you can talk about Ukraine, you can talk about Russia, but really, it’s about trade more than anything else.
All things being equal, the S&P 500 was very strong until basically November. And now it looks like it is just chopping back and forth. And why wouldn’t it? After the massive gains that we have seen since April, it makes sense that maybe we spend a little bit of time middling around, but there is nothing on this chart that suggests the S&P 500 is in trouble.
My Final Thoughts
US equities on the whole should do fairly well for 2026. Again, you’ll have the leaders and the laggards. The leaders, of course, will be all the usual suspects. A lot of what you’re seeing on the US equities in these charts will be a reflection of passive investing. Everybody who has some type of retirement account owns Nvidia, they own Apple, they own Microsoft. They all own the same things.
And in that sense, trying to short this market is like swimming upstream. It doesn’t mean we won’t have the occasional pullback, but it’s just not designed to fall. And with that, I anticipate that 2026 will be another positive year. I don’t know if it will be as positive as we had seen 2025 behave after April, but the upward momentum is undeniable.