Good morning,
Just checking in this morning—holiday-tardy at that.
We’re entering the final three trading days of 2025, likely on holiday-light volume. That follows a week in which most major equity indices edged higher, with the exception of small caps. For the week: the S&P 500 rose +1.41%, the Nasdaq Composite +1.23%, the Russell 2000 +0.21%, International Developed Markets +1.20%, and Emerging Markets +2.14%.
Turning to the 2026 outlooks now circulating from market seers, not much has changed from last year. The bulls who were constructive on 2025 remain bullish for 2026, anchored primarily by continued optimism around the AI giants, a still-booming tech sector, and ongoing U.S. economic growth. Last year’s bears—who warned of tariff-induced stagflation and an employment-led recession—remain cautious. While still concerned about valuations and growth durability, most have moved to market-weight equity recommendations, albeit with warnings that the next likely move in their balanced, multi-asset models is a downgrade of equities. They haven’t abandoned the recession call—just pushed it further out on the calendar.
One of my favorite characteristics of Ned Davis Research is that they treat outlooks as sport—a useful but ultimately disposable exercise. Given the choice between being right and making money, they choose the latter every time. As the market message changes, their outlooks get tossed. Instead, they rely on models grounded in shifting supply-and-demand forces to guide portfolio construction across asset classes, geographies, sectors, market cap, and style (value vs. growth).
That said, NDR’s current view is worth noting:
“Equity investors face a more challenging backdrop as stretched valuations and less supportive macro trends limit potential gains. The current cyclical bull market is now more than three years old, placing it among the longer post-WWII advances and showing clear signs of maturity, including fully invested households and cycle-high valuations. Although risks such as a softening labor market, tariff uncertainty, and questions about the durability of the AI spending surge are gathering, the near-term environment remains constructive. Key indicators still argue against an imminent recession, earnings are growing, and monetary policy is expected to ease further.”
Using four forward-looking inputs, NDR arrives at a year-end 2026 S&P 500 target of roughly 7,100. Earnings growth of about 7%, combined with modest P/E contraction, supports that projection. Historical bull-market comparisons suggest that a second, non-recessionary bear phase becomes more likely later in 2026.
Have a great rest of your week.
Be well,
Mike