Hello everyone,
I trust many of you have enjoyed the spoils of good food and kinship this holiday season so far. To help keep the mood festive, I am pleased to inform you that December has brought on some decent results. The TSX is up 1.96% (https://ycharts.com/indices/%5ETSX/level) and the S&P500 is up 1.18% (https://ycharts.com/indices/%5ESPX/level). It looks like Santa did deliver after all!
As this year draws to a close, it is essential to consider the market's resilience and the primary themes that have influenced 2025. Financial markets in 2025, at the time of this writing, experienced double digit returns despite bouts of volatility and macroeconomic uncertainties. U.S. equities rebounded strongly throughout the year, driven by solid corporate fundamentals and sustained consumer spending. By the end of 2025, the S&P 500 had achieved an approximate year-to-date return of 16.45%, reflecting strong investor confidence for much of the year (https://www.spglobal.com/spdji/en/commentary/article/us-equities-market-attributes/). Globally, stock market returns were also upbeat, notably, Japan's market led with a 24% return and Canada with an outstanding performance of 28.99% year to date.
Looking deeper, economic indicators showed a moderate cooling with unemployment stabilizing around 4.3% and consumer price inflation moderating to approximately 2.9%, suggesting a soft-landing rather than a recession type scenario as previously mentioned earlier in the year (https://corient.com/us/en/insights/articles/q3-2025-thoughts-on-the-investment-markets ). This wasn't without merit though, market volatility increased influenced by policy uncertainties including tariff implementations and fiscal concerns that led to a sharp global market downturn early April. However, in the months to follow, we witnessed a recovery phase to which brought relief to many, including myself (https://en.wikipedia.org/wiki/2025_stock_market_crash , https://www.usbank.com/investing/financial-perspectives/market-news/is-a-market-correction-coming.html). The technological sector, particularly those linked to artificial intelligence and innovation, contributed positively and maintained momentum amid other evolving economic conditions.
Overall, 2025 was characterized by solid market gains supported by strong earnings and consumer activity, punctuated by short-term shocks related to geopolitical and policy developments. This dynamic resulted in a year of recovery and growth, setting a foundation for cautious optimism heading into 2026 (https://www.spglobal.com/spdji/en/commentary/article/us-equities-market-attributes/ , https://www.jpmorgan.com/insights/markets-and-economy/top-market-takeaways/tmt-in-the-rear-view-how-did-our-2025-themes-pan-out).
Many of you have been asking me: what holds for 2026? I'm happy to tell you that I'm generally positive on the outlook, supported by continued economic growth, decent corporate earnings, and continued advances in technological innovation. I'm not alone in my thesis, various financial institutions and market analysts also foresee that 2026 will be another year of gains for global equities but also caution investors about the risks of inflation, geopolitical tensions, and potential economic slowdowns. Basically, the same going into 2025, 2024, 2023….lol.
To support the above statement, according to Goldman Sachs economists, global economic growth is expected to remain sturdy at approximately 2.8% in 2026, slightly above the consensus forecast of 2.5%. The United States economy is projected to substantially outperform other regions, supported by strong consumption and ongoing technological investments, particularly in artificial intelligence (AI) and related sectors (https://www.goldmansachs.com/insights/outlooks/2026-outlooks). This growth foundation underpins many forecasts for continued upward movement in equity markets.
This is further supported by many other analysts who predict that S&P 500 earnings could grow by around 14 to 14.5%, surpassing the 10-year average annual increase. This robust earnings growth is expected to sustain investor confidence and support valuation multiples despite some headwinds (https://www.investors.com/news/2026-stock-market-forecast/ , https://financialpost.com/investing/5-predictions-for-2026). Key sectors likely to fuel this growth include technology, healthcare, and financial services, with technology stocks benefiting from accelerating AI adoption and investment. Furthermore, Morgan Stanley highlights a continued but somewhat tempered bull market in 2026, where strong corporate earnings and a resilient economy drive gains, yet elevated uncertainty and tightening monetary policies might cap the pace of growth. They emphasize that while equity markets remain attractive, investors should prepare for bouts of volatility and selectivity in sectors and stock picking (https://www.morganstanley.com/insights/articles/stock-market-outlook-bull-market-risks-2026).
To counter, J.P. Morgan Global Research provides a slightly more cautious perspective, estimating roughly a 35% probability of a U.S. and global recession in 2026. They contend that persistent inflationary pressures and geopolitical tensions, such as trade disputes and conflict risks, could weigh on market momentum, a real reality in my opinion. Despite these risks, the firm expects markets to exhibit resilience with reasonable valuation levels supported by strong earnings trends (https://www.jpmorgan.com/insights/global-research/outlook/market-outlook).
Volatility remains a recurring theme among market commentators, as noted above. Although most experts anticipate market appreciation, increased price swings and corrections could occur due to concerns about inflation normalization, central bank policy adjustments, and evolving macroeconomic dynamics. More specifically, I'm a little worried about how resilient the consumer will be. Can they continue to carry the economy with a net zero increase in disposable income? I guess one could argue that refunds from the CRA/IRS will help, but that is exhaustive and only temporary. But again, the impacts of the One Big Beautiful Bill are expected to emerge sometime in 2026.
There you have it: the forecast for financial markets in 2026 is cautiously optimistic. We can likely expect continued equity market gains supported by solid economic expansion and stable if not improved corporate earnings, particularly within technology and cyclical sectors. As we close out another remarkable year, I want to thank you for your continued trust. Looking ahead to 2026, I'm excited about the opportunities that lie ahead and remain optimistic about the growth and innovation we’ll experience together. May the coming year bring you happiness, success, and new achievements. Wishing you a joyful and prosperous New Year from all of us at TD Wealth.
The information contained herein has been provided by Rietze Duke & Associates Wealth Management and is for information purposes only. The information has been drawn from sources believed to be reliable. Graphs and charts are used for illustrative purposes only and do not reflect future values or future performance of any investment. The information does not provide financial, legal, tax or investment advice. Particular investment, tax, or trading strategies should be evaluated relative to each individual's objectives and risk tolerance.
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