As the new year is approaching by the minute, today we are going to look together at what analysts are saying about 2026, what to expect, and what we should pay attention to as long term investors.
Because yes, the spotlight is on what will happen next year, but the real question is: does it actually matter?
WHERE WE STAND TODAY
Over the past 3 years, the market has delivered exceptional returns. Specifically, the S&P 500 has risen 87% from its lows, placing this period in the top 5% of all three year periods in its history.
Put simply, this means we are in one of the most profitable bull markets of the past few decades.
Optimism is widespread. Wall Street analysts are forecasting gains of 10% or more for 2026. Corporate earnings expectations are positive, the Fed has already cut interest rates by 1.75% over the past 15 months and is preparing for further easing, while valuations, especially in the technology sector, have started to normalize.
Even the Nasdaq 100, which had run far ahead in previous years, has returned to more reasonable valuation levels. In fact, the gap in P/E compared to the S&P is the smallest it has been in the past 6 years. Everything looks “in order.” Or at least that is how it appears on the surface.
3 BIG QUESTIONS
At this point, however, three major questions arise that we need to examine.
The discussion around whether a small number of stocks such as Nvidia, Alphabet, and Broadcom are driving the market has intensified. And it is true that if we removed the performance of these companies, the S&P 500 would have posted much smaller gains.
To put this into perspective: if these three stocks had remained flat, the S&P 500’s return this year would have been reduced by one third. This clearly shows how critical the contribution of mega cap technology companies has been.
At the same time, we are seeing bank stocks, cyclical sectors such as energy and industrials, and other traditional industries beginning to participate. The overall advance decline ratio points to more diversified support.
But we also need to understand one more thing: leadership changes within bull markets are rare. And this bull market has been built on artificial intelligence. That has been the fuel behind the rally. And it continues to be.
So do not expect small caps, retail, or railroads to suddenly take the lead. Leadership remains concentrated in a few strong companies.
OpenAI is preparing to raise $100 billion. In a private round. At an $800 billion valuation, making it larger than 90% of publicly listed companies in the United States.
SpaceX is preparing for an IPO at $1 trillion or more.
Anthropic is also in the mix.
At the same time, there are dozens of startups waiting in line to go public before these giants, trying not to get lost in the crowd.
Meanwhile, Goldman Sachs expects an increase this year in the number of shares circulating in the market. Why? Because S&P 500 companies are not focusing on buybacks. Their cash is going into capex, meaning investments.
More shares in the market without a strong increase in demand means pressure on prices. This is not necessarily negative. But it is a variable we need to watch closely.
Crypto dominated headlines in 2025. Bitcoin has lost around 30% from its recent high and appears to have decoupled from the Nasdaq.
Where they once moved hand in hand, we now see the Nasdaq near its all time highs while Bitcoin lags behind.
Is this good or bad? It depends, although personally it does not concern me much.
On one hand, it may be a sign of maturity. That crypto is no longer the ultimate risk thermometer.
On the other hand, many retail investors, the ones who previously pushed the market forward with momentum, have shifted elsewhere. And when retail investors step back, overall market momentum often weakens.
In addition, many of the “old” Bitcoin holders are the ones selling recently. At the same time, several mining companies have transformed into AI infrastructure providers, abandoning mining altogether.
INVESTING
If you ask me, yes, I am positive about 2026. I see companies investing in infrastructure. I see earnings growing. I see a Fed that is no longer tightening but easing. I see optimism, but not madness.
