From the studio

Podcast: Investors Club | Equities, gold and USD post-Fed rate cut (10 mins)
Video: Running a 2026 portfolio, with CIO's Adrian Zuercher and Jon Gordon (5 mins)
Video:TRIOs for 2026: CIO’s Delwin Limas on AI, power, and longevity (7 mins)
Video:Our preferred Chinese stocks for 2026, with CIO's Suresh Tantia (6 mins)
Video:Get your core portfolio, hedges in shape with CIO’s Mark Andersen (9 mins)

Thought of the day

The S&P 500 closed above 6,900 on Thursday, reaching a new record high despite some weakness in tech stocks driven by Oracle’s large spending plans and revenue guidance that did not materially exceed analyst expectations. The equity benchmark rose 0.2% and is on track for a third consecutive week of gains.

Volatility may pick up next week, as the releases of US data including nonfarm payrolls, the consumer price index, and retail sales could shift market expectations for the timing of the Federal Reserve’s next interest rate cut. Central bank decisions are also expected from Japan, the UK, the Eurozone, Norway, and Sweden.

But we maintain the view that US equities can climb further in the near term as well as into 2026. We expect the S&P 500 to reach 7,300 by June next year and 7,700 by the end of 2026.

December has historically been a seasonally strong month for equities. Data going back to 1929 show that December tends to be the second-best performing month for the S&P 500, with an average gain of 1.3%, just behind July’s average advance of 1.7%. Notably, price increases have often been concentrated in the second half of December, giving rise to the term “Santa Claus rally” to describe this seasonal trend. While past performance is no guarantee of future results, we believe the fundamentals are supportive for the market’s next move higher.

Earnings growth is expected to remain robust. Corporate earnings are key in stock performance, and forward returns have historically shown a positive correlation with changes in earnings expectations over the next 12 months. Bottom-up consensus forward earnings estimates have continued to rise, and we expect S&P 500 earnings per share to grow 10% in 2026, following an estimated 11% increase this year. This, in our view, should continue to underpin equity market strength.

Fed easing has more to go. While there is clear divergence in policy views among Fed officials, Chair Jerome Powell this week noted that job creation could be overstated, based on the downward revisions to the annual benchmark over the past two years. We believe next week’s data will support an additional rate reduction in the first quarter of 2026, creating a favorable backdrop for equities. Historically, stocks perform best when the economy is not in recession and the Fed is easing, which we define as a rate cut within the last three months. And even after the Fed pauses sometime next year, the effects of lower rates should continue to filter through the economy, supporting the performance of US stocks.

So, we believe investors should position to gain from the expected equity rally in the coming year, adding exposure to tech, health care, utilities, and banking for those underallocated to the US market. In our recently published Monthly Letter, "New words, timeless ideas," we also discuss strategies for building a robust portfolio for 2026 and beyond, including putting cash to work, seeking tactical opportunities, and hedging market risks.