Edward Jones' Mona Mahajan on 2026 Market Outlook and CPI Data

Inflation and Market Rally Potential

• 💡 The November CPI print came in well below expectations, with the core CPI reading at 2.6%.
• 📈 If the trend of moderating inflation continues, it could alleviate one of the identified risks for 2026.
• 🎅 A Santa Claus rally is possible, given the market's sideways movement and historical data showing such rallies occur between the last five trading days of the year and the first two of the next.

2026 Economic and Earnings Outlook

• 🎯 While specific index targets are not provided, S&P returns are expected to be driven by earnings growth and valuation expansion.
• 🚀 Double-digit earnings growth is anticipated for the upcoming year.
• 📈 There is limited scope for valuation expansion in tech and growth sectors, but potential for catch-up in other market areas outside the 'Mag 7'.
• ✅ A base case of positive returns for 2026 is established.

Sector Preferences for 2026

• 🏥 Edward Jones particularly favors healthcare and industrials sectors, remaining overweight in these areas.
• 🛍️ Consumer discretionary is also viewed favorably due to potential valuation upside.
• 🎯 The overarching theme is to seek non-tech and growth opportunities within investment portfolios.

Consumer Spending and Economic Environment

• 🏦 The Federal Reserve's anticipated lowering of interest rates is seen as a positive backdrop for the overall consumer.
• 🏠 Stabilization in the 10-year yield could positively impact mortgage rates.
• 💰 The high middle and high-income consumer segments are currently holding strong and are key drivers of the economy.