Kevin Mahn on 2026 Market Outlook: Bull Market Continuation with Increased Volatility

2026 Market Outlook

• 📈 The bull market is expected to continue into 2026, building on the 41 record closes for the S&P 500 in the past year.
• ⚠️ However, this continuation is anticipated to come with much more volatility compared to previous periods.

Growth Opportunities and Sector Performance

• 💡 Expect another double-digit growth year, but performance will vary significantly across market sectors.
• 💰 Growth opportunities will be found by following where money is being spent, particularly in areas like AI, infrastructure, aerospace and defense, biotech, and power solutions.
• 📉 The influence of the MAG7 stocks on the S&P 500's total return has been weakening, decreasing from 62% three years ago to around 44% currently.

Drivers of Market Growth

• 🚀 Tailwinds include deregulation and billions of dollars in planned AI infrastructure spending.
• 📊 Historical data shows that bull markets hitting their three-year anniversary have historically continued higher for an average of eight years.
• 🧠 AI is likely contributing to increased productivity, evidenced by 4.3% GDP growth with core CPI around 2.6% and wages exceeding inflation.

Economic Health and Consumer Spending

• ✅ A healthy economy is indicated by strong GDP growth, manageable inflation, and wages outpacing inflation.
• ⚠️ The economy's performance hinges on the consumer continuing to spend, as AI infrastructure spending has matched consumer contribution to GDP in the first half of the past year.
• 📉 A shift by consumers to servicing debt instead of spending could slow the economy.

Federal Reserve and Interest Rates

• 🏦 The market should not rely on the Fed for significant accommodation in 2026, with expectations of only one 25 basis point rate cut in 2026 and one in 2027.
• ⚖️ The neutral rate is around 3%, and current rates are only 50 basis points away, suggesting no immediate need for further accommodation for economic growth.
• 💰 Falling shelter and energy costs, along with rising wages, are expected to help consumers manage expenses.