Liz Ann Sonders on 2026 Market Setup, Oil Prices, and AI Trade

Geopolitical Events and Market Impact

• geopolitics, such as the situation in Venezuela, typically do not significantly impact markets unless they evolve into protracted military events with lasting energy channel effects.
• 💡 The market's lack of a knee-jerk reaction to the Venezuela situation was not a surprise given this historical pattern.

Energy Sector Outlook

• 📊 The energy sector is currently rated as neutral or market perform by Charles Schwab.
• ⚠️ It is likely too late to significantly underweight the energy sector, but there's no current catalyst like Venezuela to upgrade it to an outperform rating.
• 📉 The market faces an oversupply of oil globally, which is expected to keep prices from rising significantly in the short term.

Midterm Election Year Market Dynamics

• 📈 Midterm election years in a four-year cycle historically exhibit wider market swings with a tendency towards a "violently flat" pattern.
• ⚠️ This increased volatility is partly due to investor uncertainty about the direction of Congress.
• 📉 However, historical patterns are not always reliable, as the pre-midterm year (2025) did not align with historical averages, performing well ahead of them.

Market Focus: AI Trade vs. Broader Market

• 🧠 The market is currently heavily focused on the AI trade and memory pricing data, overshadowing other factors.
• 📉 Beneath the surface of cap-weighted indexes like the S&P 500, there's significant churn and rotation with bare market level drawdowns at the average member level.
• 🎯 In 2026, a shift is anticipated, with less singular focus on cohorts like the Magnificent 7 and a broadening out of investment opportunities.