Mackenzie's Marks: Global Market Rally and Earnings Outlook for 2026

Geopolitical Risks and Market Resilience

• 🌍 Geopolitics is identified as a significant market risk due to its unpredictability and the difficulty in positioning for various scenarios.
• 📈 Despite increased geopolitical tensions, including events in the Middle East and Russia/Ukraine, major indices like the S&P 500 have shown strong performance, surprising many investors.
• 💡 The market's resilience is attributed to the prospect of greater earnings growth, driven by strong tailwinds from monetary policy, fiscal policy, and an artificial intelligence-fueled productivity boom.

Drivers of Market Performance

• 📊 The primary driver for medium to long-term market performance is identified as the prospect for stronger earnings.
• 🚀 While geopolitical events can cause short-term volatility, the current market is fundamentally trading on the expectation of robust earnings.
• 🤖 The productivity boom, significantly fueled by the use of AI across various business sectors, is a key factor supporting the earnings outlook.

Broadening Market Rally and Geographic Opportunities

• 💡 The current market rally, which has been primarily technology-driven, is expected to broaden out across sectors and geographies.
• 🇨🇦 🇪🇺 Opportunities are seen beyond the U.S. market, particularly in Canada (materials sector) and Europe (defense and financials).
• 📈 Emerging markets are projected to have the biggest earnings growth in 2026, followed by Canada, suggesting a need for investors to think more broadly.

Sectoral Shifts and Capital Intensity

• ⚙️ Technology companies are becoming increasingly capital intensive, which is a shift from their previous model of high free cash flow and lower capital intensity.
• 📉 As technology plays become more capital intensive, their high multiples are expected to decrease, further supporting the thesis for a broadening market rally across different sectors.