Market Resilience and 2026 Outlook: AI Weakness, Global Breadth, and Quality Tilt

Market Resilience and Rotation

• 📈 The market has shown resilience in 2025, with the S&P up over 17% on a price basis, though it's been a rotational market rather than a broad rally.
• 💡 It's encouraging that the market has remained strong despite AI weakness or skepticism, which Mayfield views as healthy and not indicative of a bubble.
• 🌍 Global participation is a key underdiscussed factor, with Japan, Europe, and emerging markets also performing well.

2026 Outlook and Strategy

• 🎯 For 2026, Mayfield suggests a continued quality tilt is important, especially in the fourth or fifth year of a bull market with rates above 4%.
• 🏦 While AI leadership may resume, the market is healthier with participation from sectors like banks and financials, and a slight improvement in consumer discretionary.
• 📊 A potential concern for 2026 is sentiment and the risk of it impacting the market in the first quarter, especially with strategist price targets continuing to rise.

Interest Rates and Inflation

• 📉 Rates are seen as well-tamed, with the Fed likely unable to cut much below a neutral rate due to persistent inflation and a strong economy.
• ⚠️ The long end of the curve is influenced by fiscal concerns, potential worries about Fed independence, and themes like deglobalization and supply chain reshoring, which are inflationary.
• 📈 The 10-year Treasury yield pushing towards 5% in 2026 is a possibility and could pose a challenge for equity markets.