Major financial institutions hold a moderately bullish outlook for US stocks in 2026, driven by anticipated rate cuts and AI-fueled growth, though some caution about specific risks and advocate for diversified investment strategies.
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Here's the thing. Everyone thinks that
we're going to be in a big crash coming
soon, right? Not so fast. I pulled
together some articles of some huge
financial institutions and other
analysts to see what they actually think
for 2026. And this absolutely shocked
me. And after this, I'm going to explain
what's probably happening next week with
the Fed rate cut and how that's going to
affect the stock market very short term.
Black Rockck also just dropped a
bombshell, shifting away from bonds and
long-term treasuries, which is a very
bad sign. My name is Nolan Goa. My
students call me Professor G, and I made
this channel to make investing
simplified. Remember that all investing
carries risk, so do your own research.
This is not financial advice, and I'm
not a financial adviser. Okay, so I put
together this table here and what you
can see are a bunch of these big
institutions like Morgan Stanley, Black
Rockck, Bank of America and overall if
we look at the outlook on US stocks in
that second column, most of them are
bullish or moderately bullish. Bank of
America is a little bit cautious but
they still think it's going to be
positive. If you look over to the next
side, the forecasted S&P 500 level, Bank
of America says it'll be around 7,100
for 2026. Remember, right now we're at
around 6,800. So that's still positive,
but that's only up 3 to 5% or so.
Whereas BNP at the bottom says 7,500.
Morgan Stanley at the top says 14% or so
upside over the next year. This is all
well and good, but we want to see the
key themes or drivers and even the
sector bias. So looking just at Morgan
Stanley, the key themes there would be
rate cuts, earnings, growth, and
rotations out of bonds. The sector bias
there is that they favor equities
broadly. For DWS, they say profit
recovery and monetary easing. The sector
bias there is cyclical sectors and rate
sensitive industries. For BlackRock,
they're saying AIdriven investment boom,
capex cycle, and rate cuts are going to
be the key themes and drivers. The
sector bias for them would be tech. AI
and infrastructure beneficiaries. Since
Bank of America is a little bit more of
like a warning tone, let's see what they
have to say, which is that they have
this AI air pocket, weak consumer, and
valuation risks. The sector bias for
them is overweight defensives like
healthc care, staples, and REITs and try
to underweight tech. Okay, so what does
this even mean, though? So, this type of
research suggests five basic things for
investors. From what I've compiled, the
base case is actually moderately
bullish. Many large institutions expect
US stocks to deliver solid gains in
2026, supported by rate cuts, earnings
growth, and growth themes like AI. There
are diverging views on risks, though
some are cautious, highlighting risk
from weak consumer spending, over
reliance on AI, or stretched valuations,
meaning volatility could rise. Now the
third thing here is that there is a
sector level divergence that's likely
techile stocks may outperform if growth
and investment continue but more
defensive sectors like healthc care
staples real estate financials also have
a case if economic growth or consumer
spending softens. Another thing that I
found that a lot of these institutions
are talking up even more is that
geographical investment could matter.
Several forecasts signal potential
upside outside the US, like specifically
in Europe, which could reward investors
with diversified global holdings. And
all of this leads to number five, which
is just the importance of flexibility.
Given mixed signals, many analysts
emphasize staying diversified and
flexible rather than leaning too heavily
into one sector or theme. I've been
saying this for about a year now. If
you're just relying on just AI or just
tech, know that that has never worked in
the history of the whole stock market.
You can't rely on one sector. Make sure
to keep yourself safe. Now, a lot of
this information was positive, but I did
come across a couple of institutions
that were very bearish and actually
saying the opposite, namely Vanguard, JP
Morgan, and Michael Bur. But then again,
when is Michael Bur not crying wolf? The
most likely decline range as far as if
the stock market's going to drop or not
in 2026 was between 10 and 20%. For the
most part, they're saying that it's
going to be a correction and not
necessarily a crash of over 20%. Unless
a perfect storm happens where multiple
different risks all hit at the same
time, like rate, global shock, or a tech
bubble. Risk isn't uniform, high growth,
highly leveraged, or AI dependent firms
are viewed as the most vulnerable.
defensive sectors or diversified
allocations may fare better. This is why
I've been talking so much about value
investing. Nobody really wants to do
that right now because it's not as fun.
The tech stuff and the AI stuff is going
crazy where things like SCHD or even VTV
are kind of staying steady growing at 5%
or something rather than 20 or 30%.
Understandable, but there are market
cycles and we just need to understand
that we may be shifting to a new one. So
overall, if there is going to be a
crash, I do believe it's going to mostly
be in tech or AI, specifically the
high-risk type sectors, maybe even in
the Bitcoin market, things that are
higher risk. For those with a long
enough investing horizon, though, this
should not be scary. This should excite
you. I know that it's going to excite me
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Okay, so one of the biggest things
that's going to affect our stock market
right now is the Fed meeting happening
next week. The FOMC Fed watch tool has a
huge majority that believe we will see a
cut next week. The reason for that is
signs of a weakening labor market which
is increasing expectations for that.
Recent data showed job losses. The
private payroll provider ADP reported a
drop in jobs, marking the third decline
in four months. Also, total US layoffs
for 2025 just passed 1.17 million, the
highest since the pandemic, with
November alone accounting for 71,000 job
cuts. This weak labor backdrop has
strengthened the case that the Fed may
cut rates soon, boosting investor risk
appetite. We could definitely see
further upside if the Fed signals a rate
cut. This will especially benefit small
caps, financials, and non- tech sectors.
But if the Fed doesn't make a rate cut,
then we're in for a roller coaster
market. With so many already pricing in
the cut, a non-cut would absolutely flip
the script. Markets don't crash on
decisions, they crash on surprises. So,
if the market's already pricing in this
rate cut, but Powell doesn't deliver,
the reaction could be a sell-off.
specifically in tech or small caps, high
valuation growth, maybe real estate or
rate specific style investing, bond
yields would jump and risk assets would
drop fast. But we're not in for
something like a huge crash like a 20%
drop or something like that unless
Powell comes out and says something
like, "Not only are we not cutting
rates, we're actually going to increase
rates." If Powell simply just delays the
cuts, then usually what happens in the
market is that the market does have a
little bit of a pullback, but nothing
crazy. Historically, stocks dip on
disappointment, yields go up, volatility
spikes, but markets usually stabilize
within days or weeks. Think of it like
an air pocket, not like a crash. But let
me hit back on that point that I said
earlier. What would cause a major crash
would be a Powell no cut also with some
type of hawkish message from Powell. If
Powell says something like, "We're not
close to cutting. Rates may need to stay
higher for longer." That's when markets
break down. If job losses are rising,
which they are, and Powell still refuses
to cut, markets could interpret this as
a policy mistake. And that's when
markets absolutely go crazy and a major
correction is in store. We'll just have
to see what happens. I'm definitely
going to keep you informed. And with
that, you should sign up for my free
newsletter that I just started. Down
below in the description is the link.
It's totally free and I'll only send one
or two out per month, so I won't spam
you, but anything big will receive a
newsletter write up and you'll be well
informed. Join the 10,000 investors that
have already signed up with the link
down in the description. Now, the last
news that I want to get into is actually
a very big one, and it's from Black
Rockck, which warned on long-term US
Treasury bonds as AI related borrowing
has surged. Black Rockck shifted its
stance on long-term US treasuries from
neutral to underweight, warning that
heavy borrowing tied to AI
infrastructure could drive interest
rates up again. The firm, while still
somewhat bullish on US equities overall,
flagged increased systemic risk if debt
financed AI investments trigger
instability. The shift away from
long-term US treasuries by a major
institution like Black Rockck highlights
concerns about increased leverage and
potential instability tied to AI
investment waves. We're kind of right
now in the middle of this possible
storm. Either the storm's going to get
better or it's going to get a little bit
worse. But right now, the best way to
protect yourself would just be to make
sure that you have a balanced portfolio.
if you haven't watched this video yet.
This is a simple portfolio that shows
you not only how you can live off of
this portfolio forever, but also how you
can get to the point where you can live
off of it. I took some time here in this
video to show you how to build out the
best portfolio for long-term or
short-term, just depending on what your
goals are. Most videos talk about
something like living off dividends, but
they don't show you how to get there.
So, watch this video here as soon as you
can or watch this one that I just made
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