2026 Surprise of the Year? Stock Talk Update, Friday February 13, 2026
Like many other advisory groups, the team here at Oak Harvest likes to release our market outlook for the year. Our team has historically split the year into the first and second half as things can change rapidly as we saw in late1q25. This year’s release was titled “Being a Bull Rider is Harder Some Years”. We laid out 2 positives and 2 negatives we saw that might affect stock market returns while producing higher volatility in 2026 than in prior years.
The bullish tailwinds and arguments for 2026 stock returns center around S&P500 earnings and earnings growth rates throughout the year. Large and accelerating AI capex investments by the largest market cap companies, helpful tax policies within the BBB, big beautiful bill, from a business accelerated deprecation standpoint, consumer tax refund and cash flow tailwinds set the overall S&P 500 up for high and accelerating quarterly EPS from 1q-4q through 2026. Add in a likely more dovish Federal Reserve and or Treasury department come the 2nd quarter. Historically, 1q EPS are the low bar for quarterly earnings in the US for the year. Currently bottoms up, FactSet’s EPS forecasts have 4q26 quarterly earnings expectations of about $83.34/s up over 13% yty from the quarter we are in right now.
While this is a touch lower than projected 17% growth a few months ago, this “slowdown” in growth rate is entirely due to 4q25 EPS coming in significantly higher than projected just a few months ago. This higher base rate in EPS for 4q25 would make the 4q26 comparable growth rate at up over 13% slightly lower off a much higher base.
The two negative themes for 2026 were the normalcy of higher sustained volatility due to it being a second year of a presidential term, mid-term election cycle and at some point, the markets likely testing the new Fed Chairman within the first year of his sitting term. We ventured to guess it would be over a shock of sustained higher inflation prints.
Our team usually also gets the question of what could be a “surprise” for the markets. Of course, most people think negative surprises first and we listed the usual suspects of negative surprises around geopolitics in China or the Middle East or Fed Reserve missteps. However, the last 6 weeks’ price action in the overall SP500 got me thinking. Is there perhaps a positive surprise lurking out there? One on no one’s radar? And if so, what might it be.
Investors, 2026 started off “fast and furious” in a negative way with much higher volatility. But with that said, the overall S&P 500 sits at about 6950, pretty much the same level as we were at in late October 2025, 4 months ago. Here’s the vol curve as of this writing. One can see it’s pretty pricey to buy puts to help cushion one’s portfolio beyond the 1q given realized vol sits around 8-10 most weeks now and bond volatility is in a downtrend still below 65. All the volatility contracts hover between 20.5-22 currently.
Currently S&P500 earnings have grown almost 4% QTQ from 3q25 to 4q25. That’s also up +12% YTY. The 10-year nominal Treasury interest rates are essentially flat at 4.15% since last October. And the S&P 500 is? Flat since late October 2025. That doesn’t scream irrational exuberance to me. It is saying PE compression not expansion.
To me, if anything, the first 6 weeks of 2026 price action in the S&P500, with stock breadth broadening in the indexes, small caps and foreign stocks leading, and continued elevated cost of hedging already in the 21-22 range beyond the 1q26, versus realized volatility below 10, strikes me at something quite opposite of bearish.
It strikes me as quite bullish for 2-4q26, and that possibly the biggest surprise to myself and others might be slowly happening. What’s that? That would be a first quarter of more or less churning price action in the overall price. That would be a correction in the overall S&P500 based in time not so much % price decline in the overall SP500.
Remember that an average decline in this index in any 12-month period average is over a -5% decline. Anything less than -5% peak to trough would be a surprise and run counter to past corrections. Many strategists I read are looking for a -10-15% first half correction. So far, we’ve only had a -3.15% decline peak to trough in the 1q and that’s if you were perfect buying and selling.
The biggest surprise I could think of for the 1h26? Would be? That we’ve already seen the 1h lows in the S&P500 cash markets somewhere around 6750-80. I’ve posted how we are trading vs two prior periods many times since the Tariff tantrum lows last April. One comparing Trump1.0 vs. Trump 2.0 and secondly comparing the AI buildout cycle vs. the Dot.com period from 1997-2000.
Here’s the updated overlays of the SP500, Nasdaq 100, Dow Jones industrials for you large cap value fans, and one of the most volatile but leading groups off the bottom almost a year ago, semiconductor equipment, versus that time period back in the Dot.com buildout as that continues to seem to me to be the most logical analogy.
If this pattern continues to hold, would that mean that one has to rush in and buy stocks? No, of course not, but it would mean that the overall markets would once again frustrate those predicting the most dire negative outcomes at least for a few more quarters. That the more likely outcome than a big market dive would be another 6+ weeks of churning around in the SP500 between say 6700 and 6950, before investors exhale and start to believe those accelerating earnings and growth numbers for 2-4q26.
The good news is that our investment team has experience in these types of sloppy churning markets as well as those with higher levels of volatility. Remember investors that elevated volatility also means elevated opportunity, for longer term investors. Historically, investors’ biggest incremental returns come from investing when volatility is high, not low, and markets are down and others are either acting emotionally or worse yet being forced to sell, when they really should be pushing their chips into the center of the table and adding to investments.
What does all this mean to you?
Our advice to you is to keep following our investment content on our Oak Harvest Website and our YouTube Channels. Investors, whether you desire growth or income, or a combination of both in your portfolio, the entire OHFG team is here for our clients doing what we can to plan for you and your family’s future regardless of what stage you are at in your career or retirement.
Do you need a retirement plan that goes beyond allocating funds to truly fit your needs? We can help you create a retirement life plan customized for your retirement vision and legacy. Call us at 877-896-0040 or fill out this form for a free visit: https://click2retire.com/lets-connect
Chris Perras
CFA®, CLU®, ChFC®
Chief Investment Officer, Financial Advisor
Chris is a seasoned investment professional with over 25 years of experience working with some of the most successful money management firms in the world. Chris has made it a point in his career to adapt as the market landscape changes, seeking to utilize the appropriate investment strategy for a given market environment. His transition from managing billions of dollars at the institutional level to helping individuals and families retire is guided by a desire to see first-hand the impact he is making in the lives of clients at Oak Harvest.
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