1H26 Stock Market Outlook: Part 1 -Cycles and Seasonality

The reward for investing in equities is its return. The “risk” is enduring the drawdowns and market volatility at times. Here’s data we’ve previously shared  from Charlie Bilieo on S&P500 drawdowns and their frequency.

A -5% decline in the S&P500 happens nearly every year. A -10% decline usually happens, a bit over once every 18 months.  A bear market decline, defined as -20%, happens a little over once every 4 years. If you invest long enough, expect at some point during your lifetime, the S&P500 will lose -50% of its value. Given its rarity, let’s call that a generational decline.

With these downturns in mind, we are going to add some details to last week’s sneak peek at Oak Harvest’s 1h26 market outlook.  This week we are covering seasonality and cycles and how they might be both a tailwind beginning in early 2026 but a headwind throughout most of mid-year.  Our goal is not to be precisely accurate, but to give Oak Harvest clients and prospects an idea of what issues, as well as opportunities, our investment team thinks the 1h2026 might present investors.

Some years, like 2017, lack volatility. The bull strolls out of the gate, and your ride is over in 8 seconds. An investor looks back at year end and looks at their portfolio and it looks like nothing eventful happened, but your portfolio of stocks gained.  More frequently however, like 2025, you look back and the markets and your investments endured a few bouts of downside volatility.  Most years, even in strong bull markets, the bull tries to buck investors off its back onto the ground.  Hopefully an investor ends the year without being gored.

For the early first half 2026, our team is thinking the tailwinds for the current bull market extend, pushing the major indexes higher in early 1q. Historically, late December and very early 1qtr seasonality is positive and on the investors side.

Here’s the monthly return data chart from Merrill BAC dating back to 1929.

December tends to be a strong positive return month, but the positive return is generally all back ended loaded.   The second half of December stands out as the strongest half-month of the year and most the gains come after the 15^th trading day in December which happens to be today. Here’s the intramonth return chart for December from Market Gauge and Seeking Alpha.  Longer time periods look similar.

As you can see, the first quarter of the year is historically strong, averaging about 3% through April.  This historical strong seasonality bode well for returns in the next few months.

Besides the much-discussed positive seasonality of 4q-1q stock performance, with the recent strength of the S&P500 from April through October of 2025 registering 7 straight monthly gains with a 20%+ gain this too has historically been good for forward returns.

Historically, what comes next after such a rally? Per data from RBC and The Market Stats on average, the S&P 500 records positive returns the next 3 months after a normal flat to down period of 4-6 weeks. This aligns with current market seasonality as the S&P 500 has gone nowhere since late October and would place the market in a position to reaccelerate higher after December options expiration starting next week should history hold true to form.

The above data would triangulate the S&P 500 to peak in the late Jan, February period between say 7166-7266, up between 5-6% from when this was written and up about 3.5-4% above previous ATH’s. These stronger returns appear not to be random events. These winning streaks have occurred when earnings are strong, liquidity is high, or major shifts are driving markets. Today it is AI capex, easing financial conditions and a resilient consumer. As always, history is not a guarantee.

Unfortunately, while seasonality is a tailwind for equities in the next few months, 2026 does usher in the dreaded second year of a presidential term. As we’ve discussed in previous election cycle videos, the 2^nd year is historically the worst of the four-year Presidential cycle with a mere +3.3% average return during the year and positive returns only 54% of the time since 1929. Here’s the data from Charles Schwab and Ned Davis Research as well as the monthly data from Merrill Lynch Paul Ciana.

Even if we look at more recent data from the 50’s forward, the gain in a Presidents 2^nd year from 1950-2023 period has been only +4.6%, less than half the average annual S&P 500 gain of about 10%. Remember these are point to point returns at the start and end of the year, and they don’t include intra year highs and lows. This history, combined with our team’s outlook for elevated volatility for most of 2026, makes the case for trying to be more tactical in one’s investments in 2026.

Throw into the Presidential election cycle equation the markets history of “testing” a new Fed Chairmen during their first term, and investors should be wary of the middle few quarters of 2026.  What am I talking about?  Here’s a list of recent FOMC chairs and what happened during their first 12 months in the lead.  Lot’s of negative peak to trough numbers there.

Before we wind up this video, I’m sure a few viewers are wondering about how this outlook and forecast might compare versus the prior “dot.com” investment cycle from 1995-2000.  Specifically, how might the first half of 2026 play out if markets continued to move along a similar path as the one, we’ve laid out in previous videos the last 7 months, since the current April 4^th, 2025, Tariff Tantrum low overlaid with the rally in Dot.com after the Oct 8^th, 1998 LTCM bottom through the end of Dot.com boom.

Here is the updated overlay of the two-time periods. Yes, still generally traveling along the same path in both price and time.

A similar outcome prevailing in 1q26 triangulates to over 7200+ in mid 1q26 for the S&P500, followed by a sharp fall in mid-year.

I’m still finding this to be an amazing replay of investor behavior or a total coincidence, but it bears watching still as what event is slated to take place in early mid-year 2026 right around when a future low would show up on this “cycle replay”?  A new Fed Chair appointment hits the FOMC.

As one can see, there will be pushes and pulls in 2026 and we will address more of each in coming videos. For 2026, one of the things that is top of mind for our team is sustained heightened market volatility.

The good news is, our investment team has experience in these types of volatile and bucking bull markets. Remember 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’

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 and we will be addressing more of our outlook in the next few weeks.  And tune into our Livestream YouTube on our 2026 Market Outlook on —Jan 29.2026-.

Investors, whether 2026 plays out as a bucking bull ride or something different, 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