2026 Outlook Preview: Being a Bull Rider is Hard Some Years

Since we exited the Covid lockdown, investors have been treated to a continuation of the bull market that began between 2010-2012 depending on your definition. As of this writing, the cash S&P500 sits around 6850 up about 16.5% year to date. This said, it has not been easy to stay a “bull” and to stay positive and long biased the last 5 years. Over the last 5 years an investor had to endure a -27.5% peak to trough decline in the S&P500 in 2022. Include the near +10% inflation reading that year and that’s, -37.5% in purchasing power declines.  In addition to that 2022 earnings “recession” decline, investors more recently had to whether a -21% decline in the S&P500 in April 2025 around the Trump Tariff tantrum.

Longer term investors know that if you invest long enough, you will likely endure unrealized losses and downside volatility of varied sizes each and every year if you are invested in the S&P500 or any other index. The reward for investing in equities is the return. The “risk” is enduring the downside volatility at times. Here’s some great data from Charlie Bilieo on annual drawdowns and their frequency.

Look at the above chart. -5% decline in the S&P500 happens nearly every year, while a -10% decline happens, every 18 months.  The treaded bear market decline of -20% happens a little over once every 4 years while a recessionary decline of -30% happens 1 out of 10 years.  Investors, if you invest long enough, expect at some point during your lifetime that the S&P500 will lose half its value.  Given its rarity, let’s call that a generational decline.

With this in mind, it brings me to this weeks topic, our Oak Harvest’s 1h26 market outlook, or at least a sneak peek. We’ve been doing these forecasts for over 5 years now at Oak Harvest.  Our goal in this exercise is not to be precisely accurate, although many of our market forecasts have historically been both pretty accurate as well as precise, but its to give our clients and prospects an idea of what issues, as well as opportunities the Oak Harvest investment team thinks the coming year might present investors.  As we’ve discussed in the past, there are times when tactically, the investing odds favor going faster and investing more, and there other times, like going into 2020, that it was time to “curb your enthusiasm” and proceed more cautiously.

Historically there are certain economic and market setups that have higher odds of replaying similar past outcomes with higher frequencies. Some years. Say like 2017, 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 as there was little to no volatility.  More frequently however, like 2025, an investor will look back and see they had to at least one or two bouts of major downside volatility.  Most years, even in strong bull markets, the bull tries to buck investors off its back onto the ground, those investors who do not have a steady hand, or retirees without an advisor or coach, or at least a financial plan, can get swayed emotionally by swift increases in market volatility throughout the year.

For first half 2026, our investment team is thinking that the tailwinds for the current bull market to extend itself should continue, that the pluses outweigh the negatives we see, however the likelihood for higher sustained market volatility exists and we do not expect it to be a smooth ride in the 1h26.

For now, we are going to list the headwinds and tailwinds we see for 2026, delving into more detail in the coming weeks here in our videos as well as in person for our clients, in January at our Market Outlook Summits.

In the bull’s camp is very strong anticipated 2026 S&P500 earnings and quarterly earnings growth rates.  Currently bottoms up, FactSet’s EPS forecasts have 4q26 quarterly earnings expectations of about $82.5/s up over 17% yty from the quarter we are in right now.  Remember investors, over longer time frames, stocks follow earnings and historically, unlike market bottoms that anticipate recoveries, the market doesn’t historically peak in front of earnings but rather coincidentally. Assuming, no PE contraction in 2026, 17% growth, on top of the current S&P500 of 6850ish would triangulate to a much higher S&P500 at some point in the 2h2026. Interestingly, this path would also mirror the path we took along the Dot.com/AI investment cycle pattern post Long Term capital in October 1998, that stocks have been in sync since the early April lows.

A few factors that could contribute to these EPS numbers being achievable in 2026 are stronger than expected real GDP growth on the back of elevated BBB incented capex spending by large tech companies. Throw in a rebound in lower end and middle end consumer spending in the middle of the year due to larger tax refunds many spenders will get due to the BBB and those are positive tailwinds.

The bull market “kicker” that our team potentially sees happening in mid-2026?  A more dovish biased new Fed Chairman, appointed by the President, that should begin their term in early May, just in time if there is seasonal weakness next year.  Can you say “QE” or maybe “yield curve control”?

On the negative side of the ledger for 1h2026. Things the market is likely to worry about?  First and foremost, in our book, an uptick in market inflation expectations in the early months of the year seems likely. As we’ve discussed before, inflation is seasonal in the US. However, concerns over catchup tariffs affects, higher new year labor costs and stratospheric medical cost increases, could hit just as investors begin to worry about Fed independence under a new chairman.

The Federal reserve appears more fractured than we can remember with board members split between prioritizing waning job market strength or too high than wanted inflation readings.

Finally, like many other indicators, market volatility waxes and wanes in cycles.  2026 is the second year of the presidential cycle.  The dreaded mid-term election year.  Historically, while posting positive returns these mid-terms years have elevated levels of volatility and exaggerated seasonal swings in returns. Couple these negative headwinds with the increased scrutiny of what our team is calling the AI and economic “Credit circle”, and the setup for a year of ups and downs, of a bucking bull ride is higher in 2026 than many other years.

The good news, our investment team has experience in these types of 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, 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 and we will be addressing many of these points and more, and tune into our Livestream on YouTube of our 2026 Market Outlook on —Jan 29.2026-.

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.