Overview
- The author forecasts a 2026 pullback of at least 10% at some point, noting corrections are common, with 25 since 1974 and only six becoming bear markets.
- The S&P 500 was up more than 18% as of Dec. 25, following gains of 24% in 2023 and 23% in 2024.
- The index trades above historical price-to-earnings levels, which the author says reduces the market’s margin for error and heightens the risk from modest shocks.
- The Federal Reserve has begun lowering interest rates, with expectations for supportive balance-sheet moves that could continue to bolster equities.
- AI leaders delivered outsized returns, yet the author warns the trade looks fragile as hyperscalers spend hundreds of billions on infrastructure with projections running into trillions.