2026 Predictions
It’s a new year, and the pundits are out in force – predicting and pontificating. Before we listen to them let’s see how good they were with their predictions last year!
Pessimism Ruled!
Last year I remember pouring scorn on the prediction made Dec 2023 /Jan 2024 for the year end Dec 2024. On average they were off by over 20%. Here’s the predictions:
On average they were underestimating by 20%! Not a great track record. So how did they do this year? A lot better, actually – only 4% off. My guess is that after underestimating so badly last year they went all optimistic this year.
Should we listen?
So – should we start listening to them? Well, I think there is a fair bit of obfuscation going on. It was actually really hard getting this information – only by playing off Gemini and GPT did I actually get the correct figures (well, I think they are – as correct as I can).
They all change their predictions during the year once they see which way the wind’s blowing.
Because things keep changing. . .
It reminds me of Alice In Wonderland: “It’s no use going back to yesterday, because I was a different person then.”
So, let’s look at some of the major backflips:
Bank of America
BofA started out last year with an optimistic 6,666 – but that only lasted a couple of months before they turned bearish. Very bearish.
The “Reasons” for the Change (March 24, 2025):
- The “Tariff Shock”: BofA’s Savita Subramanian warned that new tariffs on China, Canada, and Mexico would deliver a 10–15% direct hit to S&P 500 operating income.
- Recession Risks: They raised their recession probability to 40%, fearing that tariffs were effectively a “tax increase” that would crush household purchasing power.
- The Squeeze: They predicted flat earnings growth ($250 EPS) and warned the S&P could drop as low as 4,000.
6.666 to 4,000!! That’s some change!
Luckily, the stock market proved much more resilient than BofA’s models.
By July, they were forced to change their minds again, raising their target back to 6,300, and eventually to 7,100 by year-end as the AI boom and consumer spending ignored their recession logic.
So much for conviction!
And Barclays as well . .
Barclays followed a nearly identical path, starting at 6,600 before the March panic.
The “Reasons” for the Change (March 26, 2025):
- Slowing Growth: They slashed their target to 5,900 (a 700-point drop), citing “tariff uncertainties” and a global downshift in manufacturing.
- Earnings Downgrade: They reduced their S&P 500 earnings-per-share (EPS) estimate to just $262, believing that trade wars would eat all the profit margins.
Like BofA, Barclays had to admit by summer that the “inflation boost” from tariffs wasn’t killing the market as expected. They spent the rest of the year chasing the rally they had just bet against.
And Goldman Sachs as well . . .
‘Trade tensions’ and ‘muted earnings’ dropped their prediction from 6,500 to 6,200.
But the prize goes to:
BCA Research. Their reputation is as the “intellectual bears” of the industry. They rely heavily on macroeconomic modeling, debt cycles, and labor data rather than just corporate earnings. You have to be impressed at the quality of their forecasts – all bases covered!
Well, they have 5,200 – 7,500 covered . . . of course they are going to be right!!!
So the 2026 Predictions?.
The moral of the story? Really, no-one has any idea.
Just treat all predictions as fantasy fiction.
To the markets . . .
A relatively quiet Christmas / New Year period. We didn’t get an increase in volatility, which often happens because of the low volume.
SPY Charts
SPY has barely moved since the last blog – up a little down a little, moving from $680.73 to $683.17. It actually made a new high on Christmas Eve ($690.38), but essentially it is still travelling sideways, as it has been since October.
On the long term chart, we see that SPY is definitely out of the trading channel it established in April last year. We note the previous trading channel starting late 2023 came to a sticky end in February last year, bottoming in early April and narrowly avoiding a bear market. The reason then was the Tariff Tantrums, let’s hope that SPY doesn’t feel obliged to do it again.
Let’s look at an even longer term chart, on a log scale. Here is SPY going back to the turn of the century. The Techwreck and the GFC are clear, both being major dips, the Covid bear now barely a blip. But everything is travelling in a nice steady upward trend, not a hockey stick in sight!
This chart comes from this website – choose ‘Charts’ from the Tools Dropdown Menu. To change from linear to log scale just hover over the RH axis and choose ‘logarithmic’. Here’s the link: Charts
SPYG Charts
SPYG is still in its consolidation phase – does not seem to want to go higher than $108. Thee seems to be an ascending triangle forming, and that often (not always) predicts a break to the upside. Let’s hope so.
Longer term, like SPY, it seems to want to drop out of its trading channel.
QQQ Charts
QQQ still hasn’t got back to its highs in late October. This shows the folly of relying on what you ‘see’ in the charts. The blue dashed lines are still forming a symmetrical triangle, and unlike the ascending triangle, is just as likely to go down as up when it breaks out.
But let’s have a triangle for optimists! Change the starting point to 4 days later and we have an ascending triangle, likely to go up!
Which on is right? Both are; patterns on a chart are subjective, and depend on the person drawing and what dates are chosen. Sometimes they are relatively unequivocal, but often a different starting point gives a different perspective.
On the long term chart, QQQ is still in the trading channel. Now for a challenge:
Go to the chart section and look at QQQ on a log chart for 2000 – 2025 – what does this show us?
VIX Chart (Volatility)
The Vix is still in low-volatility territory.
ITMeter
The week ahead . .
As the markets get back to normal, this week brings:
- Mon Jan 5 ISM Manufacturing PMIA: key health check for the industrial sector; expected to show slight contraction (around 48.2).
- Wed, Jan 7 JOLTS Job Openings: Measures labor demand. Investors are watching for signs of the “labor market softening” that began in late 2025.
- Fri, Jan 9 December Jobs Report (NFP). Expected non-farm payrolls of ~55k-57k. A return to the normal Friday schedule after last year’s government shutdown delays.
- Fri, Jan 9 Unemployment Rate: Forecast to edge lower to 4.5% from 4.6%.
The futures . .
. .don’t seem to be too worried about Venezuela.
Fingers crossed for a good week!
Heather
Trade the tide, not the waves.
10 Responses
Dear Heather,
Congratulations with your purchase of a new house. What is your thought of the real estate market right now in 2026 and beyond? The 18 year cycle in real estate market?
Hey George Henry!
Housing in Australia has been going up at a huge rate – function of extremely high immigration and a very low housing supply. however, if you are buying and selling in the same market it doesn’t matter too much.
I’m not doing this for investment – just that I want that enormouse (139 sq m!) balcony with the fabulous view of the ocean! Much as I love my current house, it is time for a change.
x
h
Hi Heather.
Thanks for your excellent blog. My favorite read of the week.
Looking forward to the new book and the blog.
Good luck with the new house and have a very prosperous 2026.
Hi Ben – how kind! Thank you.
Yes I am looking forward to the new place – fabulous view! – but not looking forwared to the packing up and selling this house! Hopefully will be all done and dusted by April.
Well, thats what I am hoping.
x
h
Hey Heather!
How is the book coming along? Can’t wait to read it!
Hope you enjoyed your holidays.
Jason
HI Jason – pls see reply to Brian below.
x
h
Hi Heather,
When is your new book going to be for sale? Looking forward to it.
Kevin
Hi Kevin – see reply to Brian below!
x
h
Hi Heather,
I forgot, when will your new book be coming out? Looking forward to it!
Hi Brian – the book is actually finished – I am developing a whole website of resources to go with it, and I want to launch them together – hoping for the end of January.
Everything has been slightly delayed because I have bought a new place and am selling this house – which means I have had floor sanders and painters, inside and out (and on roof! and it is 3 storey!) – all this activity has disrupted my schedule, hence the launch has been pushed out to the end of January.
I am really pleased with the book and I think the website will be a first!
h