Traditionally, on the last show of the year, we try to forecast what could happen in the next year over various markets. This year’s version is no less challenging than in past years. The truth is, forecasting markets is hard!

Twenty-four strategists surveyed by Bloomberg on Dec. 16 expect the market to be about 6,500 at year end 2025—the street was not bullish enough. The most bullish strategists saw 7,000 to 7,100 look to be a little light, though Santa could rally us there if we are good little boys and girls this week.

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Berman’s Call last year was cautious on equities to be sure, but we stopped short of putting a price target on the S&P 500. I did say that 6,500 was doable if we did not see a jobs recession. It’s arguable that we are now seeing a jobs’ recession based on recent data and what Federal Reserve Chair Jerome Powell said in the last Federal Open Market Committee (FOMC) press conference.

I expected a volatile 2025, which we certainly saw in the first half. I did not expect a perfect landing to the economy, and thus far, while inflation has elevated, markets do not seem to care too much. Historically, the forward based return after a three-year rally like we have seen in 2023 to 2025 is for negative returns. I did expect the U.S. would lead the world in AI and that tailwind would help, which is certainly has, but my call that rest of the world would lag was wrong! As a reminder, looking in the rearview mirror to forecast the go forward is generally a bad idea.

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Looking forward (28 forecasts), 7464 (+9.2 per cent) is about where the strategists see 2026 with about $305 (13.4 per cent) in earnings and for the at multiple to remain elevated in the 24 to 25 range. The top 10 bulls are in the 7,700 plus range.

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When we look at the sector level, the majority amount of the earnings per share (EPS) growth is coming from the tech sector. Huge tax benefits from accelerated depreciation is likely the major catalyst. The much higher than historic multiple is dominated by technology at almost 35 per cent of the index and more than double any other sector and equal to the weight of the next three sectors.

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From a bottom-up perspective, if all the stocks hit their price targets at the same time which is not likely, the forecast is in the 7900 area. This suggests the strategy bulls are too optimistic.

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I expect that the Bank of Canada will cut rates one more time. I expect the FOMC will cut two to three more times next year and possibly more in 2027 if we get the fiscal cliff and hard landing post capex boom in 2026.

Pricing in rate hikes in the back of the curve is likely mispriced. The U.S. Administration has a very strong desire to keep capital markets strong heading into the mid-term elections with approval ratings very low for the GOP. The new construct and leadership of the FOMC tilts policy in the easing direction. Stephen Miron’s view that FOMC should be thinking 18 months in advance will likely be incorporated in the new FOMC construct.

A huge known unknow in 2026 is what happens to the long end of the yield curve. Massive debt (deficit) supply, less foreign demand, and lingering inflation concerns. I expect full on QE again in the next recession, but that looks increasingly like a 2027 call at this point.

Long bond yields stay elevated (U.S. 30s near 5 per cent area) and the curve steepens. Gold likely stays strong in this environment and could hit US$5,000 before it eventually corrects back to $3,000 once we lose market liquidity. Bitcoin could easily fall below 50,000 in a risk off scenario too, but I don’t see that in the first half of the year or until 2027.

Another move back to all-time highs is possible if we gat back above $100,000. Right now, risk assets probably keep grinding higher supported by lingering economic momentum and AI optimism (developing bubble).

I am very worried about the labour market and its impact on aggregate demand as AI influence on jobs in the coming decade grows. I think there is a skills mismatch to adapt to the new reality of the AI productivity boom to come. My best call, learn how to improve your job skills to have AI help you and not replace you!

Happy Holidays and best wishes for a health and happy 2026!