Hello. Merry Christmas everyone. It's

the 27th of December and we've got only

three trading days left for the year.

Yep, we're coming to the end of 2025 and

it's been another doubledigit gain for

the US markets. You know, we had double

digit gains in 2023, 2024, and now 2025.

S&P is up 17% year to date. And of

course, no thanks to the profits of

doom. Once again, if you had listened to

any of the doomsday pawn stars on the

mainstream news, you would have lost a

lot of money this year selling at the

bottom at the end of the tariff crash of

of April and probably lost money if you

shorted the market. All right, never

forget. In fact, in June last year, we

had uh you know experts saying that the

stock market crash is coming 2025. Well,

they said that every year for the last

10 years and is the bubble of all

bubbles going to burst, right? And then

in in April when we had got we had that

tariff crash from Trump's liberation

day. We had again majority of economists

saying that we are going into a

recession this year. They said that in

2023 as well. All right. Classic bare

market rally says HSBC. Jeffre cut S&P

500 target. See stock falling from here.

This was back in April of this year.

Wall Street trading desk once S&P 500

selloff will get worse. Not could get

worse. Will get worse. We are still

heading into a bare market. This was 10

April of this year. Strategists who call

end of US exceptionalism sees no

recovery. All right. So as again I keep

telling all of you, you know, ignore all

these opinions from other people. Just

stick to great companies, stick to the

market, stay invested, and you will do

very very well. Now, as for my personal

portfolio this year so far with 3 days

left to go, uh let me just check it out

right now. It's loading live. Yep. So,

I'm up 18.74%

year to date. Slightly edging out the

S&P 500, but it's actually nothing

compared to my students. My students are

kicking my ass this year, right? You can

see up 31% this year. We've got Raj

who's up uh sorry, 32% this year. We've

got Rustam who's up 127% this year.

We've got Ary who's up 28% this year.

We've got Brian who's up um uh 208% this

year. And you know, the list goes on,

right? So, you know, it kept me thinking

that I think this year I was too

conservative, right? I was really too

conservative this year, right? But never

mind. I'll be actually doing another

video which I'll talk about my year in

review, which is um what are my hits in

2025, what are my misses, what I learned

from it, and so and so forth. But as

long as I beat the market even by a bit,

and I made money, it's a pretty good

year. I can't complain. Anyway, let's

get to the focus of this video, which is

what can we expect in 2026? What are the

opportunities and what are the risk?

Now, before I begin, I always say this,

right? No one can predict the market

with any certainty because there are too

many moving parts. All we can do is we

can just make guesses and of course, we

could be wrong. But understand that

whether I think that 2026 is going to be

bullish or bearish, it does not affect

my investment and trading decisions at

all. [snorts] Forecasts are purely for

entertainment. So even if I think that

2026 the market is going to be bearish,

I will still buy companies if I think

they're undervalued because in the long

run they're going to grow in value. If I

see trades that are bullish trades

within a down year, I will still take

the bullish trades, but of course, I'll

take some bearish trades as well. So,

with that in mind, let's take a look at

what we can expect. Now, first and

foremost, remember that

every year that begins, the bias is

always to the upside. And this is again

based on history. If you take a look at

the last 74 years excluding this year,

you can see that the market goes up a

lot more than it goes down. Right? In

the last 74 years, starting from 1951

all the way to the end of last year,

2024, you know how many years ended of a

gain? If you count, you can see there 58

years out of 74 years ended with a gain.

So that's 78% of the time. and 16 years

ended with a loss out of 74. That's

21.6% of the time. So what does that

mean? That means that on any given year,

your chance of the market going up is

78%.

On any random year. So the question is

for 2026,

are we bullish which means is the chance

more than 78%. or are we bearish when

the chance is less than 78%. So let's

take a look at both arguments

and let's begin with the bullish

argument and then we'll look at the

bearish argument and we'll do a summary.

So reasons to be bullish for 2026. I

think there are six main reasons to be

really really bullish. Number one is the

US economy remains very strong. Uh

a lot of economists they said that we're

going to go into recession this year.

They said that for the last 3 years, it

never came. And not only that, but the

recent GDP quarter 3 data that was

released a few days ago showed that the

US economy grew the fastest in the last

two to three years, right? It was way

above expectations and I'll go through

that in a while. But basically the

economy remains very very strong and

it's expected to grow uh next year as

well by between 2.3% which is the target

by the Federal Reserve to 3% by some of

the investment banks. So that's the

range for next year. So why does it look

like the the US economy will continue to

grow next year? Few reasons. Number one,

the lack effect of the rate cuts. So

remember that the Fed has been cutting

interest rates already for a few months

now. It's a lag effect. Cartic interest

rates is like stepping on the

accelerator, the gas on the car pedal,

but it doesn't react immediately. It

takes a few months to react. So the the

effects of lower interest rates have not

filtered through the economy. So it's

going to kick in next year. Second is

fiscal stimulus. So as you guys know the

Trump administration, they are one big

beautiful bill. They are doing a lot of

fiscal stimulus which means the

government is pumping a lot of money

into the economy through infrastructure

building through tax cuts and of course

the Fed is in an accommodative cycle

which means the Fed is not raising

interest rates they are cutting interest

rates. So all that bolsters well for the

US economy. So that's the first thing.

Now I'm going to go through go into

detail in a while. So this is just an

overview. All right. Second reason is

that once again the Federal Reserve is

in a rate cut cycle and they just ended

their quantitative tightening. So in

essence this increases the money supply

which historically bodess well for

stocks and risk assets. Number three,

the S&P 500 company's earnings are

expected to grow next year by 15%. By

the way, they grew double digits this

year, way above expectations. They're

expected to grow at 15% for calendar

year 2026. Why? Mainly driven by

productivity increase in profit margins

because of AI adoption and again details

in a while. Fourth reason once again the

the one big beautiful bill which is

deregulation

plus a lot of corporate tax cuts are

coming. So essentially what the Trump

administration is doing is that they are

allowing companies to keep more of their

money through tax cuts and tax write

offs. A total of $137 billion

is going to go into the pockets of

companies. So more profits means more

value of the shares, higher stock

prices. And as part of the bill, uh,

households in the US, the consumer

themselves are getting a $100 billion

amount of tax break. So more money in

the pockets of consumers, more consumer

spending,

higher uh GDP, higher growth of

companies. Number five, the yield curve

that was inverted for a couple of years

and people say recession didn't happen.

Now the yield curve is uninverted and

the yield curve is sloping up very

nicely and the 10-year Treasury yield is

in a sweet spot. Again, details in a

while. And the last reason is more of a

technical reason which is the market is

on an uptrend and on an uptrend the

probability is that prices keep staying

on the uptrend until the trend reverses

down which it has not yet. and the fact

that we are in the fourth year of the

bull market which started in October

2022

next year will be the fourth year of the

bull market and the fourth years are

usually pretty strong okay so let's go

through these uh points one by one so

again the first point like I mentioned

uh this was uh reported a few days ago

GDP for the for quarter 3 that was

delayed but just came out came in at

4.3% % that was the best quarterly

growth in two years. I think I said 3

years earlier on, wrong, it's two years.

So what drove GDP growth in quarter 3?

It was consumer spending. Interesting,

right? Consumer spending was the key

driver of growth. In fact, it was up

3.5% with strong purchases of both goods

and services. And you can see it here on

the table as well. You can see quarter

one was negative and everyone screamed

recession and quarter two was very

strong. Quarter three even stronger and

quarter four which is again not out yet

is projected to be u pretty strong as

well. I think it's like 3% as well.

Okay. So first reason. Second reason

again uh the Federal Reserve is now our

friend. Okay. So the Fed is right now in

the rate cut cycle. They've been cutting

rates for a while as you can see. So uh

they have reduced the fed funds rate

above 5% all the way down now to the

target range of 3.5 to 3.75%.

So from here where do we go? Well based

on the last FOMC meeting the Fed expects

to cut one more time in 2026

one more time in 2027 and that should

bring the Fed funds rate to the neutral

level at 3%. So 3% is the neutral level

right there. And if you look

historically 3% Fed funds rate is

somewhere in the middle of the range. So

that's in a way the sweet spot.

Um in the last FOMC meeting the Fed also

said they are more optimistic about the

economy. They expect uh GDP to be at

2.3% next year which is an increase from

their prior forecast. They expect

inflation to have peaked this year going

down and unemployment they expect to

have peaked. Now how much weight do I

place on their on their analysis? Not

really a lot. All right? Because the Fed

has been wrong many many times. But

basically that's what they said. Now not

only has the Fed started cutting

interest rates but as of December this

year they have ended quantitative

tightening.

So what does that mean? So basically

when you cut interest rates and you do

not uh continue quantitative tightening

that increases the money supply in the

market right so when you increase money

supply there's more money in the system

that is bullish for assets okay

if you take a look at this table you can

see that when the Fed cuts interest

rates is that bullish or bearish it

depends when the Fed cuts interest rates

when a recession is expected or when the

economy is in a recession, that's

bearish. Then the market goes down as

the Fed cut interest rates. But when the

Fed cuts interest rates when there's no

recession and the Fed cuts interest

rates when markets are near an all-time

high, historically that has been very

bullish. And that happened the last 22

times since 1980. And you can see that

these were all the times the Fed cut

interest rates when the market was near

an all-time high, which is where we are

right now. And out of the 22 times it

happened, in all 22 instances, the S&P

500 was up one year later, which is 12

months later. In fact, uh 12 months

later, the S&P is up a median of 11.1%.

and 6 months later it's up a median of

5.2%.

So what does it mean? Basically it means

that fat gut interest rates when market

doing well, economy doing well is

bullish.

Then we look at not only that but the

end of quantitative tightening.

So quantitative easing is when the Fed

buys bonds. When they buy bonds

it increases the money supply and they

did quantitative easing. QE uh during

the crisis, right? So during the COVID

crisis, the Fed they did the

quantitative easing. So when it buy

bonds, what happens? It pumps money to

the system. Market does very well. And

then when in inflation was too high,

what did the Fed do? the Fed, they raise

interest rates and they did quantitative

tightening, which means they stop buying

bonds and they allow the bonds that they

own in the balance sheet to to mature

and they do not renew the bonds. That's

called quantitative tightening. So that

started in April 2022. They started

quantitative tightening which is

reducing the money supply and you can

see the Fed balance sheet shrank from

April 2022 to December this year.

So this is so-called the money supply

shrinking. But you may say, hey, if the

money supply is shrinking, how come the

stock market went up? So that's what a

lot of people didn't understand because

a lot of people when they say, hey, the

Fed is doing QT, the market has to

crash. And so a lot of people shorted

the market and they're going to short

there. Why is the market going up?

Reason is because even when the Fed is

reducing money supply, the market will

still go up if earnings are very strong

and because corporate earnings have been

very strong driven by AI productivity

gains.

That's why we have the market doing very

well. So now we have got again the

productivity gains going forward plus

now QT is ending. what you think is

going to happen. We're going to have two

tailwinds to the market in 2026.

Again, there's no guarantee. I'm not

saying it must go. I'm just saying that

the odds of the market going up are

higher now than it was in the last 3

years because we've got now no more QT

and we've got strong earnings growth and

we've got lower interest rates.

Next, we look at the individual

companies, the S&P 500 companies.

The 500 companies are projected to grow

uh at 15% earnings growth in 2026 and

again mainly driven by uh productivity

gains from the adoption of AI AI agents

large language models and automation. So

the red dotted line is the projected

earnings per share. The blue line is the

actual earnings per share. So you can

see that for this year the the projected

earnings per share uh for the the entire

year is over here. That's a projection

and the actual earnings per share looks

like it's going to catch up to that now

for next year. That is the projected

earnings per share for the S&P 500 and

ultimately share price follows earnings

right and that's why the market is

expected to rise next year as well. Uh

this is from fact of which I own the

shares as well. Uh you can see that the

magnificent seven companies are expected

to report earnings growth of 22.7% next

year.

and the other 493 companies are expected

to report earnings growth of 12.5% next

year. So overall 15% but the Magnificent

7, your Microsoft, your Apple, your

Nvidia, uh your Amazon are expected to

make up the majority of the games.

Hence, we want to stay invested in those

strongest companies in the market, which

I am.

So those are the first three points. Now

point number four once again the one big

beautiful bill I have already talked

about it which is again the Trump

administration doing a lot of

deregulation cutting the red tape making

mergers and acquisitions a lot easier

corporate tax cuts and household tax

breaks will put more money in the

pockets of consumers and more profits in

the pockets of companies and that is

very very bullish. Number five the yield

curve is in a sweet spot. If you look at

the yield curve right now, this shows

you the different um interest rates or

yields based on the different maturities

of the US government bonds. And you can

see that we are right now in an upward

sloping yield curve. The 10-year

Treasury yield is currently at uh just

below 4.2%.

So, is that good or bad? Right. So this

was a chart uh from Funstrat couple of

um years ago in fact and you can see

that if you look at

the PE ratio of the market it tends to

be at the highest where the 10-year

Treasury yield is between 3.5 to 5.5%.

So that's the sweet spot. So currently

where's the 10ear yield? We're currently

at 4 point less than 4.2% somewhere

around here. We are within that sweet

spot. So as long as the 10ear yield

doesn't go above 5.5%.

And it doesn't fall below 3.5%

we are in a Goldilocks spot for the uh

long-term uh interest rates. Okay. So

the sixth and last reason for being

bullish is simply that the market is on

an uptrend and we are entering the

fourth year of the bull market and the

fourth year of the bull market tends to

be a pretty strong year historically. So

again when did this bull market start?

This bull market started in October

of 2022. That's when this bull market

started. So 2022 October, 2023, 2024,

2025 October. So October this year was

the end of the third year. So we are now

in the fourth year of the bull market.

And if you take a look historically at

the previous bull markets, you can see

that year four of the bull market, what

are the chances of it being up? uh you

can see percentage of the time it is

higher in the fourth year is 85.7%.

Which is higher than the 78%

usual bullish year in the market. So

again, I expect 2026 to be bullish uh

more bullish than normal in in other

years, right? But having said that, I

don't expect another double-digit gain.

I expect a singledigit gain here. And

I'll talk more about that later on. And

of course, finally, if you look at the

charts, you can see that, you know, the

old saying is the trend is your friend.

As long as the market remains on an

uptrend, the the path of least

resistance is up, up, and away. Okay,

until the trend reverses. But for now,

we are on an uptrend. How do we know? We

take a look at the moving averages.

We've got a 20 EMA, the red dotted line,

above the 40 EMA. That means the

short-term trend is up. We've got the 50

moving average, the blue line, above the

150 moving average, which means the

medium-term trend is up. And we've got

we've got a 200 day moving average

sloping upwards, which means the longer

term trend is up. So, the short-term,

the medium-term, and the long-term trend

are all aligned. They're all on an

uptrend. And sure enough, you take a

look at the price action, you can see

higher highs and higher lows, right? You

can see wave up, wave down, wave up,

wave down, wave up, wave down, wave up,

wave down, wave up, wave down, wave up,

wave down, wave up, wave down, wave up,

wave down, wave up, wave down, wave up.

So, you can see the market making higher

highs

and making higher lows. So when a market

makes higher higher highs and higher

lows, the uptrend is very much intact.

But again, always remember that it

doesn't go up in a straight line. After

a wave up, what tends to happen? You're

going to have a wave down, right? And

then wave up and then wave down. So, do

I want to, you know, if I want to buy

the S&P 500 ETF, do I want to jump in

right now? Probably not, right? because

we're not on a wave up. I like to wait

for a wave down, wave down to, you know,

dollar cost average into the market

before the next wave up. Okay, so six

reasons to be bullish for 2026. But

there are reasons to be bearish as well.

Yeah, there are a lot of reasons to be

bearish as well. So, what are these

reasons? Well, find out in part two of

this video coming up really soon. So, if

you have not already done so, subscribe

to this channel so you get instant

notification when once the next video is

going to come up and it's going to be

really, really soon. Part two, I'll talk

about reasons to be bearish in 2026. And

then we'll do an overall summary of what

to expect and how to position ourselves

for the coming new year. Thank you for

watching and may the markets be with

you. If you want to catch my latest

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Coup and may the markets be with