US Stock Market Outlook and Q1 Correction
The equity markets appear to be nearing a significant peak, with a forecasted correction for the S&P 500 expected to intensify during the first week of February. Despite this initial volatility, the year-end target for the S&P remains 10% to 12% higher than current levels around 6,950.
In November 15-month midterm election cycle primary rally driver.
2026 Composite Cycle for the S&P 500.
Long-Term Cycles and Inflationary Pressures
Current economic conditions mirror the 54-year cycle last seen in 1972, characterized by persistent price inflation, social unrest, and rising interest rates. This environment of "excess liquidity" is evidenced by record-breaking prices for collectibles and comic books. Furthermore, the removal of the gold window in 1971 and subsequent monetary acts have removed traditional limits on currency monetization, explaining gold’s ascent toward the $5,000 mark.Sector Rotation and Technology Moderation
A primary theme for 2026 is the transition of leadership away from the "Magnificent Seven" and toward undervalued sectors. While technology will remain relevant, leadership is shifting to names like Intel and Micron rather than the overextended market leaders.
Capital is expected to flow into healthcare, base materials, and emerging markets, the latter of which are breaking a 15-year relative downtrend against US equities.
Bullish Outlook for Energy and Oil
Oil presents a compelling "witches' brew" of bullish indicators: strong technical support between $50 and $55, extreme bearish sentiment, and favorable seasonal cycles.
Monthly Crude Oil Cycle.
A rally is anticipated through June, with stocks like ExxonMobil (XOM) and Schlumberger (SLB) showing classic technical breakout patterns. This sector stands to benefit most from the rotation of funds out of high-priced mega-cap tech.
Fixed Income, Gold, and Bitcoin
Fixed income remains unattractive, with the 10-year note facing strong seasonal headwinds in March.
10-Year Notes monthly histogram.
Gold.
Bitcoin.
Conversely, Bitcoin continues to adhere closely to its cyclical data, suggesting a potential rally toward the $110,000 to $115,000 range by April.