Professional bears
and purveyors of pessimism often emerge at this time of year with
gloom-and-doom narratives. While there are indeed periods to adopt a
bearish stance, currently such warnings should be approached with
caution.
The
standout stock of 2025 has been Nvidia. My forecast for the first few
months of 2026 suggests a decline into mid-February, followed by a
strong rally into April. On a longer-term basis, indicated by the blue
line representing the extended cycle, Nvidia has historically rallied
approximately 75% of the time during similar periods. This pattern is expected from mid-February into May, presenting a favorable opportunity for Nvidia investors.
Edgar Lawrence Smith's research in the 1930s profoundly influenced Warren Buffett. Smith demonstrated that stocks outperform bonds over long periods, particularly through compounding via retained earnings in growing companies. Buffett emphasized firms with disciplined reinvestment of profits. Smith also identified a dominant 3.5-year cycle in stock prices. Out-of-sample testing from 1930 onward reveals cycle lows that marked excellent buying opportunities in 1995, 1998, 2002, 2005, 2008, 2012, 2016, 2019, and 2023. This cycle points to another potential buying opportunity in 2026.
Historical data on years ending in "6," dating back to 1806, show that 85% closed higher, with only four instances of declines. Additionally, after three consecutive up years, the fourth year has been positive eight out of eleven times. These patterns suggest high odds for continued upward momentum, provided supportive fundamentals persist.
The M2 money supply exhibits a cycle of approximately six to seven years. Lows in this cycle have historically aligned with bull market advances, as seen from 1960 onward. The next upswing is projected for 2026, introducing a bullish bias, though not guaranteeing a straight-line rally.
In summary, 2026 is likely to feature higher stock prices, declining interest rates, and rising inflation. In Q3 I expect an historic buy point for US stocks. For detailed forecasts, visit iReallyTrade.com starting January 1.
Reference:
Larry Williams (December 23, 2025) - 2026 Market Forecast: Cycles, Risks, and Opportunities. (video)
Larry Williams (January 1, 2026) - Forecast 2026.
Larry Williams (December 23, 2025) - 2026 Market Forecast: Cycles, Risks, and Opportunities. (video)
Larry Williams (January 1, 2026) - Forecast 2026.
Analyses of the S&P 500—integrating decennial, presidential, and seasonal cycles—project an annual return of up to 12% for 2026.■ Strong rally in Q1, peaking around late February to mid April.
■ Pullback in April, followed by increased choppiness through June to August.
■ Weakness in late summer-early fall, and significant trough in October.
■ Robust year-end recovery from the October low.
Beginning in July 2026, the S&P 500 enters its strongest 24-month window of the four-year presidential cycle. Since 1942, every 24-month period starting in July of a midterm year has posted positive returns—a perfect 21-for-21 streak—with an average S&P 500 gain of 36.5%.
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