1st Quarter 2026 Market Outlook:
On the cusp of the new year, we are looking at a few different factors to define our outlook for the first quarter: Political Landscape, Federal Reserve Policy, Macro Economic Trends, and Technical Analysis.
Political Landscape:
At the start of this administration, President Trump emphasized a focus on “Main Street, not Wall Street.” Many initially interpreted this to mean that he would prioritize middle-class economic well-being even at the expense of market performance. Yet, experience has shown that the President is unwilling to let prolonged market weakness persist.
For example, he initially pressed forward with aggressive tariffs but paused once equity and credit markets began to falter. This pattern is consistent: while his methods are often controversial, his actions demonstrate a willingness to support markets when needed. Examples of this include his talk of wanting to do a “DOGE dividend” earlier this year as well as payments to citizens based on the money saved from the tariffs and the tax cuts from the OBBB. The long-term effects of these policies are hard to understand, but in the short run, President Trump is showing his desire to boost the stock markets and the economy overall.
Federal Reserve Policy:
In 2025, the Fed has cut interest rates a total of three times going from between 4.5% and 4.25% in January to 3.5-3.75% today. These cuts have caused 10-year treasuries to drop while 30 years have stayed relatively static around 4.8%. This is in line with our prediction early in the year that short-term rates have further down to go than longer term rates, which has worked out well for our fixed income positioning. On another note, decreasing prices of short-term debt can boost performance of technology companies who often use corporate bonds to fund their increasing R&D expenses. Small-cap firms are also positively impacted by interest rate cuts due to their reliance on financing and experience greater sensitivity to cost increases.
The other notable impact of the FED this month is their resumption of QE initiatives. Historically the market has done very well during times of QE, although sometimes inflation rises as an unintended consequence.
Another factor to consider with FED policy is the uncertainty of Jay Powell’s term being up next year. Rumer has it that trump will be announcing the next FED chair early next year. Typically, the markets do not like instability, however, given Trumps propensity to seek to prop up the market, the markets could overlook the uncertainty and give a bullish response to the announcement.
Macro-Economic Trends:
When addressing Macro Economic Trends, we want to focus on one specific aspect of the macroeconomic landscape—specifically precious metals. In the past year and a half, we have seen gold valuations clock a 100% or more increase. This shows a few things; 1). The markets are losing trust in the US dollar and 2). American and global sentiment is changing towards metals and mining. These changing perspectives were on full display when Morgan Stanley CEO recommended shifting from a traditional portfolio with 60% stocks and 40% fixed income to a portfolio with 60% stock, 20% bonds, and 20% precious metals. As larger players and influential people recommend putting money in gold and silver, it will become a sort of self-fulfilling prophecy continuing the increase of these assets.
Additionally, Geopolitical events are continuing to affect the global economy and cause questions as to whether the USD will remain the global reserve currency. This type of geopolitical uncertainty is typically very good for gold and silver.
Technical Analysis:
From a Technical standpoint the markets are still looking bullish. The S&P 500 is following an uptrend that has been pretty strong since mid-May. This index is above both the 50 Day Moving Average and the 200 Day Moving Average. The former highs of 6920 may act as resistance here in the next few days. The Stochastic Oscillator looks a little overbought which could send us back to the 50MA before completing another wave up.
Bonus Gold Stock Analysis:
Gold has been in an aggressing uptrend for at least the past 18 months. It has been held up well by the 50 Day Moving Average only briefly dropping beneath it at times. Currently it is still following the 50MA up. STO is a bit high which could bring GOLD back to its 50MA but no signs of a trend reversal anytime soon.
Conclusion:
In conclusion, we are optimistic for the first quarter of 2026. The political landscape, the FED policy, the Macro Economic environment and technical analysis all point to continued growth in the markets. We will remain fully invested and potentially add a larger stake in gold and silver this next year.
Bibliography:
Barron’s. (n.d.). Bonds: Market data center: Barron’s. Bonds | Market Data Center | Barron’s. https://www.barrons.com/market-data/bonds?mod=md_subnav
Berk, C. C. (2025, December 10). Fed meeting recap: Fed’s starts stealth easing, Powell rules out hike and Markets Rally. CNBC. https://www.cnbc.com/2025/12/10/fed-meeting-today-live-updates.html
FOMC minutes, January 28-29, 2025. Board of Governors of the Federal Reserve System. (n.d.). https://www.federalreserve.gov/monetarypolicy/fomcminutes20250129.htm
Fed says it will begin treasury bill purchases on Dec. 12. (n.d.). https://www.bloomberg.com/news/articles/2025-12-10/fed-says-it-will-begin-treasury-bill-purchases-on-dec-12
Politico pro: Trump: Fed Chair Pick will be announced early next year. subscriber.politicopro.com. (n.d.). https://subscriber.politicopro.com/article/2025/12/trump-fed-chair-pick-will-be-announced-early-next-year-00672854
Morgan Stanley CIO Favors 60/20/20 portfolio strategy with gold as inflation hedge | Reuters. (n.d.-b). https://www.reuters.com/markets/wealth/morgan-stanley-cio-favors-602020-portfolio-strategy-with-gold-inflation-hedge-2025-09-16/
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