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From Growth to Consolidation, Fundstrat Warns of a Market Shift Ahead

Market Movers: The Opening Bell

December 17, 2025

Video Transcript

After three strong years for stocks in 2026 be more about consolidation than the gains as we head into the final trading sessions of 2025, the S&P 500 is up a little over 150% year to date.

No stronger dollar and higher yields could add pressure early on, but any increase in volatility may also create some opportunities.

Well joining me.

Here at the New York Stock Exchange this morning to weigh in is Mark Newton, head of technical research at FundStrat.

Mark, happy holidays.

Great to have you here.

Thank you very much.

Happy holidays to you.

Thank you.

2025 has been quite the year when it comes to all asset classes, not just here in the US, but around the globe.

So what are your expectations as we head into 2026?

Well, look, I think it's going to be The so-called the year that refreshes, the pause that refreshes, it could be a year of consolidation after three very strong years.

There are a couple of different issues right now with the market and the technology has gotten very, very overbought and we've seen a very big divergence in breadth and momentum.

And many recall the same thing happened last year in 2024 December actually wasn't the most kind month for the market, and now it's repeating yet again.

Uh, that could be an issue because a lot of the so-called, you know, mag 7 high flyers have been starting to show some evidence of consolidation.

Many that own Nvidia know the stock has really been a shell of its former self and similar to stocks like Alphabet and Microsoft.

They've all been hit very, very hard.

Well, I do suspect that that improves early in the year, but I think that we're going to have similar to this year, a period of consolidation that likely Begins next spring and I think between February and early March we probably start to peak out and pull back into the second quarter and I expect third quarter weakness as well, but overall I'm bullish for the year.

I think we get to 7300, so it should just be some consolidation, but yet we end on a very good note.

And I do want to ask you, zooming in on the technicals, what's positive for US markets next year and what are some areas of concern for you?

Well, I think the metals remain an area that they're still quite bullish.

I mean, we're still in a time of Fed easing and the Federal Reserve likely lacking its own independence as a new Fed chair selected.

I think neither party is really talking about, you know, cutting spending, so precious metals likely can do very well.

I think fixed income to start the year can start on a good note where yields start to pull back, but then I suspect that yields likely can start to lift, so that might not be the best, you know, for the 1st 6 to 8 months really.

It's going to be crude oil which I believe is going to end its 3 year bear market that likely can end the year this year 2025 on a bad note.

But then I think we're going to start to lift, you know, we need fossil fuels for AI and You know, many people are starting to change their tune about this really being peak oil, so in general that should be a time when crude starts to lift in the 1st 6 months of next year.

So I'm actually bullish on energy for the year even though I sense the next couple months could be a little bit rough before we start the new year.

And Mark, while I have you here, I do want to get your technical ratings in terms of sector for 2026.

So tell us about your downgrades, upgrades, and unchanged sectors.

Well, I think the retail consumer, there's been some bifurcation there, and we've seen a little bit of, you know, selling pressure and discretionary.

So for me that's going to be a neutral heading into the next year.

I think it's going to be really a sector you need to be a little more selective in.

Uh, let's talk about the ones I like.

I like industrials, I like financials.

I like utilities and I like energy.

Utilities, of course, not necessarily a defensive sector anymore.

It has very much, you know, those power centers that really serve to push AI are very, very positive and the sector has been great.

I still have to be a negative on consumer staples and also, you know, looking at the REITs.

I think that even if defensive sectors have a bounce in the 2nd quarter, I still think that over the year they're likely not to do as well.

Technology for me.

Uh, it goes to a neutral.

I've been bullish on tech for years.

It has gotten overbought.

I'm seeing evidence of counter trend exhaustion signals on tech, and a lot of the cycles that I look at for stocks like Nvidia actually are not too kind for 2026.

So I feel that tech is going to consolidate.

It doesn't mean the bull market is over.

It just means we pull back, and then that's going to provide a buying opportunity, I think, for 2027 into 2028, so.

Uh, if tech falls next year, that means the market likely is going to have to consolidate.

It's tough for the market to work without technology, of course, which is 30% of the S&P.

A lot to keep our eyes on as we head into next year, but as you mentioned, next year is midterm election cycle here in the US.

So when it comes to seasonality as well as market performance, tell us what traditionally, historically happens and your expectations for 2026.

Well, the midterm election year seasonally has been the worst of the four years of the presidential cycle, unfortunately.

So we've had 3 great years now I think we have to consolidate a bit as we head into next year.

Uh, this directly gels with the own cycle that I watch, a 41 month, 180 week cycle for stocks that peaks and pulls back into 2026 before bottoming.

So the two of those really go hand in hand.

The one thing that's missing from the Bas case is really that exuberance that we've seen over the last couple of years that really hasn't been seen in 2025.

We went from an era of real fear to now just more, you know, gradual, you know, getting on board and you don't want to miss the rally, but people still have legitimate concerns about, you know, the tariffs.

Will they be lifted, the fight for the Fed.

Governor, the end game for the Fed in terms of the rate cuts.

The majority of the world has already stopped cutting rates.

It's really just the Federal Reserve, the Bank of England, and Norgas Bank.

And so, you know, increasingly I think we're going to shift to more of a growth perspective and that can be helpful, but it also means that long term interest rates likely are going to start to head higher if healthcare subsidies are taken out at the end of January.

That could be somewhat inflationary for the beginning of the year.

My own view is that crude oil being as down as it is, it's going to be a downward pressure on CPI.

I also think AI definitely has a deflationary bias, so the two of those likely can offset, uh, you know, inflation.

The question is how far does crude start to bounce?

If I'm bullets on energy next year, uh, you know, I think eventually if we start to have a big rally, then that might be a concern.

Yeah, and Mark, finally, before I let you go, you mentioned your price target for 2026 for the S&P 500, and I think if we zoom out and look at all asset classes, we're surprised that we're ending at least heading into the final days of this year in terms of crypto, but we have seen that outperformance when it comes to precious metals, as you mentioned, double digit percentage gains outperforming the equity markets.

So I do want to get your goal technical outlook as well as support levels.

Look, I think gold probably gets to 5500, 5000 into early next year.

Then we consolidate.

We get down to 3800 to 3300 potentially at a maximum before we start to turn back higher.

But, the precious metals have gotten very overbought.

It's certainly not, uh, you know, the trade that you want to get into right now and expect multi-year gains.

The RSI in gold relative strength index has gotten up above a 90 on a monthly basis.

That's Very, very overbought, but it's also a time when the metals are trending very, very well for a lot of the right reasons.

So if interest rates start to pull back along with the dollar into early next year, that's still going to fuel the metals trade, which I think can persist into next year.

Silver is really one to watch.

That's been outperforming substantially and the industrial metal, that's actually a lot more bullets than gold, it's broken out of a lengthy, almost a 40-year base.

If you look back at the.

The short squeeze in 1980 to 1979.

I mean, we're up above those levels and it's really starting to show some decent momentum.

So I think investors have to have metals exposure for 2026, precious metals and base metals for stocks you have to be a little bit more selective, but I do like buying dips in energy.

I like the financials and industrials.

Transportation, you know, is about to hit a new all-time high, so a lot of these airlines and rail still look very, very attractive to me.

OK, Mark, well, always great having you on.

Thank you so much and happy holidays to you.

Thank you so much, Mark.

The financial markets have experienced exceptional volatility and substantial gains in recent years. As 2025 draws to a close, the S&P 500 has surged more than 150%, marking one of the strongest multi-year runs in recent history. According to Mark Newton, head of technical research at Fundstrat, this extraordinary performance may give way to a period of consolidation in 2026. Understanding this transition is critical for investors assessing market conditions amid evolving economic dynamics.

Newton described 2025 as a transformative year for global asset classes, not only in the United States but across international markets. His analysis points to a familiar market pattern, where extended periods of strong performance are often followed by pullbacks or consolidation phases. Current technical indicators suggest that technology stocks, including Nvidia, Alphabet, and Microsoft, are beginning to show signs of fatigue. Investors heavily exposed to these names may need to prepare for near-term adjustments.

Looking ahead, Newton anticipates what he calls a “pause that refreshes” in 2026. Rather than a sharp downturn, he expects a consolidation phase as markets digest gains. Based on technical signals, Newton believes the market could peak and experience a pullback between February and early March. Despite potential short-term weakness, he projects the S&P 500 could reach approximately 7,300 by year-end, reinforcing a constructive longer-term outlook.

Newton also outlined sector-specific expectations that could shape investor strategy in the coming year. He expressed optimism across several areas:

Precious metals are expected to benefit from continued Federal Reserve easing, making the sector an attractive opportunity.

Energy may be positioned for a rebound after exiting a bear market, with crude oil prices showing potential for recovery.

Industrials and financials continue to display solid growth prospects, offering diversification opportunities within equity portfolios.

At the same time, Newton urged caution toward consumer staples and REITs, which have exhibited weaker performance and less favorable technical trends.

The technology sector faces a more complex outlook. While Newton has maintained a bullish stance on technology for years, he acknowledged that current conditions appear overbought. Seasonal factors tied to upcoming midterm elections may also influence market behavior. Historically, midterm election years have been challenging for equities, which could reinforce consolidation pressures heading into 2026.

Beyond equities, Newton highlighted broader macroeconomic factors that could influence market direction. Movements in crude oil prices and inflation trends are expected to play a significant role in shaping investor sentiment. Additionally, potential changes to healthcare subsidies at the start of the year could introduce further volatility across asset classes.

Cryptocurrency markets have also drawn investor attention amid these shifting dynamics. While Newton did not provide an extensive outlook on crypto, comparisons between the outperformance of precious metals and historical crypto trends offer useful context. Investors may increasingly evaluate how digital assets fit within diversified portfolios as economic conditions evolve in 2026.

Mark Newton’s analysis provides a clear framework for navigating the next phase of the market cycle. As consolidation becomes a growing possibility, investors who remain disciplined and attentive to sector performance may be better positioned for the year ahead. Whether through traditional equities or emerging asset classes, strategic allocation and adaptability are likely to define successful investment approaches as markets transition beyond the historic gains of recent years.

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