The final month of the year gets underwayon Monday, and investors will be looking for a smoother month to round out the
year after choppy November trading saw the Nasdaq Composite (^IXIC) snap a
seven-month winning streak while the S&P 500 (^GSPC) moved back to within
1% of a record high.
On Friday, markets ended the week bynotching a fifth straight session of gains to close out the up-and-down month
in a holiday-shortened trading session. And despite snapping its monthly
winning streak, the Nasdaq is also within 3% of a record. The Dow is less than
2% off its record close.
And while the final five days were good tothe market, the past month was anything but steady, as worries about a
potential AI bubble weighed on some of the market's heavyweights. Over the last
month, Meta (META) stock has lost 13%, while Nvidia (NVDA) shares are down
about 8%. Oracle (ORCL) has lost nearly 30% over this period.
The exception has been Google (GOOG), whosestock is up about 20% after a strong earnings report, positive reaction to its
Gemini 3 model, and, this past week, reports of a multibillion-dollar AI chip
deal with Meta.
In the week ahead, investor focus willremain on the odds of a rate cut at the Federal Reserve's December meeting,
with traders currently predicting an 86.9% chance of a quarter-point cut. The
Fed entered its mandatory blackout period on Saturday, marking the start of a
quiet week and a half before the Federal Open Market Committee meets on Dec.
9-10.
Reports this past week also suggested thatthe Trump administration is getting closer to landing on a candidate to succeed
Jerome Powell as chair of the Fed, with Kevin Hassett, director of the National
Economic Council, appearing to have emerged as the frontrunner for the
nomination.
The economic calendar will continue a slownormalization after the 43-day US government shutdown threw data collection
into chaos, with private reports on US manufacturing activity, service sector
activity, and ADP's monthly private payrolls report featured.
On the corporate earnings side, bargainretailers Dollar Tree (DLTR), Dollar General (DG), and Five Below (FIVE) are
all reporting, while Salesforce (CRM) and CrowdStrike (CRWD) will feature from
the tech industry.
Wall Street's 2026 optimism
Investors have been getting plenty ofbearish signals over the past month.
Famed short sellers Michael Burry and JimChanos made calls against the AI trade. Nvidia leadership published an
ill-received letter attempting to assert that the chipmaking giant does not, in
fact, have the same structural problems as Enron. Elsewhere, the largest US
retailers saw mixed results in third quarter earnings as consumers have been
squeezed by inflated prices.
Strategists on the Street, however, see arosier picture for the stock market going forward.
Top equity strategists at JPMorgan see theS&P 500, currently sitting at 6,849, reaching 7,500 by the end of 2026 — a nearly 10% rally. If the Federal Reserve keeps cutting interestrates, the bank sees a case for the index to cross 8,000.
"The U.S. is set to remain the world’s growth engine, driven by a resilient economy and an AI-drivensupercycle that is fueling record capex and rapid earnings expansion,"
JPMorgan strategists wrote in a client note.
Elsewhere on the Street, HSBC strategistsset their 2026 price target at 7,500 while Deutsche Bank predicted the index
would hit 8,000. All three firms pegged their bullish calls to the AI trade.
"Back then [in the 1990s equity boom],like today, tech is leading, return concentration is high, and a new technology
is promising to be transformational. We expect equities to remain supported by
the AI-led capex boom," HSBC strategists wrote.
At Deutsche Bank, strategists expectvolatility between now and what they see as a clearly more efficient — and, in turn, higher-earning — corporateenvironment as a result of AI innovation.
"Given the pace of technologicaladvancement, it is almost impossible to believe this won’t translate into meaningful productivity gains in the yearsahead," Deutsche Bank's team wrote.
"In the meantime, markets could swingsharply between boom-and-bust narratives, irrespective of their eventual
destination. So, while our global economists and strategists remain largely
positive for 2026, expect no lay-up in volatility or sentiment swings."
The bullish outlook for 2026, then,essentially calls for a replay of 2025, with November serving as the prime
example of what it takes to realize above-average returns.
"Volatility is like a toll thatinvestors pay on the road to attractive long-term returns," LPL Financial
chief equity strategist Jeff Buchbinder wrote in an email. "This year
offers us this powerful lesson once again."