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It is hard to believe that we are one-quarter into the twenty-first century. Where has time gone? Put another way, where has time taken us? The internet is all high-speed digital (what was AOL?). Telephones are all wireless, compact, digital (no longer analog), linked to the internet and take photographs. Cars can run on electricity, can drive on their own and have dashboards like cockpits on the F14 Fighters. This year will be the twenty-fifth anniversary of the 9/11 attacks. The Seattle Mariners have yet to win a World Series. Buffalo’s Bills and Sabres have yet to win a championship, but the Bills have at least a shot this year.
For the most part, Artificial Intelligence (AI) will continue for some time to be a factor in our lives and the capital markets. However, there is much more to discuss about the year ahead and hence my foregoing Gut Feeling for 2026.
So, here it goes:
Working off a base estimate of S&P 500 (SPX) Earnings per Share (EPS) of $286.7 for 2025, I applied a base earnings growth rate of 13% year-over-year. Most of this growth will occur in the top tier of the SPX companies where are ever increasing percentage of market capitalization is concentrated. From this, I made some adjustments:
An additional 2 dollars of EPS as the impact of the Big Beautiful Bill of 2025 flows into the pocketbooks of consumers
An additional 2 dollars of EPS from lower interest rates.
Continued benefits of one dollar from DOGE and newer efforts to eliminate fraud, waste and inefficiency on both the state and federal levels. While Minnesota comes to mind, it occurs across the entire country.
A reduction of 2 dollars as I expect the Democratic Party will retake control of the House of Representatives resulting in more gridlock and unnecessary impeachments.
All told, my revised SPX earnings for 2026 will be $327. Carrying forward the same PE multiplier of 24 from 2025 (I expect higher multiples to be the norm as earnings shift from lower growth to higher growth stocks), my SPX price target for 2026 will be 7,848. Let’s call it an even 7,850 implying a 14.7% increase from the end of 2025.
As we now stand heading into 2026, The Federal Reserve Open Market Committee (FOMC) has set its benchmark rate at a rate of 3.50 to 3.75%. However, 2026 will be a tale of two Chairmen. The current Chairman’s FOMC term will end on May 15 after the third of eight FOMC meetings in 2026. The Powell FOMC will cut rates by ¼ point during the rest of his tenure. Under the new FOMC leadership, including four new voting Reserve Bank Presidents, rates will be cut by a total of ¾ over the last five meetings. Of course, the mid-term elections will have an influence, even though the Fed will make you believe otherwise, on rate policy. Finally, last but not least, the new Chairman of the FOMC will be Kevin Hassett.
Economic growth will be supercharged at a minimum of 4% for the year. The better news is that inflation will be well under control at 2.5% or less. All told, the Fed will be able to push down interest rates to further accommodate economic growth.
As the Federal Funds Target rate dips below 3.0%. The belly of the curve and long end are not expected to drop as much as the short end of the curve. As a result, the yield curve may steepen providing bond investors snatch opportunities in the Treasury and Corporate sector as they push out the curve. All told the long end of the curve might not change in a material manner from where it ended in 2025. Stay tuned as there is much to watch and react to across the interest rate landscape with these moving parts.
The story remains the same for AI. The top semiconductor chip companies, Nvidia (NVDA) and Broadcom (AVGO) will continue to lead the AI revolution. Be careful as both can be volatile and tend to move in fits and starts. However, you cannot remain complacent by just owning those two companies as part of your AI strategy as great as they are. At LakeView, we are moving down the AI food chain. In doing so, we are investing in data centers, power generation, HVAC and other AI related companies. It’s these companies which not only round out the AI portfolio but could outperform the chips in the coming year. Here is a little taste of what I am talking about: Comfort Systems (FIX) which we began to accumulate in 2024. FIX makes the HVAC systems for the heat producing data centers.
Our Growth portfolios, on average, an unaudited basis rose roughly 31% in 2025. During the same year, our Dividend Value portfolios, on average, on an unaudited basis rose about 11.5%. So, while the outperformance of Growth over Dividend Value was continued, it will still make sense to reallocate some of those outsized gains from Growth to Dividend in 2026. This is especially true for clients who are approaching or entering retirement age. I believe that with declining interest rates, capital appreciation in Dividend stocks will add to that sector’s allure.
We expect to see some dramatic changes in which consumers behave and the consumer discretionary markets in 2026. We will summarize this in bullet point form:
The push back again social media usage by young adults and teens will continue. Social media companies such as Meta (META), better known as Facebook, are working with regulators and legislators to make social media safer. The guardrails set by other nations such as Australia will be adopted here in the US. As a result, what we know as social media companies will focus more on AI and advertising. Murder, assault, rape or other criminal activity emanating from social media will result in criminal action against the social media company.
Lower tax rates and greater tax refunds will feed consumer discretionary spending. The tariff factor has already been absorbed in consumer prices such that it was a one-time transitory cost, and consumers are buying a greater amount of domestic sourced products.
More money in consumer wallets will also have four unexpected phenomena:
Combined with lower mortgage rates, home purchases, especially new home construction will rise.
Savings to 401(k) and other retirement programs will rise.
Credit cards and other debt will be paid down
Marriage rates will tick higher.
Birth rates will tick higher.
In Politics, in the midterm elections, the Republicans will hold the Senate, but the Democrats will regain a small majority in the House of Representatives. As a result, nothing will get done of substance but impeachments in the House, which are plentiful, will never make it to the Senate floor. However, there is a silver lining. The two most positively biased quarters in the sixteen-calendar cycle are the 4th quarter of the Mid-term Election Year and the 1st quarter of the following (Pre-Presidential Election) year. This will commence in the 4th quarter of 2026.
In other political, entertainment and social news, here are some of my speculative expectations:
Joe Biden will find himself in hospice care and will not survive by the end of the year.
Expect multiple indictments in Minnesota for the missing childcare and other government program funds. Despite all of that, Minneapolis Mayor Jacob Frey will announce his campaign to replace Tim Waltz as Minnesota governor.
The Supreme Court (Scotus) will have one or two vacancies in 2026. President Trump will lean heavily on Ted Cruz to fill one of the seats.
The Theocratic government of Iran will fall, leaving a void for the exiled Crown Prince to return and establish a Constitutional Monarchy
Tulsi Gabbard will resign as Director of National Intelligence (DNI).
Benjamin Netanyahu will announce a schedule for his retirement as Israeli Prime Minister, but not until after there are more nations added to the Abraham Accords.
On the fields of play, here are my expectations, but don’t make any wagers on Draft Kings (DKNG). The Los Angeles Dodgers will be pre-season favorites to three-peat the World Series. However, the Dodgers will face strong opposition from the Philadelphia Phillies in the National League. In the American League, the Toronto Blue Jays will be the representative in the World Series. The Phillies will win the series. The Los Angeles Rams will face the Buffalo Bills in the Superbowl, with the latter having to battle teams like Denver and New England to get here. To celebrate Marv Levy’s 100th birthday, the Bills will win the Super Bowl and break that city’s championship drought (Editor’s note, this prognostication was made before the Divisional Playoffs but before final regulatory edit and publication). On the ice, Team Canada will win Olympic Gold. In the NHL, the Colorado Rockies will suffer the indignity of the President’s Trophy Curse. In the end, the Dallas Stars will better the Tampa Bay Lightning for the Stanley Cup. In the NBA, the Oklahoma City Thunder will repeat as NBA Champs. In the NCAA Men’s Basketball Tournament, I originally thought that Arizona would be the men’s Final Four Champion, but I am going with a lower seed, the Michigan Wolverines.
Best wishes for a Happy and Healthy 2026. As always, please contact me or Carly if we can help you with your investment or financial planning needs. Also, feel free to email me your comments or questions to My Gut Feeling and remember to pass it on to relatives, friends, and colleagues throughout the year. Also, referrals are an important part of our business, so if you can remember us to friends and family, we would greatly appreciate the referrals.
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Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView Asset Management, LLC were long AVGO, FIX, META and NVDA - although positions can change at any time. The mention of stocks are not recommendations and may not be suitable investments for your individual situation.
Scott Rothbort is the President & Founder of LakeView Asset Management, LLC, (LVAM) an investment advisor representative, specializing in high-net-worth private wealth management. LVAM is a separate entity of Osaic Advisory Services, LLC, a registered investment advisor.
For more information on investing with LakeView Asset Management, LLC call us at 702-749-9343 or request more information by clicking on the contact button on the top right-hand corner of the website or by emailing Scott at scott@lakeviewasset.com or Carly at carly@lakeviewasset.com. LakeView Management, LLC is a Nevada LLC, with its principal office located in Henderson, NV and branch office located in Millburn, NJ
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