December 2026

This Month in the Markets 

Bottoms up? Top Down? Enlightenment? What is it that you saw in the year that is about to call it a wrap? If the answer is all of it, you would not be in the minority. The upside for all involved, if you kept your head about you and did little in the way of moving assets around, 2025 was another great year to be invested.

First off, the ‘bottoms up’ from the companies that make up the economy. Lots of charts, but if you are long assets pay attention. If you are short anything I’ll send a fruitcake to your room at the state loony bin. Because that’s where you are right now. Picking stocks that are going to go down in a raging bull market is a tall order and many have given up completely.

Looking for proof that there are some serious legs to this economy, look no further than this chart from FactSet Research. The last two years have earnings growth above 10% and sales growth above 5%. Those are strong numbers and help support the ‘why do the markets keep going up’ question.

The big counter to the argument about the ‘healthy’ earnings is that there is a behind the scenes story that does indeed show an ‘un-healthy’ backdrop. It’s the complete lack of breadth to that which contributes to actual earnings themselves.

Nine companies, only nine companies, make up more than 50% of the number. That is very narrow and masks that not all companies are living in the ‘gravy days’, there are some serious salads being served up out there.

Writers Note: I absolutely love this chart and want to know where it’s been all my life. I tried to hunt one down for 2025 but didn’t see that @bastion_manager has produced one yet. Makes sense as the year isn’t over yet. Regardless, this one is a beauty.

Exhibit B in the case that ‘Ya got trouble right here in River City’ is forward P/E and stretched valuations. At 23 times, that’s for sure up there and where trouble has been found in the past. That said, never short a market or an individual stock, on valuation. Managers that have tried are no longer in business. And for you youngsters that line refers to trouble in River City’ from ‘The Music Man’ circa 1957. Catchy little tune.

Source: Conestoga Financial Advisors

That’s a wrap for what’s going on from the “bottoms up’. All in all, it’s a good story right now. But as they say, past performance is no guarantee of future results. So be careful to not have that head in the sand as well. There is a lot on the line in the coming year.

Source: Stephen Geist

Now, it’s on to the ‘top down’. But before we do I want to explain that while I’ve been in the business of finance in and around Wall Street for 29 years, I’ve never seen so many cross currents and back eddies as there are right now. The complete and utter land rush into AI, and all that goes with it, has frightening implications on how we see the economy in the future. The crystal ball is cloudier than I’ve ever seen it.

The good news is that the major borrowing and lending systems of the economy appear to be very healthy and intact. It’s gotten tougher for banks to borrow short and lend long, and growth in consumer credit reflects that. Since 2020 borrowed money out there in system by consumers is 25% higher than it had been. Pandemic be dammed, we stood up and borrowed. What’s the worst thing that could happen?

Regarding debt, and debt maintenance, beware the headlines and charts that you might think tell you about the economy, leading or lagging. Credit default rates are interesting to follow. But if you ever sold a stock based on them going up, you would have sold a stock for no material reason. Noise more than signal.

I might give car payment deliquesces a little more credence, but how much I can’t tell. As is obvious as the nose on your face, the masses aren’t exactly ‘killing it’ right now. It’s tough to be middle class and inflation is ripping all over the place.

Hell, even I fell behind and am not afraid to admit it. I’ve been backing up the tractor and burning cash to get my other business going and creating inventory and if hustling around marketing products puts me at 60 or 90 days, big picture do I really care? Being an entrepreneur is a lonely financial place at times. But it’s worth every dime….I think.

The most important thing this year from the top-down is the change in rate policy at the Federal Reserve. I’ve said this many many times, you get into a lower for longer situation and you get into higher and higher asset prices. It’s simply how it is. The correlation is probably 1 to 1. I’m so sure of it, I’m not even taking the time to show a chart that says as much. I’ll give you one side of the picture, and that is we’ve been in a bull market for bonds for going on for closing in on 50 years. And that’s worked out well for assets and the economy. Like really well.

That gets us to the semi-useful Fed ‘dot plot’. This is the collective intelligence of the Federal Reserve Governors and staff. As of now the look is we get is one, may two, rate cuts next year. And that’s it. Not much to go on in terms of longer-term plan. But that’s where we are today, and it beats a chart that is up and to the right.

Since this is indeed the season to be merry and bright, take a little time in the next two weeks and think how lucky we all are and how good investors have had it now for going on five years. While much was earned, there certainly have been a lot of gifts given out as well. Ho ho ho!