After much speculation and wild swings in market expectations, President Trump has nominated Kevin Warsh as his Fed chairman. If confirmed, he is expected to replace current Chair Jerome Powell in May at the end of his term.

At a recent advisor presentation, I was asked an interesting question about this year’s consensus upbeat outlook and what could happen if it doesn’t come to fruition. Indeed, you can make the case that consensus coming into 2026 is sanguine. U.S. GDP growth is expected to be around 2 percent, with some economists forecasting even higher growth due to the benefit of fiscal stimulus from the One Big Beautiful Bill Act. It is challenging to find anyone calling for a U.S. economic recession, despite concerning trends in employment and inflation. Certainly, this outlook contrasts with that of late 2022, when almost everyone was forecasting a recession in 2023. That recession never materialized. The lesson? The consensus view isn’t always right. 

As we approach the Fed's next meeting at the end of January, what do we expect the central bank to do about rates? In this month's Market Observatory episode, Sam and I talk about the likely path ahead, the tug-of-war between headlines and fundamentals, and how a pause on rates may shift investor focus to corporate earnings, which continue to beat expectations.

December was a mixed month for markets. The Nasdaq ended the month down slightly, while the S&P 500 and Dow Jones saw modest gains. Overall, markets had a strong 2025, with all three major U.S. indices up between 15 and 21 percent for the year. The economy also continued to expand throughout 2025, as shown by the 4.3 percent annualized GDP growth rate in Q3. Consumer spending has remained resilient and helped power the economy throughout the year.

As we get ready for 2026, investors are faced with some uncertainty about the path ahead. Consumer confidence has deteriorated, the jobs market seems to be slowing, and inflation has started to tick up. But against this backdrop, the market still seems positioned for another year of solid gains. So, what are the risks—and the opportunities—as we begin a new year?

As we enter 2026, we do so with the combined power and efforts of LPL Financial and Commonwealth. In the spirit of that partnership, we encourage you to check out the LPL Research team’s 2026 Outlook,* available now. I think you’ll find the team’s analysis and insights to be valuable as you help clients plan for the year ahead. With that same goal in mind, I’d like to provide my thoughts on what investors can expect in 2026. 

After declines in early November, a late-month rebound brought the S&P 500 and Dow Jones to positive territory, although the technology-heavy Nasdaq ended the month down 1.45 percent. Turning to the economy, a delayed employment report showed a rebound in hiring in September, following modest job losses in August. But the unemployment rate rose to 4.4 percent, marking the highest level since late 2021.

The government shutdown is over, but when will the economic data return? That's the big question for the Fed—and for investors. In this month's episode of the Market Observatory, Sam and I discuss which economic data we're likely to see soon, what the quality of that data will be, and whether there are some reports we may not get at all.

The government shutdown came to an end last night after 43 days, making it the longest shutdown in history. We will leave it to the political commentators to pass judgment on what it means for the decision-makers in Washington. From our perspective, though, we recognize that the shutdown was beginning to have a significant impact on the economy. 

The S&P 500, Dow Jones, and Nasdaq posted positive returns in October, with falling short-term interest rates and strong corporate earnings supporting markets. In fact, the average Q3 earnings growth rate for the S&P 500 stood at nearly 10.7 percent at the end of October, above analysts’ 7.9 percent estimate at the end of September.