Trading a “Backlash Market” in 2026 VIEW IN BROWSER
BY JEFF CLARK, EDITOR, MARKET MINUTE Hi folks, it’s Jeff Clark, here to give you my thoughts on the stock market for 2026. But to do that, I’d like to give you my thoughts on people. When you think about it, it is the emotional stability, the range of emotions in people that create the stability and range of emotions we see in the stock market. When people are excited and enthusiastic, the stock market tends to do well. When people are pessimistic, stocks tend to do rather poorly. And what I’ve noticed in the last several weeks is that people have gotten very cynical and skeptical. If I were just to describe my own friends, family and colleagues, it seems like everybody has grown a little bit tired of being told one thing and reality being something different. That what they see with their own eyes isn’t necessarily what is happening. They’re tired of being told that if the Fed lowers the Fed funds rate, mortgage rates will come down. They’re tired of being told that if they do good things and play by the rules, that they’ll succeed. The reality of the matter is, they look out in the economy and see that folks who aren’t playing by the rules tend to do a little bit better than the folks who do. And that’s a sad state of affairs. But it seems to be what’s happening in the world and certainly in the minds of a lot of folks. I think that’s going to lead to 2026 being a “backlash market,” so to speak. A lot of the positive aspects of 2025 are probably going to reverse and maybe go negative in 2026. You’re already seeing the enthusiasm around AI start to pull back a little bit. Oracle (ORCL) announced earnings a couple weeks ago that were just fine, but the stock got clubbed. The stock is roughly about 45% lower than its all-time high for the year. Frankly, it had no business being at $350 a share, but here it is at $180 a share just a few weeks later: 
And you wonder: How does that happen with a stock that is in the middle of the biggest boom of the whole century, as they say? We also noticed it with Micron Technology (MU). The stock was way up after Micron just recently reported earnings. But when I’m talking to folks about the earnings call, a lot of them just don’t believe it. Micron announced fantastic numbers that beat the previous guidance… they raised guidance for next quarter… did everything that you’re supposed to do. And it just sounded phenomenal – best earnings report of the year for pretty much any company. Yet that cynicism is creeping in. They’re saying, “Well, you know, it’s what Micron always does at the top of the cycle.” So that’s another example of why I’m formulating this theory that people have grown tired of what’s being fed to them. It’s not just politics (although there’s a big swath of political stuff that this falls into)… and it’s not even just the corporate situation… but it’s also happening with gambling. It was a big thing this year for a lot of folks to be playing zero-date expiration options, they’re playing Kalshi and the other prediction markets, and they’re not having the experience that they thought they were supposed to be having. Gamblers found out that all these college basketball players were skimming points. They’re also seeing questionable things going on in some of the major football games, where points that normally would not be made are being made. It has a significant impact on the betting markets. Then, when you combine all these things, it creates a situation where you have a possible backlash. In terms of the stock market, the biggest risk that I see is in these zero-date expiration options. It’s one thing if I’m trading… I know I’m gambling a little bit, and I understand the odds. But when I then find out that the market maker that has taken the other side of the trade or the brokerage firm that’s clearing my orders is taking the other side of the trade… or somebody with a bigger wallet than I have is able to push prices around in the final seconds of trading? That takes what might have been a profitable trade and intentionally creates a losing trade, and vice versa. Now, how do you trade something like this: a backlash market? I would say that anything that increases an investor’s confidence is probably going to do well in 2026. That includes anything that increases our ability to do things by ourselves, where we don’t have to rely on somebody else and trust their claims. Think energy stocks. We all use energy, right? And the more self-reliant we are, the better off we probably are. This backlash theory could use a bit of further formulation, but this is where I’d be looking for 2026. I see a market where there’s a healthy degree of skepticism on the big promises that are made, as people realize those promises may or may not come true. Not coincidentally, there’s also a renewed interest in value-oriented stocks. When you look at value versus growth ETFs, for example, the Invesco S&P 500 Pure Value ETF (RPV) – that’s the green line below – has really broken out compared to the Pure Growth ETF (RPG), which is the blue line on this three-month chart: 
When we say value versus growth, by the way, we’re talking almost twice the price/earnings (P/E) multiple – 26.8 versus 14.7, even after the value stocks being bought up this past month. And from that perspective, it’s even more difficult to go wrong when you’re buying a stock that trades with a single-digit P/E multiple… Meanwhile, with stocks that are trading at 100 times earnings, 150 times earnings, or 20 times sales – anything along those lines – you’d have to believe a lot of promises to buy into that. In that way, people’s thought processes in 2026 are going to be the opposite of what we saw in 2025. To the extent that it affects the way that they make investments, their attitudes are going to spill into the stock market. Therefore, I think 2026 is going to be a relatively difficult year for stocks. That said – I think there’s going to be opportunities if we can find them. That’ll be in the stocks that I think increase investor confidence in their industry. In the meantime, have a wonderful holiday, folks. We’ll talk soon. Take care. Best regards and good trading, 
Jeff Clark
Editor, Market Minute | 
