2026 Macro Outlook: The Market Is Sending a Warning After a 3-Year Rally w/ Mark Newton

Quick Overview

Mark Newton predicts that 2026 will be a choppy but ultimately positive year for risk assets like equities, though he anticipates a short-term pullback and notes that the US Dollar Index (DXY) is likely to weaken, which would benefit emerging markets and potentially gold.

Key Points: Newton forecasts 2026 to be a choppy but positive year for equities and risk assets, despite expecting a short-term pullback. He predicts the US Dollar Index (DXY) will weaken, likely falling towards the 98-99 range, which benefits emerging markets. Newton suggests investors focus on gold, silver, and industrials, noting that gold is at a decade-high RSI and silver recently broke out of a base. He believes that the strong performance of mega-cap tech stocks (like NVDA and Apple) has been disproportionate, and market breadth needs to widen for sustained gains. While acknowledging the hype around AI, Newton points out that the true benefits are likely a few years out, and current valuations are stretched. He suggests that Fed easing (rate cuts) in 2024/2025 would be a strong positive catalyst for risk assets, especially gold, as the Fed is not yet signaling cuts. Despite recent market strength, the Fed's current stance and high interest payments for US debt create tricky conditions, making a near-term recession or significant correction a possibility.

Context: John Gillen of Milk Road Macro interviews Mark Newton, Managing Director and Head of Technical Strategy at Fund Strat Global Advisors, to discuss his macro and technical outlook for 2026, published in his recent report titled 'Expecting a Choppy but Positive Year of Consolidation'. The discussion centers on market breadth, the strength of major tech stocks versus other sectors, and the outlook for commodities like oil and precious metals in the coming year.

Detailed Analysis

Mark Newton projects that 2026 will be a volatile but ultimately positive year for risk assets, following a period of consolidation. He cautions that while the S&P 500 equal-weight index has finally made a new all-time high, the strength has been narrowly focused on large-cap tech stocks like Nvidia and Apple, which account for a significant portion of the index's weight. Newton notes that the broad market remains weak, with many stocks still below their 200-day moving averages, signaling a lack of conviction and breadth. He anticipates that the US Dollar Index (DXY), currently around 98-99, will weaken over the next couple of months, which would be supportive for emerging markets and commodities like gold and silver. Newton favors industrials, financials, and precious metals over the heavily weighted tech sector for 2026. Regarding crypto, he notes that while the narrative around AI is strong, the valuation bubble might be overblown, and he prefers owning Ethereum over Bitcoin for the near term. He believes that the Fed's current restrictive policy, evidenced by the high cost of servicing US debt, creates an environment where a significant correction is possible, though he does not necessarily foresee a deep recession. Finally, he suggests that the market will need to see the Fed pivot toward rate cuts, likely in 2025, before a sustained rally can occur, and that the current setup suggests caution regarding broad market strength.