Executive Summary:
Our base-case outlook calls for a continuation of the Roaring 2020s scenario next year, with ongoing productivity gains that fuel a robust economy, which propels earnings and the stock market higher. Today, Dr Ed reviews the Roaring 2020s thesis; outlines what he expects 2026 will bring in terms of economic variables, earnings, and the S&P 500; makes portfolio allocation recommendations; and weighs in on the “Impressive-493,” the rising appeal of foreign stock markets, bullish expectations for the dollar and gold, and bearish ones for bitcoin. After the Roaring 2020s? There’s reason to think the 2030s could roar as well. … Check out the accompanying chart collection.
Roaring ’20s I: Just Another Year of the Roaring 2020s
We are getting into the warm-and-fuzzy spirit of the holidays. Thanksgiving is on Thursday. Hanukkah begins the evening of December 14 and lasts through the evening of December 22. Christmas Eve is on December 24. Kwanzaa is from December 6 through January 1. The season ends with fireworks on New Year’s Eve. Then it is back to work after New Year’s Day as 2026 rolls in.
We expect that 2026 will be just another year of the Roaring 2020s, which remains our base-case scenario. Our Roaring 2020s scenario has had a good six-year run since we first predicted it in 2020. It has also had a good few months lately, with upward revisions to GDP and downward revisions to payroll employment, suggesting that productivity growth was strong during Q2 and Q3 of this year. Q4 might also show surprisingly strong productivity growth despite the government shutdown.
In the November 24, 2020 issue of our Morning Briefing, we wrote: “This should be the first and last Thanksgiving requiring us all to
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