2026 Market Outlook - Full Insights

Cautious Optimism, Disciplined Execution

After a banner 2025 for Canada and a resilient run for U.S. equities, 2026 looks set to exchange last year’s fireworks for something steadier—and, in many ways, healthier. We continue to view today’s environment as part of a long-running secular bull market, one that began over a decade ago and has been powered by real earnings, real cash flow, and real innovation. Gains this year may be more modest, but they remain firmly on the table. In Canada, we expect the S&P/TSX to finish in the 32,000–33,500 range (roughly 5% from recent levels). In the U.S., we see the S&P 500 ending the year around 7,300–7,500, implying mid‑to‑high single‑digit returns driven more by earnings than by lofty valuations. Think of 2026 as a bumpier bull, with plenty of opportunities for investors who stay patient and stay selective.

While trade headlines and political noise aren’t going away, we view them as speed bumps—not detours. Tariff decisions and Supreme Court proceedings may create temporary volatility, but we expect “policy substitution” rather than any “policy vacuum.” Meanwhile, the Bank of Canada has shifted from cutting rates to holding steady, and the U.S. Federal Reserve remains on a slow, data‑dependent path to easing. These conditions typically support markets, even if they also invite short‑term pullbacks. Importantly, the backdrop continues to broaden beyond the biggest tech names—a key sign that this bull market still has legs.

Our positioning reflects this environment: focused, disciplined, and tilted toward areas with durable earnings and strong cash flow. In Canada, we continue to emphasize financials, pipelines/midstream, and select energy infrastructure, where income remains attractive, and balance sheets are strong. Based on 2025’s surge, we stay selective in materials and energy. We also see opportunity in Canadian industrials, communication services, and utilities, all of which offer steady cash flow and, in some cases, exposure to the growing demand for infrastructure and power.

In the United States, we lean into earnings compounders beyond the mega caps. That includes software firms with pricing power, health care services with reliable volumes, and industrials tied to productivity and AI‑related capital spending—areas that stand to benefit from the next stage of the AI rollout. Consistent with our broader view, we also maintain an overweight to communication services, utilities (a major beneficiary of data‑center electricity demand), and financials, where earnings are normalizing, and consolidation themes continue to play out. Across both countries, high‑quality fixed income once again provides diversification and optionality as policy rates drift lower.

Through all of this, our message remains simple: volatility is a feature, not a flaw. We expect pullbacks along the way, and we plan to use them to upgrade quality—not as a signal to retreat. Canada’s “positive is still positive” setup argues for thoughtful stock selection, while the U.S. continues to offer a wide field of opportunities for patient investors. At MSB Wealth, our focus remains steady: stay invested, stay disciplined, and let fundamentals—not headlines—drive decisions.

Bottom lines:

• Canada (S&P/TSX): 32,000–33,500 — low single‑digit gains; selectivity over spectacle.
• U.S. (S&P 500): 7,300–7,500 — mid‑to‑high single‑digit gains; earnings over excitement.
• Process: Embrace the bumps. Buy quality on weakness. Let discipline—not drama—guide the year.

 

Prefer a quick, visual summary? Watch our 2026 Market Outlook video here