Market Call: Stan Wong's outlook on North American Large Caps & ETFs

Market Call with Stan Wong - January 8, 2026 Summary

Key Concepts:

• Monetary Policy: The primary driver of market performance in 2026, with a focus on the new Fed Chair’s stance.
• Midterm Election Volatility: Historically, midterm election years exhibit higher volatility and drawdowns, despite often being positive overall.
• Earnings Growth: Expected S&P 500 earnings growth of approximately 14% provides a supportive backdrop.
• Valuations: Current valuations are higher, shifting focus to earnings results and guidance.
• Sector Rotation: A shift from high-growth tech to industrials and financials is anticipated, though tech remains viable.
• MAG Seven: Performance within the MAG Seven stocks has been uneven, with only a few outperforming the S&P 500.
• Technical Analysis: Utilizing moving averages (200-day, 100-day) and chart patterns to assess stock strength and potential entry/exit points.
• PEG Ratio: Price/Earnings to Growth ratio used to assess valuation relative to growth.
• Beta: A measure of a stock's volatility in relation to the overall market.

1. Market Outlook & Key Drivers (2026)

The primary driver for market performance in 2026 will be monetary policy, specifically the direction set by the new Federal Reserve Chair. While a dovish chair is anticipated, volatility is expected leading up to the appointment. Contributing to this volatility are the renegotiation of USMCA and the midterm elections, which historically correlate with increased market drawdowns. Despite this, the overall outlook remains positive, supported by an expected 14% earnings growth for the S&P 500 and easing inflation, which should foster a more accommodative monetary policy.

2. Valuation Concerns & Sector Rotation

Current valuations are higher than in previous years, placing greater emphasis on actual earnings results and forward guidance rather than narrative-driven valuations, particularly in the technology sector. A sector rotation is underway, moving away from solely focusing on technology and communication services towards industrials, financials, and healthcare. While technology remains a viable investment, the higher beta associated with the sector suggests it will be more susceptible to volatility. The performance within the MAG Seven has been mixed, with only a few companies significantly outperforming the S&P 500.

3. Sector Specific Insights

• Technology & Communication: Still offering growth potential, but increased volatility is expected.
• Healthcare: Remains a favorable sector for long-term growth.
• Financials: Benefiting from potential deregulation, lower tax rates, and stabilizing net interest margins.
• Industrials: Poised for outperformance, driven by infrastructure build-out and technological advancements.
• Defense: Potential upside from increased government spending, but valuations are currently extended.

4. Stock Specific Analysis & Recommendations

• Boston Scientific (BS): A leading medical device company with long-term growth potential due to aging demographics. However, current technical weakness (below 200-day moving average) warrants caution.
• Tesla (TSLA): Highly volatile due to extremely high valuations (trailing PE of 310, forward PE of 215). Performance is heavily reliant on production and delivery numbers. Not currently held in the portfolio.
• Nvidia (NVDA): A leader in AI infrastructure, trading at a reasonable valuation (PEG ratio under 1). Strong growth potential driven by demand from hyperscalers.
• Meta (META): Lagged the MAG Seven in the past year, presenting a potential entry point. Strong fundamentals, particularly in AWS and advertising.
• Amazon (AMZN): A top pick, benefiting from AWS, advertising, and automation. Valuation is considered attractive relative to growth.
• UnitedHealth (UNH): Previously held, profits were taken in April 2025. Monitoring for potential re-entry, but cautious due to recent challenges.
• Lennox International: Sideways performance, 200-day moving average trending downwards. Not currently favored.
• JP Morgan Chase (JPM): A top pick, benefiting from a diversified business model, investment in technology, and potential deregulation.
• Citigroup (C): Performed well, but other US mega-banks (Goldman Sachs) are preferred.
• Tourmaline Oil: Positive outlook due to LNG Canada project, but valuation is a concern.
• Blackstone: Valuation is a concern, particularly with potential regulatory changes.
• Raytheon (RTX): Strong technical structure, but valuations are extended.

5. ETF Recommendations

• Financial Select Sector SPDR Fund (XLE): Provides exposure to US financial institutions (JP Morgan, Goldman Sachs, Morgan Stanley). Low expense ratio (0.08%).
• Invesco DB Base Metals ETF (DBB): Offers exposure to copper, aluminum, and zinc, benefiting from infrastructure build-out and the global economy.
• Vanguard FTSE All-World ex US Index Fund: Provides diversification into international markets, with a recommended allocation of 10-30% of a portfolio.

6. Technical Analysis Principles

Stan Wong frequently utilizes technical analysis, focusing on moving averages (200-day, 100-day) to identify trends and potential entry/exit points. Breaking above or below these averages is considered a significant signal. He also considers chart patterns and technical weakness (e.g., falling below the 200-day moving average) as warning signs.

7. Notable Quotes

• “I think everything underneath [volatility factors] is fairly supportive. We have an expectation of about 14% earnings growth for the S&P 500.” – Stan Wong
• “It’s more about the earnings results and the earnings guidance rather than the narratives around many companies including technology companies.” – Stan Wong
• “We’re shifting to a little bit more of the Industrials, a little bit more of the Financials, probably not really lowering our weight to Technology because I still think there’s a pathway for Technology to perform well.” – Stan Wong
• “With this type of stock [Tesla], it’s really a larger retail investor base that’s purchasing, purchasing this, this type of company or stock. And you’re going to have more volatility with it.” – Stan Wong

8. Data & Statistics

• S&P 500 Earnings Growth: Expected 14% in 2026.
• Midterm Election Years: Historically volatile, with higher drawdowns, but still often positive overall.
• ETF Expense Ratios: XLE (0.08%), Vanguard FTSE All-World ex US (not specified).
• PEG Ratios: Used to assess valuation relative to growth.
• Beta: Used to measure volatility.

9. Synthesis/Conclusion

The market outlook for 2026 is cautiously optimistic, driven by earnings growth and potential monetary policy easing. However, volatility is expected due to midterm elections and geopolitical factors. A sector rotation towards industrials and financials is underway, while technology remains viable but potentially more volatile. Successful investing will require a focus on earnings, careful valuation assessment, and a willingness to adapt to changing market conditions. Utilizing both fundamental and technical analysis, alongside diversification through ETFs, is recommended.