No prolonged weakness in U.S. stocks: Belski

Key Concepts

• Secular Bull Market: A long-term market trend (spanning years or decades) characterized by sustained price increases.
• Fundamental-Driven Market: A market environment where stock prices are dictated by earnings, valuation, and operating performance rather than speculative momentum.
• Duration Game: The concept that market impacts from geopolitical events are determined by the length of time a stressor (e.g., high oil prices) persists, rather than short-term volatility.
• Demand Destruction: A permanent or long-term reduction in the consumption of a commodity (like oil) caused by sustained high prices.
• Contrarian Investing: An investment strategy that involves going against prevailing market sentiment.

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1. Market Outlook and Secular Trends

Brian Belski, CEO and CIO at Humulus Investment Strategies, maintains a highly optimistic long-term outlook for the U.S. stock market.

• 25-Year Secular Bull Market: Belski argues that the U.S. is currently in a secular bull market that began in 2009. He projects at least another 8 to 10 years of growth, noting that recent market "silliness" and geopolitical malaise may actually extend the cycle.
• Shift to Fundamentals: Belski predicts that 2026 will mark a transition toward a "normalized, earnings-driven market." He notes that the market is currently delineating winners from losers, moving away from the broad-based, momentum-driven rallies seen in previous years.

2. Geopolitical Tensions and Market Impact

Belski addresses the impact of Middle East conflicts on investor sentiment, emphasizing that investors should avoid emotional reactions.

• The "Duration" Threshold: He argues that geopolitical shocks only become a systemic issue if they cause "demand destruction." Specifically, he suggests that oil prices would need to remain at $100 per barrel for three to six months—not just a few weeks—to significantly damage the economy.
• U.S. Energy Resilience: He highlights that the U.S. is the world’s largest oil producer, which provides a buffer against global energy shocks.
• Historical Precedent: Belski cites the 1990 Iraq-Kuwait conflict as a case study. While the U.S. entered a consumer recession, it lasted only one quarter. By the end of 1990, the market resumed its upward trajectory, proving that such shocks can be short-lived.

3. Investment Strategy and Methodology

Belski advocates for a disciplined, fundamental approach to portfolio management.

• Contrarian Perspective: He views current bearish sentiment as a positive indicator for contrarian investors. He warns against "emotional" selling, noting that investors who fled the U.S. market last year missed a significant rally from April through the end of the year.
• Portfolio Construction: During periods of market doubt or corrections, Belski advises investors to focus on:
  • Dividend growth.
  • Value stocks.
  • Small and mid-cap exposure.
  • Tech stock components with a 12- to 18-month time horizon.
• Quality Focus: He identifies the U.S. stock market as the "highest quality" globally, followed by Canada. However, he suggests that investors should now "lighten up" on Canadian positions in favor of the more diversified U.S. index.

4. Notable Quotes

• "Inflation can go up like an elevator but down like an escalator." — Regarding the near-term concerns of inflationary pressure.
• "We want to go to where the puck is going. If everyone is negative now... we want to be positive and understand that stocks are led by fundamentals." — On the importance of contrarian, fundamental-based investing.
• "We are going to have these drawdowns. We are going to have these moments of doubt, but these moments of doubt and corrections provide opportunities from a longer-term perspective." — On managing expectations for 2026.

5. Synthesis and Conclusion

The main takeaway from Belski’s analysis is that the U.S. market remains fundamentally sound despite short-term geopolitical volatility. He argues that investors should ignore the "noise" of current events and focus on long-term earnings potential. While he acknowledges that 2026 may bring corrections and increased volatility, he views these as buying opportunities rather than signals to exit the market. His framework emphasizes that the U.S. market's structural quality and energy independence make it resilient enough to sustain its long-term secular bull market.