This year is going to be a ‘trader's market’, says Howard Capital Management CEO

Key Concepts

• January Barometer: The belief that the S&P 500’s performance in January predicts the year’s overall performance.
• Trader’s Market: A market environment where active trading and tactical asset allocation can yield significant returns due to volatility and diverging performance across asset classes.
• ETF (Exchange Traded Fund): An investment fund traded on stock exchanges, offering diversification and liquidity.
• Yield Curve: A graphical representation of interest rates across different maturities, used to gauge market expectations about future interest rate movements.
• West Texas Intermediate (WTI) Crude: A benchmark price for crude oil, particularly in the United States.
• Financials (in this context): Specifically, trading firms like Goldman Sachs and Morgan Stanley.
• Smids/Small & Mid-Caps: Small and mid-capitalization companies, often considered to be more sensitive to interest rate changes.

Market Outlook for 2026: A Trader’s Opportunity

Vance Howard, CEO and Portfolio Manager of Howard Capital Management, expresses a bullish outlook for the market in 2026, framing it as a “trader’s market” where active management and diversification will be key to success. This optimism is rooted in historical market data and current economic conditions.

The January Barometer and Historical Trends

Howard highlights the significance of the “January Barometer,” referencing the Trader’s Almanac. Historically, if the first five trading days of the year close positively, there is an 83% probability of a positive return for the entire year. Even a positive January alone increases the odds to 73%. As of the date of the interview, the market was up for the first five days, bolstering his optimistic view.

Shifting Market Dynamics: Beyond the S&P 500 & NASDAQ 100

Howard argues that 2026 will deviate from recent trends dominated by large-cap stocks. He anticipates that different asset classes will outperform the S&P 500 and NASDAQ 100, creating opportunities for active traders. He specifically points to the potential for strong performance in gold, Bitcoin, and small-cap stocks. He notes that small caps have underperformed for the past three to four years but are poised for a rebound, particularly as interest rates begin to decline.

The Impact of Oil Prices and Geopolitics

The discussion extends to the oil & gas sector, with Howard expressing a positive outlook. He believes that West Texas Intermediate (WTI) crude oil around $58 a barrel is relatively inexpensive and helps to curb inflation. He further suggests that if Venezuela were to increase oil production and bring the price of crude down to $48 a barrel, it would further reduce inflation and benefit the middle class. He acknowledges his personal connection to the industry, stating, “I’ve got a lot of friends in the oil & gas industry.”

Sector-Specific Recommendations: Financials & Bitcoin

Howard identifies the financial sector, specifically trading firms like Goldman Sachs and Morgan Stanley, as a particularly attractive investment opportunity. He explains that these firms will benefit from increased trading volume in both equities and bonds as market volatility rises. He recommends accessing this sector through ETFs (Exchange Traded Funds) for diversification.

Regarding Bitcoin, Howard advocates for investing through Bitcoin ETFs, citing their liquidity and ease of trading. He states, “Bitcoin is a really good buy to us in the ETF space with a lot of liquidity and trade it so it’s very, very actively done and sold off to the point it’s a good buy.” He prefers ETFs over directly holding Bitcoin on a hardware wallet, emphasizing the convenience and accessibility of ETF trading: “It’s highly liquid and you can trade it any time you want and you don’t have to worry about that. It’s right on the exchange that goes into your account so I’d rather trade the ETF than the coin themselves.”

Interest Rates and the Yield Curve

The conversation addresses the impact of potential Federal Reserve rate cuts on the financial sector. While a flattening yield curve (where the difference between long-term and short-term interest rates narrows) typically negatively impacts banks’ lending margins, Howard argues that trading firms within the financial sector will benefit from increased market activity. He clarifies, “When you look at financials I’ll explain when I say financials I’m saying Goldman Sachs, Morgan Stanley, I’m talking about the trading firms trading a lot of liquidity but equities and trading bonds going into 2026. That’s going to increase their profits and have a very healthy year.” He anticipates two to three rate cuts by May, which would further support small-cap performance.

Addressing Consensus Trades: Small & Mid-Caps

Howard acknowledges the growing consensus around small and mid-cap stocks (“smids”) but dismisses concerns about a potential “consensus trade.” He believes their recent underperformance justifies a rebound, and that declining interest rates will disproportionately benefit these companies. He notes that mega-cap companies, with their large cash reserves, are less sensitive to interest rate fluctuations.

Conclusion

Vance Howard presents a compelling case for an active, tactical approach to investing in 2026. He believes the market will offer opportunities beyond the traditional dominance of large-cap stocks, with potential gains to be found in sectors like financials, Bitcoin (via ETFs), and small-cap companies. His outlook is grounded in historical market data, current economic conditions, and a keen understanding of the interplay between interest rates, oil prices, and geopolitical factors. He emphasizes that success in this environment will require a willingness to “work your money” and capitalize on emerging trends. He concludes with a positive sentiment, noting the S&P 500 had turned positive by the end of the trading day.