Where are the opportunities in global markets?

Market Outlook for 2026: A Constructive Perspective – Nadeem Kassam Interview

Key Concepts:

• Bull Market: A period of sustained increase in asset prices.
• S&P 500: Standard & Poor's 500, a stock market index representing the performance of 500 large-cap companies in the United States.
• S&P TSX: S&P/TSX Composite Index, the benchmark Canadian stock market index.
• Mag Seven/Ten: Refers to the seven or ten largest publicly traded companies in the US, primarily in the technology sector (e.g., Apple, Microsoft, Google, Amazon, Nvidia, Tesla, Meta).
• USMCA: United States-Mexico-Canada Agreement, a free trade agreement.
• Sticky Inflation: Inflation that remains persistently high despite efforts to reduce it.
• Bonus Depreciation: An accelerated depreciation method allowing businesses to deduct a larger portion of an asset's cost in the first year.
• Procyclical Sectors: Sectors that tend to perform well during economic expansions (e.g., Financials, Industrials).
• Second-Order Effects: Indirect or delayed consequences of an initial event or policy.

I. Overall Market Outlook & Historical Context

Nadeem Kassam, Chief Investment Strategist at Private Wealth Counsel, maintains a “constructive” (rather than optimistic) outlook for markets in 2026. He acknowledges market realities are complex, avoiding a purely “glass half full” or “glass half empty” perspective. The foundation for this outlook rests on the continued robustness of corporate earnings, mirroring the performance of 2025 where earnings were the primary driver of equity market returns in both Canada (S&P TSX) and the United States (S&P 500). Historically, bull markets average five years in duration, and with the current bull market entering its fourth year, Kassam believes it doesn’t necessarily indicate an imminent end. He states, “Bull markets don’t die of old age.” A supportive economic backdrop further reinforces this view, with a recession not currently being factored into their base case scenario.

II. Regional Performance & Investment Strategy

While the S&P 500 saw a 17% return in 2025, the Canadian TSX outperformed with a 30% return. Kassam highlights that positive economic growth, supportive monetary policy, and fiscal spending are not limited to North America, suggesting consistent underpinnings for equity markets globally. He advises investors to consider international markets as potential winners in 2026.

Regarding the US market, Kassam suggests a “broadening out” of performance beyond the “Mag Seven/Ten” companies. Opportunities exist within the S&P 500 in sectors outside of Infotech and Semiconductors. He emphasizes the depth of the US market allows for finding unique opportunities even while remaining large-cap oriented.

III. Geopolitical Risks & Macroeconomic Factors

Despite the constructive outlook, Kassam acknowledges several risks. He draws a parallel to April 2025, where a “half glass empty” sentiment quickly shifted to “half full” in the latter half of the year. Key risks for 2026 include:

• US Midterm Elections (November): Potential policy shifts impacting markets.
• USMCA Renegotiation (July Deadline): Uncertainty surrounding the trade agreement.
• Sticky Inflation: Inflation remaining at the upper end of the Bank of Canada and Federal Reserve’s target ranges, limiting potential for monetary easing. However, he anticipates the benefits of 2025 rate cuts will materialize in 2026.
• Escalating Tariff Rhetoric: Potential for increased trade tensions and inflationary pressures.

He notes that if these risks materialize significantly, the outlook would require adjustment. However, current valuations, particularly for the TSX and S&P 500, are close to five-year averages (with a slight premium), avoiding the extremes seen during the dot-com crisis.

IV. Sector-Specific Opportunities

Kassam identifies several sectors with potential for growth:

• Infotech & AI: He believes the AI trade has significant “running room,” moving from first-order effects (observed in 2024-2025) to second-order effects, including productivity gains and broader industry adoption. Canadian and US Infotech sectors are experiencing double-digit earnings growth, driven primarily by the AI theme in the US.
• Financials: Kassam remains positive on the financial sector, describing it as “procyclical.”
• Industrials: While underperforming expectations, the sector benefits from the favorable economic backdrop and the accelerated bonus depreciation provisions within the US “One Big Beautiful Bill,” allowing companies to free up capital for investment. He explains this bill allows companies to realize the present value of depreciation benefits in the same year they are incurred.

V. Investment Recommendations & Diversification

Kassam stresses the importance of diversification, not only within markets and across sectors but also globally and across asset classes, to mitigate risk. He advocates for a well-diversified portfolio to navigate potential volatility.

Notable Quote:

“Bull markets don’t die of old age.” – Nadeem Kassam, emphasizing that the length of a bull market isn’t necessarily indicative of its end.

Data & Statistics:

• S&P 500 Return (2025): 17%
• S&P TSX Return (2025): 30%

Conclusion:

Nadeem Kassam presents a cautiously optimistic outlook for 2026, grounded in robust earnings, supportive economic conditions, and reasonable valuations. While acknowledging geopolitical risks and macroeconomic challenges, he believes the potential for growth, particularly in international markets, Infotech (driven by AI), and procyclical sectors like Financials and Industrials, outweighs the downside risks. His core message emphasizes diversification as a crucial strategy for navigating market volatility and capitalizing on opportunities in the year ahead.