Why 2026 will be 'very volatile' for stocks, DraftKings CEO talks Super Bowl, sports betting outlook

Key Concepts

• Dow Jones Industrial Average (DJIA): A price-weighted measure of 30 large, publicly owned companies based in the United States. Reaching 50,000 signifies a major milestone.
• NASDAQ 100: An index representing 100 of the largest non-financial companies listed on the NASDAQ stock exchange.
• S&P 500: A stock market index tracking the performance of 500 large-cap companies in the United States.
• MAG 7: Refers to the seven largest US technology companies (Meta, Apple, Nvidia, Google/Alphabet, Amazon, Microsoft, and Tesla).
• Hyperscalers: Large-scale cloud computing providers (like Amazon, Microsoft, Google).
• Beta: A measure of a stock's volatility in relation to the overall market. Higher beta indicates greater volatility.
• Dual Mandate (Federal Reserve): The Fed’s goal of achieving both maximum employment and stable prices (controlling inflation).
• Neutral Interest Rate: The interest rate that neither stimulates nor restricts economic growth.
• Quantitative Tightening (QT) / Quantitative Easing (QE): QT is the reduction of the Fed’s balance sheet, while QE is the expansion.
• Prediction Markets: Exchange-traded markets created for the purpose of trading contracts whose payoffs are tied to the outcome of future events.
• Same-Game Parlays: A single bet combining multiple wagers within the same sporting event.
• Refranchising: A business strategy where a company sells its company-owned locations to franchisees.

Market Performance & Rotation (February 9, 2024)

The Dow Jones Industrial Average closed above 50,000 for the first time, rising over 2% on the day. The NASDAQ and S&P 500 also experienced significant gains, both up around 2%, marking a sharp rebound from a volatile week. The Dow’s achievement is notable, with milestones at 40,000 now being reached with increasing frequency.

Sector Rotation: A key theme discussed was a rotation out of technology stocks (particularly hyperscalers) and into more defensive and cyclical sectors. Specifically, consumer staples, industrials, and materials led gains. Year-to-date, energy is the top-performing sector (up 13.2%), followed by staples and materials. This shift suggests investors are “derisking” portfolios, moving away from high-beta AI leaders towards companies participating in broader economic growth. Real estate, healthcare, and utilities also showed relative strength.

Leading Stocks: Within the Dow, Nvidia, Walmart, JP Morgan, and Amazon contributed most to the gains. On the NASDAQ 100, Broadcom and AMD (semiconductors) led the tech rebound, while Meta and Alphabet lagged. Software stocks, which were hit hard earlier in the week, saw a modest bounce. Bitcoin and Ethereum experienced a significant rally, both up over 10% in the last 24 hours, rebounding from lows of $61,000 for Bitcoin. However, strategists cautioned that this rally might be temporary given the overall downward trend in crypto.

Expert Analysis: Brad Conger Hurdle Callahan (Callahan Investment)

Callahan described the market action as a “repricing of expectations.” He highlighted a divergence: hyperscalers are down, their suppliers (semiconductors, power, storage) are up, and the downstream clients of hyperscalers (software companies) are down. This indicates a questioning of the long-term returns of hyperscalers and a focus on the benefits accruing to the companies supplying them.

Key Argument: Callahan believes investors are shifting from betting on a “technology marvel or revolution” to focusing on companies participating in overall economic growth. He noted this rotation began before Thanksgiving. He emphasized the importance of being comfortable with portfolio holdings, acknowledging that even great companies can experience losses. He stated, “The only real impairment of value is when you sell due to something that is transient and give up real long-term value.”

Crowded Thinking: Callahan pointed to a lack of contrarian investors, arguing that those who held contrarian views have underperformed since 2013, as trends and extrapolation have been rewarded. He warned that when the investment community coalesces around a “received narrative,” it can be a sign of risk.

Volatility Outlook: Callahan anticipates a volatile 2026 due to geopolitical factors, the upcoming midterm elections, uncertainty in the job market, and a new Fed chair.

Federal Reserve Commentary

Vice Chair Philip Jefferson stated the Fed’s benchmark interest rate is “well positioned” to address risks to its dual mandate (employment and inflation). He is closely monitoring economic data for potential rate cuts but emphasized the need to stabilize the labor market while bringing inflation back to the 2% target. Jefferson raised the GDP outlook to 2.2% but noted inflation has stalled due to tariffs.

San Francisco Fed President Mary Daly expressed concerns about the strength of the job market, describing a “no hiring, more firing” environment.

A Duke University survey found that two-thirds of former Fed officials support Kevin Worsh’s nomination.

Sports Betting & Prediction Markets: DraftKings CEO Jason Robbins

Jason Robbins discussed the importance of the Super Bowl to DraftKings, emphasizing customer engagement and acquisition alongside revenue. He noted a shift towards parlays and player props, diminishing the impact of the game’s outcome on revenue.

Prediction Markets: DraftKings launched DraftKings Predictions in December, partnering with Crypto.com and CME Group. Robbins believes prediction markets have a significant opportunity, particularly in states without legal online sports betting. He highlighted DraftKings’ competitive advantages in pricing, marketing, brand strength, and partnerships.

Regulatory Environment: Robbins emphasized DraftKings’ commitment to legal and regulatory compliance and open communication with regulators. He acknowledged the evolving regulatory landscape and the need for clear guidelines, referencing comments from Chairman Celig.

Upcoming Events (Week of February 12, 2024)

• Earnings: Robinhood, Coinbase, AstraZeneca, Moderna, McDonald’s, Coca-Cola.
• Economic Data: January Jobs Report (Feb 14th), Consumer Price Index (CPI) (Feb 16th).
• Federal Reserve Speakers: Multiple Fed officials will be speaking throughout the week.

Synthesis/Conclusion

The market experienced a strong rebound on Friday, driven by gains in defensive and cyclical sectors while tech experienced a mixed performance. A key takeaway is the ongoing rotation out of high-growth tech and into sectors benefiting from broader economic activity. Experts anticipate continued volatility in 2026 due to various economic and political uncertainties. The Federal Reserve maintains a cautious stance on interest rates, closely monitoring economic data. Finally, the sports betting and prediction market landscape is evolving, with DraftKings expanding into prediction markets and navigating a complex regulatory environment. Investors should prepare for continued market fluctuations and focus on understanding the underlying drivers of sector rotation and economic trends.