Market Compass video series

CNBC: Joining us now, Mona Mahajan, head of investment strategy at Edward Jones. Reading some of your comments, Mona, it’s like we're watching it play out, and I think you can give us some good insight. I mean, overall, the earnings that we’ve just seen – I guess we're about halfway through – used to think, I guess the estimate was 7%. It’s been more like 12%, but 30% in tech, which is pretty good. But in recent sessions we have seen traders or investors decide that maybe they should look elsewhere in terms of valuation. At least, that’s what it appears to be.

Mona Mahajan: I think it’s been a tough week for those investors that were exposed to the parts of the market that have really led to the upside. Think about technology, AI. But also more recently we’ve seen gold and precious metals sell off. We’ve seen the Bitcoin crypto space sell off. I’d say, broadly, if we take a step back, we still feel pretty good about the direction of the U.S. economy. We think it’s growing above trend. We feel pretty good – to your point about earnings – we think still double‑digit earnings this year, which underpins stocks. But we do think you have to start thinking about diversification more prudently, more seriously. Parts of the market that have held up well – value, cyclical, market caps in small‑cap and mid‑cap. And then, of course, when you look regionally, EM and international have held up better as well. So, there is an opportunity out there. We think it’s just a diversified opportunity.

CNBC: Valuation is never necessarily a reason to see an imminent sell‑off in anything. But in hindsight, after the sell‑off finally does happen, there were always some little clues. And you don't know what's going to cause it. Earnings might continue to be good, but it could be, well, there's this little wrench in the works here, or margins here, or something that you don't even know in hindsight what’s going to do it. But the bubble does – some air is coming out of all those leaders.

Mona Mahajan: Yeah. You know, I think it’s interesting. I think some of the business models are shifting. So certainly we’re seeing: could AI cannibalize itself in the software space? But also, a lot of the large‑cap tech space was asset‑light. It’s going from asset‑light to asset‑heavy. It was debt‑free; now we’re seeing more debt on the balance sheet.

CNBC: We're talking about that.

Mona Mahajan: So yeah, could margins get compressed a bit? Could valuation get compressed a bit more? I think there are question marks. The good news is growth is still tremendous. But the pace of growth – that second derivative – is slowing a bit.

CNBC: And then you mentioned earnings growth – double‑digit probably again this year. So if you were to assume that interest rates stay where they are or go down, you might not think there'd be a problem with multiples necessarily. So you could just say, all right, 15%, 12% earnings growth – that would translate to 12% in the S&P. But we can't guarantee rates are coming down. In fact, if inflation – if we’re underestimating that – we may not get any more rate relief, and rates could act on the long end, could actually go up like they have.

Mona Mahajan: Yeah. You know, look, I think new Fed chair in place in May – we will see what the direction of travel is.

CNBC: A hawkish Fed chair. More hawkish.

Mona Mahajan: Probably the least dovish out of the four options. But nonetheless, I do think there is a case still for one to two rate cuts this year. To your point, if inflation settles even around 2.5% or so, historically the Fed has tried to bring rates about 100 basis points lower.

CNBC: What if it doesn’t settle?

Mona Mahajan: If it goes to 2.5% to 3%, we still think a 3.5% fed funds rate makes sense here. To your point though, the long end is not controlled by the Fed – the short end is. And we could see a yield curve that starts to steepen. But all that being said, the U.S. economy has held up pretty well even in an environment where rates were probably 3.5% to 4%. So we think anything below that could support the consumer and support consumption of corporations as well.

CNBC: Played out. It… 1980, 1800. Okay, so I understand it goes up. Most years it goes up, but some years it actually closes lower. What could cause a down market this year?

Mona Mahajan: Yeah. You know, I think certainly when we look underneath the surface – to your point: S&P returns are driven by two factors – valuation expansion and what earnings growth does. If earnings growth, we think, is in that 10% range, that's fine. But multiple expansion — we think there are parts of the market that probably have more scope for expansion than others. And so probably value, cyclical could continue to perform well. If we see multiples come under pressure in the tech space, we could see a negative year – by the way, the first out of three years in the tech space. But we think parts of the market continue to hold up well. And we would look internationally a bit. We would look beyond just large‑cap.

CNBC: There’s always trade issues. China, Ukraine. I can worry about a lot of things – bird flu, I don’t know. There’s pandemics, there’s nuclear. There’s so many things – Iran – there’s a lot of things that…

Guest: Or you could slip and fall on the–

CNBC: Sidewalk. Or you could get killed by a vending machine. If you’ve got to get – you know, you put your money in and it's stuck. There’s a lot of things that can happen. You don't think… black swan – you have shark.

Mona Mahajan: Yeah. You know, look, unknown…

CNBC: Unknowns don’t come on land. Although there was a movie where they do, remember?

Guest: That shark tornado.

CNBC: Yeah. Sharknado. So it's possible – unknown.

Mona Mahajan: Unknown for sure. But look, I think the big picture here is: typically what causes a bear market is two things – one, a recession on the horizon; or two, the Fed raising rates rapidly. And neither of those seem in the cards for now. So I do think the backdrop to us still remains relatively benign. And so I think, to your point, a lot of headline noise, a lot of “squirrel” this year – politics, geopolitics – but the fundamentals are where we’re focused.

CNBC: Thank you.

This content is for general information purposes only and is not intended to predict or guarantee the future performance of individual securities, market sectors or the markets generally. Opinions expressed are as of the date of this report and are subject to change. This material is not directed to any specific investor or potential investor and should not be interpreted as a specific recommendation or investment advice. Investors should make investment decisions based on their unique financial situation.

Past performance of the markets is not a guarantee of future results. Investors should understand the risks involved in owning investments, including interest rate risk, credit risk and market risk. The value of investments will fluctuate and investors can lose some of all of their money. References to specific companies or securities should not be construed as a recommendation to buy or sell the security, nor should it be assumed to be profitable.
 

Hello, everyone, and welcome to the January Market Compass. Well, it's been about one month into 2026, and there's been no shortage of headlines, rising geopolitical tensions and policy uncertainty in the U.S. around the Fed, tariffs and government funding.

Nonetheless, for the most part, financial markets have remained resilient.

We're seeing positive returns for the S&P 500. And notably, there's been a bit of broadening in market leadership. Areas like small-cap and mid-cap stocks, value and cyclical sectors along with EM and international markets have all outperformed.

Now, what's driving this positive market backdrop? We believe markets are focused on the right fundamental drivers, namely positive corporate earnings growth, above trend economic growth and a favorable interest rate and tax backdrop. Let's dive in.

Since the start of the year, investors have been inundated by headline noise.

Geopolitical tensions in areas like Venezuela and Greenland have flared. And at home, we're watching for the nomination of a new Fed Chair, a Supreme Court decision on tariffs and a resolution around government funding. However, for long term investors, we believe it's important to tune out the noise and focus on what really matters for financial markets. We'll walk through three of these key factors here today: corporate earnings, economic growth and a better operating backdrop.

First, we believe U.S. corporate earnings are on pace to achieve double-digit growth this year. In fact, we have seen S&P 500 earnings growth revised higher to about 14.7% for 2026. Now, we know that stock markets are underpinned by earnings growth. And the good news is that this year corporate earnings are coming from a broad set of sectors.

Yes the technology sector is expected to see double digit earnings growth, but so are many other sectors supporting that broadening of market leadership as well.

Second, we see U.S. economic growth remaining above trend levels of one and a half to 2%. Now, as of mid-January, the Atlanta Fed GDPNow forecast called for Q4 economic growth to reach an impressive 5.3% annualized, driven by solid consumption and rising net exports.

Now, more broadly, we expect economic growth to continue to grow at or above trend levels in 2026, given the potential for lower interest rates and benefits from the U.S. tax bill.

Now, we know when the economy's on solid footing and the consumer remains resilient,

financial markets can perform well. Historically, it's when the economy is heading towards a downturn or recession that stock markets tend to fall more sharply. Now, this is not a scenario that we see on the horizon. Finally, we see the potential for a better operating backdrop for companies and households in 2026. Now, in our view, the Federal Reserve is likely to cut rates 1 or 2 times this year, bringing the Fed funds rate to around three and a quarter to 3.5%.

This would be supportive of better borrowing rates for consumers and corporations. In addition, the U.S. tax bill will kick in as well. And this likely means higher than average tax refunds for households this year. And for corporations, the tax bill offers benefits like an immediate deduction for capex spending. So this combination of lower rates and a better tax backdrop supports U.S. consumption broadly.

Overall, we think it's important for investors, like markets, to focus on the fundamentals and tune out the background noise in the headlines. And what we see for the year ahead is a relatively favorable backdrop: broadening corporate earnings, steady above-trend economic growth, lower interest rates and a supportive tax environment. Now we also know that there could be bumps along the way.

Markets don't rise in a straight line indefinitely, but investors can also use market volatility as an opportunity. Consider diversifying across sectors and asset classes, rebalancing investments and making sure you're aligned with your personal allocation goals. You can always speak to your financial advisor to help you come up with a plan that's best suited for your risk and return preferences.

And remember, a long term, diversified approach in any year, but especially one filled with headline noise, can help you stay on track for meeting your financial goals. With that, I thank you, and we'll see you right back here next month for the Market Compass.

Hello everyone, and welcome to our final Market Compass video for the year! I'm Angelo Kourkafas, and today we’ll look back at 2025, and share some of our key views for the year ahead.

It's been an eventful 2025. Trade policy uncertainty rattled markets early on, but stocks staged a V-shaped rebound to new highs, powered by heavy AI investment and stellar corporate profits.

Looking ahead, we expect another year of positive returns driven by steady economic growth, modest fiscal stimulus, likely more Fed easing, and rising earnings. But as we navigate now year four of this bull market, there are also potential risks, including periodic AI disappointments and lingering inflation. Let's dive into four key views.

Growth was bumpy in 2025 amid trade disruptions, a slowing labor market, and a prolonged government shutdown. Nonetheless, the economy grew about 2%, which is what we expect for 2026. 

We expect tax refunds will support consumer spending early in the spring. Also, favorable tax treatment of investment may encourage businesses to spend, while the AI buildout continues and trade headwinds fade. 

One factor that may act as a speed limit on growth is the labor market, as the low-hiring, low-firing      conditions persist. We expect job gains to improve slightly—around 50,000 to 100,000 per month—but still remain muted compared to recent years. A smaller labor supply, driven by the decline in immigration, should keep unemployment near 4.5%.

On the inflation front, tariffs have pushed goods prices higher, a trend that may persist early in 2026 before fading mid-year. The bigger story is services inflation, which makes up 75% of core CPI and is slowly moderating. Overall, inflation is likely to stay above the Fed's 2% target but improve slightly from 2025.

With the labor market cooling and price pressures still present, we think the Fed will aim for a 3% to      3.5% policy rate as it approaches the end of its easing cycle. If growth holds as we expect and the Fed cuts rates once or twice, the 10-year Treasury yield should stay rangebound near 4.0% to 4.5%. That could widen the yield advantage of bonds over cash, helping bonds outperform again in 2026.     

On the equity side, after three years of double-digit gains in the S&P 500 pushing valuations higher, 2026 will likely be all about earnings doing the heavy lifting. Returns may cool, but with no recession or Fed tightening in sight, we expect the bull market to keep going.

Leadership, however, could shift. In 2025, growth beat value, and tech and communication services dominated for the third straight year. AI should remain a major driver, but we see markets broadening—both within tech and beyond tech —with solid earnings across sectors and regions. We expect the gap between tech and other sectors to narrow in the year ahead, favoring a balanced approach. 

2026 looks promising, but risks like AI disappointments or lingering inflation could test the market's resilience.      

Investors can consider:

No. 1: Maintaining exposure to innovation and AI, but spreading risk. 

No. 2: Broadening your opportunity set to include mid-caps, cyclicals, and international equities.

No. 3: Using bonds for still-attractive income and portfolio stability.

No. 4: Reviewing excess cash allocations as yields decline with Fed rate cuts—weighing whether that cash could work harder elsewhere.

for tailored advice to your specific situation, connect with your financial advisor to help ensure your portfolio is positioned for success in the new year. And for a full look at our 2026 Annual Outlook, visit EdwardJones.com. 

Happy holidays, and we'll see you in 2026!

Hello and welcome to this month's Market Compass. My name is James McCann, I'm the Senior Economist here at Edward Jones, and I'm happy to be joining as one of the hosts of this monthly video series.
The year is almost over, and investors could be forgiven for a sense of whiplash they’ve experienced since the start of 2025 in the current economic climate.      

Earlier this year, we saw tariff negotiations played out in public, sparking renewed fears around inflation. A slowdown in hiring has triggered concerns around the labor market. We’ve heard warnings around a potential AI bubble. And most recently, we’ve contended with a record-breaking government shutdown. 
    
Against this backdrop, it isn't a surprise to see consumer confidence slump to a new low.

However, amid all this negativity, markets have delivered strong returns. The S&P 500 is up more than 30% from its April lows. This has been helped by large gains in technology stocks, while small caps have been getting in on the action, too. But this rally is showing signs of exhaustion. Investors are taking profits, and some are rotating away from the most highly valued parts of the market, like technology companies. That said, the markets are still well up on 2025 so far.

How can we reconcile the seeming contradiction between the gloomy news cycle and this solid market?

Well, I'd suggest three explanations.

First, despite the headlines, the economy remains resilient.

Businesses have so far adapted to higher tariffs. They’re adjusting their supply chains considerably to lessen the impact while absorbing the increase in costs in their margins. Despite this headwind, earnings reports this year have been stronger than expected, indicating that the firms remain highly profitable.
 
Meanwhile, households look well placed to manage a gradual uplift in inflation from tariffs. Rising asset prices, such as home values, 401(k)s and broker accounts, have helped boost the wealth of the household sector. This provides a buffer to help consumers weather shocks like inflation without pulling back materially on spending.

The upshot is that the U.S. economy is a tough nut to crack. Economists’ concerns about a potential recession over recent years have consistently proved too gloomy. This year has been no exception.  

Second, the Fed is taking its foot off the brakes.

Interest rates have fallen from their peak of more than 5% last year to around 4% now. We expect that to continue and should get down to around 3.5% next year.

This adjustment should help the U.S. economy. Lower rates encourage new borrowing and investment, while also lessening the burden of current debt.

Small-cap companies tend to benefit the most from these dynamics, which has been reflected in their strong performance in recent months, even if they have stumbled some.

Finally, markets don't always focus on short-term swings in the economy.

A good deal of attention this year has been centered on AI, the investment cycle powering its development and the expected long-term payoffs of this potentially transformative technology.

This theme has powered a 200% gain in the Mag 7 since ChatGPT was unveiled in late 2022, and it pushed the market cap of NVIDIA to about $5tn, which is larger than even the UK's annual GDP.

Bringing this together, a resilient economy, rate cuts and a burgeoning AI boom have all helped the market shake off the gloom this year.

As we look at 2026, it is certainly possible that we see some bumps ahead. Markets have moved a long way in a short time, stretching valuations and raising the risk of a near-term pullback. Recently, we have seen some signs of these dynamics in technology stocks. However, we think drawdowns could present opportunities to put cash that may be on the sidelines to work – especially with short-term interest rates moving lower.

But the economic narrative for 2026 does look brighter. Households seem set to enjoy larger refunds in April based on legislation passed this year, with businesses also benefitting from tax changes, particularly around their investment expenses. Meanwhile, rates are expected to continue to drift lower, and some of the negative impacts around shifting trade policy should fade. Overall, this appears to be a supportive backdrop for corporate earnings, with few signs of the AI investment boom slowing.

Given these fundamentals, it could be a good time to tolerate a little more risk in portfolios. Investors could consider turning up the dial on equity holdings, preferring a diversified mix of large and mid-cap US stocks, and international mid-cap and emerging markets. Conversely, investors could consider dialing down holdings of typically more defensive investments like bonds, especially following the large reduction in interest rates seen over recent years, which has lessened their attractiveness and lowered their return potential.

Speak to your financial adviser to determine what changes, if any, you might consider as we look ahead to 2026. Most of all, amid the swirl of noise around the economy, this year has taught us to stay calm, keep invested, and carry on focusing on our financial goals.

Thanks again for joining us, and we’ll see you here next month for our December Market Compass.

Hello, everyone, and welcome to the October Market Compass. Now, October is Halloween month, but does that mean it has to be spooky for investors. Historically, October is a more volatile month than average in stock markets. In fact, since 1950, research shows that there are more 1% or higher swings in October than any other month. 

This October, we have started to see signs of that volatility with the S&P 500 experiencing its biggest one-day drawdown since April earlier in October, near 3%. Now, that VIX volatility index, also known as the Wall Street fear gauge, had also inched higher closer to 20 levels after being in the mid-teens for the past several months. However, keep in mind, every year is unique and markets have been rallying steadily since mid-April, with the S&P 500 climbing over 30% without a 5%-plus pullback. 

So we could be due for a period of consolidation or some profit taking after a nice run higher, and the markets certainly have had several challenges or walls of worry to climb in recent weeks, including the extended tariff uncertainty, especially between the US and China, which weighs on consumer prices and inflation, the ongoing US government shutdown, which also weighs on economic growth each week it continues, and of course, some emerging concerns around the credit quality of smaller US regional banks, which seem contained for now but are worth monitoring closely. 

Now, despite the building concerns, we don't see a pullback or correction turning into a deep or prolonged bear market. Now, why is that? Well, there are some positive momentum factors as we head into year end and into 2026. First, the Fed is likely to continue cutting rates, which should support both the consumer and economic growth. 

Second, the US tax bill should kick in next year, which is supportive of companies spending on CapEx and R&D. And finally, corporate earnings growth continues to deliver. In fact, the expectation is that S&P 500 earnings growth will grow about 11% this year and accelerate to about 13.5% in 2026, driven by both tech and non-tech sectors. 

Now, overall, if we do experience a pullback in the weeks ahead, there are ways that investors could likely take advantage. We recommend considering three actions. Number one, rebalancing. As equity markets rallied, parts of portfolios may have grown beyond what was originally intended. For example, a balanced portfolio with 60% equities and 40% bonds may now be much more heavily weighted in equities. So this is a good opportunity to consider rebalancing this portfolio to get aligned with the desired equity and bond risk balance.

Number two, diversifying. Now, given the outsized rally in a few key sectors, including technology and AI, investors may want to consider diversification in their portfolios, especially into those parts of the market that have some more scope for catch up. Now, this could come by trimming gains in winners and reallocating or by putting new money to work as well. 

And number three, adding quality investments. Now, if markets do experience a correction or pullback, investors should consider being prepared. Have a list of potential quality investments that align with your strategic allocations ready in order to use market corrections as opportunities to add to portfolios. While regularly using dollar cost averaging to make investments is an established strategy, there may be times that call for more opportunistic investments. 

So while October has the potential to bring some scary market uncertainty if investors are prepared, volatility can become an opportunity. If you need guidance, talk to your financial advisor about strategies like rebalancing, diversifying, and adding quality investments at better prices. They can be your best resource to help make sure your investments are aligned with your personal long-term financial goals. And with that, I thank you, and we'll see you right back here for the November Market Compass. 

From renewed trade tensions with China to the ongoing government shutdown and worries around an artificial intelligence bubble. Recent headlines have triggered some volatility as we navigate the last quarter of the year. But here is what's important. Corporate earnings continued to grow, and consumer spending remains resilient even as the labor market has softened. The government shutdown will likely slow economic activity temporarily, but growth is likely to rebound once funding resumes.

In markets, Tech continues to lead, driven by heavy investment in artificial intelligence. While valuations are elevated relative to history, they remain below the extremes of the early 2000’s. Tech bubble and earnings continue to deliver. And with the fed likely to continue easing rates, we could see market leadership broaden, creating a favorable backdrop for equities. October is known for volatility, especially with markets near all time highs.

After one of the strongest six month rallies since 1950. Some consolidation of the recent gains is natural, but volatility isn't a reason to panic. It's a normal part of investing in times like these. Staying focused, diversified and grounded in long term fundamentals is more important than ever. Stay informed with our weekly market wrap at edwardjones.com

Hello, everyone, and welcome to the Market Compass. We are heading into the final stretch of the year, and both equity and fixed income markets are holding up well, thanks in large part to growing expectations for lower interest rates. 

In September, the Federal Reserve turned a page in its rate-cutting cycle. While the easing technically began last year, it hadn't gained much traction in 2025 until now. What changed? Mounting signs of a cooling labor market have shifted the Fed's focus from inflation to employment, prompting a renewed push towards easing. In this episode, we'll break down what's driving interest rate expectations and what it could mean for your portfolio. 
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Let's start with the labor market. The biggest shift in the Fed's thinking has come from signs of a softening labor demand. The unemployment rate is still relatively low at 4.3%. But job openings have now dipped below the number of unemployed workers for the first time since 2021. That's a signal that employers are becoming a bit more cautious. 

Other data points reinforce this trend. Payroll revisions showed that, over the past year, the economy added about 900,000 fewer jobs than previously thought. And weekly jobless claims have been slowly ticking up. 

Despite these signs of weakness, we don't expect a sharp deterioration. And why is that? First of all, slowing immigration is reducing labor supply, helping keep unemployment low. And also, labor data tends to lag market developments. The recent softening may reflect fallout from peak trade uncertainty earlier this year. As that fades and profit growth remains solid, hiring could rebound. 

While the labor market has taken center stage, inflation hasn't disappeared. In fact, it started to tick higher, but not alarmingly so. August inflation data came in about as expected. Tariff-related price increases have been moderate. And while goods prices are rising, we haven't seen a major spike. 

Services inflation, which makes up about 75% of the core inflation basket, is still trending lower, though progress has slowed. One potential upside of a cooling labor market is slower wage growth. Since wages make up roughly 70% of service sector costs, this could help inflation stay in check. The bottom line-- we don't see a repeat of the 2022 style inflation surge that if related pressures should be temporary and the broader inflation outlook remains manageable. 

So what does all this mean for Fed policy? The combination of labor market softness and manageable inflation suggests the Fed may not want to keep interest rates in restrictive territory for much longer. Most Fed officials view 3% to 3 and 1/2% as a neutral rate, basically where policy neither stimulates nor restricts the economy. We believe the Fed is now easing toward that neutral zone. And markets are already pricing in that shift. 

In past cycles, the market's response to Fed easing, depending on whether the rate cuts were preemptive, what we often call insurance cuts, or reactive, insurance cuts like those in 1995, 1998, and 2019 aim to support the economy before clear signs of trouble. They also tend to be bullish for equities. 

On the other hand, recession-driven or reactive cuts, like those in 2001 and 2007-2008, often coincide with poor risk sentiment and weak market returns. Today's backdrop suggests an insurance cut. While labor demand appears to be cooling, the unemployment rate remains low, and corporate profits and the economy continue to grow at a healthy pace. 

From a portfolio standpoint, which areas might be the potential beneficiaries? We think rate-sensitive and cyclical sectors such as consumer discretionary could be one, also, potentially, mid-cap stocks, which offer exposure to growth without the volatility of small caps, and also emerging markets, which could benefit from a weaker US dollar as other central banks have or already are close to approaching a neutral stance. 

On the fixed income side, the renewed easing bias is already helping. The 10-year Treasury yield has dropped to the low end of our expected range of 4% to 4 and 1/2%. While inflation and debt concerns may limit how far long-term yields fall, intermediate-term bonds still offer attractive yields in our view. 

Lower rates should help sustain the positive momentum in markets. But, of course, let's not forget, markets rarely move in a straight line. Expectations are high, and September and October tend to bring some seasonal volatility. We view any pullbacks as buying opportunities, especially with the potential for growth to reaccelerate in 2026. 

Tax cuts, deregulation, and lower rates could all work together to support the economy. As always, your financial advisor is a great resource to help ensure your portfolio is well diversified and aligned with your long-term goals. Thank you for watching, and we'll see you next month on the Market Compass. 
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