Denise Chisholm, Fidelity’s director of quantitative market strategy, uses pattern recognition to interpret data and predict market behavior. International stocks outperformed the US market last year, but Chisholm is bullish on US stocks in 2026 due to tax cuts, falling rates, and oil prices. High stock prices are not cause for concern, as historical data shows prices tend to continue rising.
Chisholm expects US stocks to lead in 2026, with median earnings growth starting to recover. She believes the current cycle is different from previous ones, with strong earnings growth expected. Three factors driving earnings growth are a lower effective tax rate, Federal Reserve lowering interest rates, and declining oil prices. Chisholm remains skeptical of headlines from any administration, citing historical examples where market reactions differed from predictions. The article discusses the impact of tariffs on the stock market and global trade, highlighting historical patterns of tax hikes not causing recessions. Chisholm expresses concerns about current market conditions, citing lack of “good news” indicators for forward market returns. He also explains why US stocks are likely to outperform international ones in 2026, based on earnings growth trends and valuation data.
Chisholm emphasizes the persistent outperformance of US stocks over international ones, attributing it to faster earnings growth and sector-specific trends. He also mentions the negative correlation between technology and financial stocks, noting that financials have strong valuation support despite challenges in the industry. Chisholm shares insights on technology sector trends, debunking concerns of a bubble and highlighting the importance of free cash flow in valuations.
Chisholm advises caution with energy sector investments due to excess capacity and over-earning relative to historical averages. He warns of potential downside risks in energy stocks, given current operating margins and returns. Chisholm’s analysis focuses on sector-specific trends, valuations, and earnings growth to guide investment decisions in the current market environment. Energy sector profitability is still in a negative risk-reward scenario going into 2026, causing pain for investors. The authors do not own shares in any securities mentioned. For more information, refer to Morningstar’s editorial policies.
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– Amazon reported a record-breaking $125.6 billion in sales for the first quarter of 2021, exceeding Wall Street expectations. The e-commerce giant also announced plans to invest $1.5 billion in employee bonuses and raises.
– Tesla’s first-quarter earnings beat expectations with $438 million in net income, driven by strong demand for electric vehicles. The company delivered a record 184,800 vehicles in the quarter, up 109% from the previous year.
– Apple posted a 54% increase in revenue for the second quarter of 2021, reaching $89.6 billion. The tech giant reported growth in all product categories, with iPhone sales up 65% year-over-year. Services revenue also hit a record high of $16.9 billion.: Why US Stocks Will Outperform in 2026, Says Fidelity’s Chisholm