Expect the bull market to continue in 2026, albeit with much more volatility, says Kevin Mahn

Market Overview - The S&P 500 has achieved 41 record closes with a total return of just over 18% and marks the three-year anniversary of the current bull market, suggesting a continuation of this trend into 2026 with expected double-digit growth despite increased volatility [2][10]. Investment Opportunities - Key areas for growth include AI, infrastructure, aerospace and defense, biotech, and power solutions, indicating where significant spending is occurring [4][5]. - The influence of the MAG7 (the seven largest tech companies) on the S&P 500 is weakening, with their contribution to total returns decreasing from 62% three years ago to around 44% currently [5]. Pharmaceutical Sector Insights - Large-cap pharmaceutical companies face challenges as many revenue-generating drugs go off patent, leading to increased competition from generics. This situation presents opportunities for small-cap companies to innovate and fill the revenue gaps [6]. Economic Indicators - The economy shows signs of health with a GDP growth of 4.3%, core CPI at 2.6%, and wages rising above inflation, but consumer spending remains crucial as it historically accounts for about 70% of GDP growth [11][12]. - The potential for consumer spending to shift towards debt servicing could slow economic growth, highlighting the importance of maintaining consumer confidence [12]. Federal Reserve Outlook - The market is not expected to rely heavily on the Federal Reserve for further monetary easing, with anticipated rate cuts of 25 basis points in 2026 and 2027, indicating a stable economic environment without the need for aggressive accommodation [14][15].