Ernest HoffmanErnest Hoffman is a Crypto and Market Reporter for Kitco News. He has over 15 years of experience as a writer, editor, broadcaster and producer for media, educational and cultural organizations. Ernest began working in market news in 2007, establishing the broadcast division of CEP News in Montreal, Canada, where he developed the fastest web-based audio news service in the world and produced economic news videos in partnership with MSN and the TMX. He has a Bachelor's degree Specialization in ...

Core Viewpoint - Forecasters expect a positive outlook for the stock market in 2026, with Morgan Stanley predicting a 13% increase in the S&P 500 due to strong corporate earnings and a "rolling recovery" in the US economy [2] Group 1: Major Surprises - Morgan Stanley identifies three potential surprises that could impact the market in 2026: a jobless productivity boom, a shift in stock-bond dynamics, and a commodities rally [4] - The bank emphasizes that a year without surprises would itself be surprising [2] Group 2: Jobless Productivity Boom - A "jobless productivity boost" could occur, characterized by a weakening job market that suppresses wage growth and inflation while enhancing productivity [5] - This scenario may lead to core inflation falling below 2%, providing the Federal Reserve with the opportunity to cut rates without concerns of inflation reacceleration [6] - Labor productivity growth is already showing signs of improvement, with output per hour among nonfarm business workers increasing to 3.3% year-over-year in Q2, up from a 1.8% annual decrease in the previous quarter [6] Group 3: Stock-Bond Dynamics - The traditional inverse relationship between stock and bond prices may shift again, as both asset classes gained in 2025, driven by a "bad-news-is-good-news" sentiment where weak economic data boosts stock prices due to expectations of Fed rate cuts [8] - Investors are anticipating a more aggressive pace of rate cuts than the Federal Reserve has projected, with a 72% chance that rates will be lower by the end of 2026 [7]