Risk Appetite Returns: A Strong Week Across Markets

THE MARKETS

Markets rallied strongly this week, showing broad participation across equities, commodities, and even pockets of fixed income. The S&P 500 (+4.05%), NASDAQ Composite (+5.86%), and Russell 2000 (+6.41%) all posted sizable weekly gains, reflecting improving financial conditions, stronger earnings momentum, and growing investor confidence heading into year-end.

The 10-Year Treasury yield edged up slightly to 4.1%, marking a small move but signaling continued stability in rates. The U.S. Dollar fell (-1.19%), adding support to risk assets and commodities.

Energy and metals were firmly higher. WTI crude oil (+3.63%) bounced on signs of improving global demand, while gold (+3.65%) pushed to fresh highs, extending its remarkable 60.71% YTD surge.

Overall, the market tone this week showcased a reacceleration in risk appetite and a broadening of market leadership.

THINGS ARE LOOKING UP

“Optimism is the faith that leads to achievement.” — Helen Keller

Since early April, asset owners have benefitted from the positive wealth effect created by easing financial conditions. These conditions include:

Rising stock prices
A weaker U.S. dollar
Tighter corporate bond spreads
Softer government bond yields
A lower federal funds rate

Investors understand that a broad market rebound today often signals an economic reacceleration tomorrow.

According to the Federal Reserve Bank of Dallas Weekly Economic Index (WEI)—which tracks high-frequency data on consumer activity, labor markets, and business production—the business cycle continues with no sign of an imminent contraction. Real-time economic growth is currently 2.1% Y/Y, higher than at the onset of the last recession (1.7% Y/Y).

If the U.S. economy could weather the negative shock of a restrictive Fed, tight financial conditions, and falling profits in 2022, then a supportive Fed, easing financial conditions, and rising profits today present a compelling case for a continued mid-cycle expansion into 2026.

“Easier financial conditions today mean faster economic growth tomorrow.” — Talley Léger

THOUGHTS ON THE STOCK MARKET

In a recent conference, WCG Investment Management was asked for an S&P 500 price target for next year. While forecasting precise levels is always challenging, fundamental, technical, and macro analysis suggests a reasonable path to 8,500 in 2026.

From a technical standpoint alone, the long-term trend remains intact. When we combine this with:

Strong earnings momentum
Exceptional corporate profit margins
A solid multi-year revenue growth outlook
An easing Federal Reserve
Large amounts of cash still on the sidelines

…it becomes clear that the market has room to run.

We are in an unusual environment where the labor market is softening, but the upper and middle segments of the consumer remain healthy—and are still spending. At the same time, more non-tech companies are expected to invest in technology. Greater tech adoption and productivity gains are deflationary over the long run. For these reasons, the Fed should be increasingly focused on the labor market—especially for lower- and middle-income families—rather than on inflation, which remains distorted by slow-moving shelter components.

"THE TREND IS YOUR FRIEND...

…till the end when it bends.” — Marty Zweig

Based on WCG's S&P 500 price targets of 6,000 in 2024, 7,000 in 2025, and 8,500 in 2026, price action appears consistent with a long-term upward trend.

If we look past the unusual volatility around Liberation Day, the market is reconnecting with its original trend channel. Support and resistance lines continue to guide price action and reinforce the possibility of further upside into year-end and into next year.

HUMAN INTEREST: CONFIDENCE, CURIOSITY, AND KEEPING PERSPECTIVE

A well-known behavioral economist recently said, “Uncertainty is where growth happens—financially and personally.” It’s a helpful reminder as investors navigate headlines, data, and noise. Progress, in markets and in life, rarely travels in a straight line. Curiosity and discipline often matter more than perfection.

Best Regards,

Andrew Zittell

Yerba Buena Financial Partners

Andrew Zittell, CLU®, ChFC®, AIF®, RFC® is a registered representative with, and securities offered through LPL Financial, Member FINRA/SIPC. Investment advice is offered through WCG Wealth Advisors, LLC, a registered investment advisor. The Wealth Consulting Group, WCG Wealth Advisors, LLC, and Yerba Buena Financial Partners are separate entities from LPL Financial.

The LPL Financial registered representative(s) associated with this website may discuss and/or transact business only with residents of the states in which they are properly registered or licensed. No offers may be made or accepted from any resident of any other state.

Sources:

Federal Reserve Bank of Dallas Weekly Economic Index

Federal Reserve, U.S. Treasury, and FRED series

Yahoo Finance and FactSet market data

Company earnings releases and investor reports

Historical trend analysis based on internal WCG research