After stock markets like the S&P 500 (SPY) returned over 15% in 2025, investors are wary that gains will continue in 2026. Inflation will take a toll on the real-world economy, while hyper-spending for semiconductors will accelerate this year.
This creates a K-shaped stock market.
On the first day of trading last Friday, the S&P 500 started off strong. At first, Nvidia (NVDA) led the advance, while firms like Intel (INTC), AMD (AMD), and Micron (MU) gained the most. Software firms like Adobe (ADBE) and Intuit (INTU) fell. By the end of the day, consumer discretionary and communications declined.
Stock markets are pricing in a drop in consumer spending. Expect companies facing profit margin pressures from inflation to fare the worst. In the confectionery space, Mondelez (MDLZ), Pepsi (PEP), and Coca-Cola (KO) might underperform this year.
Conglomerate Procter & Gamble (PG) risks erasing its recent bounce from its 52-week low.
Broader Market Rally
Strategists are upbeat. They are calling for a broadening of stock market performance this year. That would need GDP growth momentum to continue this year. If that happens, investors could consider companies like Visa (V), Mastercard (MA), and American Express (AXP). Those firms would report higher transaction volumes as consumers spend more.
If stock market performance continues this year, Robinhood (HOOD) and Coinbase (COIN) might rebound from their recent slump.
