Markets could gain 12–15% in 2026, but volatility is likely first

Financial experts are making their predictions for the coming year, and while the outlook includes possible profits for investors, they’re also flagging serious bumps that could shake the market along the way.

Ryan Detrick, Chief Market Strategist at Carson Group, believes investors could see their portfolios grow by 12 to 15 percent this year. However, he’s cautioning that getting there might mean enduring a storm beforehand.

“We’re looking at three spectacular years in a row. That doesn’t mean, though, that this fourth year can’t be solid,” Detrick said during a conversation with TheStreet. “We probably don’t gain 20%. Well, you know what? You know, 12 to 15%, we think makes a lot of sense in 2026.”

Historical data reveal steeper drops in year two of presidential tenure

The concern stems from where we sit in the presidential election timeline. As we enter the second year of President Donald Trump’s administration, a trend in decades’ worth of market data should be of interest to investors.

The first and fourth years of a presidential tenure are usually when markets perform at their peak. According to experts, this occurs as a result of campaign pledges, such as tax cuts, and the excitement that follows a new administration’s legislative proposals. 

The middle years tell a different story. Jeffrey Hirsch writes about these patterns in the 2026 Stock Trader’s Almanac. He points out that presidents and their political parties work hard to maintain power, and these efforts create ripples across global politics, economic policy, and stock performance.

“Midterm election year 2026 promises to be fraught with crisis, bear market action, and economic weakness,” Hirsch wrote in the publication.

The numbers back up these warnings. Detrick recently shared data showing just how rough the second year can get compared to other parts of the cycle. Looking at information going back to 1950, the typical peak-to-trough decline during years one, three, and four ranges from 11.2 percent to 12.9 percent. Year two tells a different story, with an average drop of 17.5 percent.

“No one knows when the low will be next year,” Detrick posted on X. “Just remember that midterm years see the largest peak-to-trough pullbacks.”

When you dig deeper into the historical record, some of those declines look even more alarming. Out of nineteen midterm years since 1950, six have seen bear markets where stocks fell 20 percent or more. In 2002, the market dropped 33.8 percent. Twenty years later, in 2022, it fell 25.4 percent.

This year could prove especially turbulent given Trump’s divisive nature and the uncertainty surrounding the midterm elections.

Todd Campbell, who serves as co-editor-in-chief of TheStreet, keeps the Stock Trader’s Almanac at his desk as a reference tool. He’s been working as a Wall Street analyst since 1997 and subscribes to the idea that while history might not repeat exactly, similar patterns tend to emerge.

But here’s where the story gets interesting for investors willing to take on some risk. While midterm year selloffs can test your nerves, they’ve historically created excellent buying opportunities for those who didn’t panic and run for the exits.

The data shows that after those second-year drops, the S&P 500 has delivered an average return of 31.7 percent in the following year. That’s substantially better than what investors typically see after pullbacks during other years in the presidential cycle.

“A year off those [second year] lows has never seen stocks lower,” Detrick noted.

The silver lining: Big drops pave way for bigger gains

Hirsch shares this view that trouble could set up opportunity. “Where there is great danger, there is also great opportunity,” he wrote. “This sets up the ‘Sweet Spot’ and the next great buying opportunity.”

His forecast predicts challenging times during the second and third quarters, followed by a rebound in the fourth quarter that will propel the market into positive territory. He expects a net gain somewhere between 4 and 8 percent for the full year.

Campbell offered a perspective based on his years of watching markets move. “If I’ve learned anything over all these years, it’s that the stock market can go much higher (and lower) than anyone thinks possible, and intrayear zigs and zags will do their best to derail you from your financial plan,” he said.

Whether 2026 follows the historical script remains unknown, but Detrick maintains an optimistic outlook even while acknowledging potential turbulence ahead.

He offered advice for investors who might see red numbers on their statements this year. “The stock market is the only place where things go on sale, and everyone runs out of their store screaming,” Detrick told TheStreet. “So there’s going to be a sale at some point. Things are going to pull back. Do not use it as an opportunity to panic. Use it as an opportunity to follow your investment plan.”

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