Stock market 2026 outlook: rally then correction ahead

0:00If you invest in the stock market right now, what I'm about to show you could either make you a fortune or cost you everything you've worked for in 2026. 2026 is shaping up to be a once in a decade, maybe even lifetime opportunity. The kind where massive fortunes are made and massive fortunes are lost. The S&P 500 has already surged 77% since October 2022 and it's positioned to surge another 20 to 30% in 2026. But, and this is critical, this exact pattern preceded every major market crash in modern history. We're talking about 2000, 2007, 2022 all over again.

0:33The difference this time, you're going to see it coming because Winston back there has done all the research for you. The market is literally about to hand you the biggest gains of the decade, followed by one of the most brutal corrections we've seen. By the end of this video, you know exactly how to position yourself to capture those massive 2026 gains by protecting yourself from the inevitable crash that follows. We learned the 5 warning signs to watch for, the exact strategy to profit for both scenarios, and most importantly, when to make your move.

1:01Now, I'm going to do one better for you. I'm going to give you a full workbook, including the 5 warning signs, what they are, checklists, and everything. That's completely free. That's in our free community at felixfriends.org/resource. And if you're wondering who the heck I am, my name is Felix Prehn. I'm an ex-investment banker. I've seen how the big money really moves and I've watched institutional investors make and lose a lot of money.

1:23I'm also the founder of the GOAT Academy where we've taught over 20,000 students so far how to trade more like the institutions do. And I'm also the co-founder of tradevision.io where we track real-time market data, institutional flows, give you live news on your stocks. And there's a crazy Christmas sale going on over there so check out the tradevision.io Christmas offer for you. But this whole community is about one thing and one thing only, levelling the playing field between retail investors like you and the Wall Street giants. We teach regular people how to beat Wall Street at their own game.

1:55And today I'm going to show you a setup that mirrors 2000, 2007, 2022, the 3 biggest market tops of the last 25 years. This isn't speculation. This is pattern recognition based on decades of market data. What you do with that information could set you up for whatever you wanted to set you up for. If you want some help with that setup and how the institutions apply strategies, learn from real investment bankers, my mentors, well, if you're serious about your money, book a free strategy call with us. Learn more about our mentorship programme. And to access that, including my million dollar life trading experiment, you can book a call at felix.org/freedom. That is also free of charge and completely risk-free.

2:33Now, where are we since October? The market's gone absolutely bananas. We're up 77% October 2022. A normal 3-year period gives us about 30%. So, we've done more than double that. Now, this doesn't automatically mean a crash is coming. And this is where most people go wrong. They see these massive gains and they think, we're due for a crash, panic. But that's actually not how markets work.

2:56Bull markets can run hot for years. In fact, if you look at the last 40 years of market history, about 50% of that time, we were in multi-year bull runs. The 90s saw a 9-year bull market. The 2010s saw an 11-year bull market. So, the fact that we've gone up fast doesn't mean we're about to crash. The real question is not will we crash because we went up fast. The real question is, what fundamentals are driving this rally and what will make them break. That's what we're going to unpick in the next few minutes.

3:25Now, people are going to talk to you about PE ratios. They're going to say, oh, the market PE right now is about 28, that's crazy. But that doesn't matter. Historically, the average PE has been lower. Yes, 16 to 17 historic. So, we're at a premium, but it doesn't matter once you understand what's driving this rally. There are two parts of that. One is the obvious, what everybody talks about, but I'm going to run you through that anyway just so you don't miss any of it. And then I'm going to tell you the not so obvious, which is what institutional money is watching.

3:55So the rocket fuel everyone's talking about is AI infrastructure spending, right? We know that it's massive. Yes, in 2026 global spending on AI infrastructure is projected to hit $400 to $500 billion. So that's a lot of money. Semiconductors, power grid expansion, the whole stuff. Companies like Microsoft, Amazon, Google, and Meta, they're driving most of that. They're planning about $280 billion of that expenditure.

4:18Second, we got the Fed. The Fed's going to cut, right? Trump's going to appoint a Fed chess or a Fed poodle. Which one's right? I'm not sure. And then they're going to cut rates aggressively, we would imagine because that's the whole point of this. Why do rate cuts matter? Well, they make borrowing cheaper for companies and for you. So, you spend more, the companies can invest more. And either way, companies make bigger profits, which means higher stock prices most likely.

5:05And then number 3, that's you. We're counting on you, the retail investor FOMO. The fear and greed index sits at greed right now. And typically that means the retail money starts to pour in because we can go higher, we can go more extreme. But what happens is that the people who've sat out 2025, and there still are those people, they're going to start piling in. They're going to see they're maybe making money and they're going to start to put money in. So it's a self-fulfilling prophecy. More buyers push prices up and so on.

5:35So my prediction for 2026, we're going to be up somewhere between 20, 25, 30%. And that could be by mid or late 2026. I suspect it's going to come before the midterms. That'll be complete coincidence. By the way, the government obviously does not manipulate the stock market to win elections. That would be absurd, wouldn't it? And the more risky stocks could actually deliver much bigger returns than that. So, it's going to be a beautiful market.

6:02Now, before we get to the crash part, because there'll be a crash at some point, there are 3 hidden forces that have been driving stock prices higher. Wall Street talks about it, but I don't really see this much talked about in mainstream media or on YouTube because it's a bit more out there. But these forces, these buyers don't care about PE multipliers. They don't care about valuations. They just keep buying no matter what.

6:25The first of these secret forces are index funds. Now, do you own an index fund? Yes or no? Put it in the chat down there. Even if you said no, you probably do. Your pension fund most certainly does. Your 401k or whatever certainly has it in it. And they buy the stocks that are in the S&P 500, right? So, you buy an ETF like VOO or something like that and it'll buy 500 companies. It does not care what they're worth because those 500 in the S&P 500 can be super overvalued. They still have to buy it. But most of that money actually flows into the top 10 companies. Why does that happen? Well, Apple, Microsoft, Nvidia, and Amazon, they get the lion's share of every dollar that flows into the index fund because they're the biggest stocks. So, there's this constant buying pressure on the biggest stocks which pushes them even higher.

7:12The second force is corporate buybacks. This year, companies bought $1 trillion of their own shares. Nothing to do with fundamentals. When a company buys back its own stock, what happens? Less shares available. Less shares, same profits means PE looks better. It looks like there is profit growth. Must be worth more, right? That's how companies pump their own stock.

7:35Now, why do they do this? Well, the cynic in me would say that CEOs in the C-suite are paid in stock options and they make more money if their stock price is high, especially just before their options vest. Now there is research out there that would show a very odd coincidence that these buybacks are often timed with just before C-suite stock options vest. I'm sure it's a complete coincidence because of course the great and good American corporate world would not pump their own stock price for their own personal gain. Right? Don't think such thoughts. It's naughty. That's the second. So those guys are going to buy their own stocks. And again, who is the biggest buyback buyer? It's the top 10 stocks.

8:15And then you've got something that's a little bit more opaque. Have you ever bought an option? Some of you might have bought a call option, right? When you buy an option, who do you think sells it to you? Good question, right? Well, there's somebody who creates it and sells it to you. And that somebody is called a market maker. They are the people who look out for the interests of the little guy. Citadel, Susquehanna, those kind of guys.

8:38Now, they have just sold you an option, which means that they have just made a trade where they're saying the market's going to go down. So, they now have risk. They eliminate that risk by hedging. And how do they hedge? They buy the index. So, it creates more buying pressure, pushes prices higher. It's a threefold mechanical process. Market makers don't care about valuations. They're just managing risk. The buyback guys don't care about valuations. They just care about their stock options.

10:11Stock options. And the index funds don't care because they have to buy when money flows into index funds, which happens passively, especially through the pension contribution system. So it's not about fundamentals anymore, it's about mechanical buying. But when the market turns, these same forces can work in reverse. Index funds have to sell. Buybacks, they're still there, but if companies have less money, they'll buy less. And options hedging will flip to sell. And that's when things turn ugly.

10:42So we talked about what makes 2026 a beautiful year. And by the way, I'm very heavily invested right now. I'm very bullish. All of our institutional indicators are very aggressive right now. And again, you want to get potentially access to that in our mentoring, book yourself a free call at vixens.org/freedom. But the party will end. Every party ends, no matter how good it is. It might be at 2 in the morning, at 4 in the morning, at 6 in the morning. It might continue on the next day. It might last all bloody weekend, but at some point the hangover is going to get you. The question is, when and how bad will it be?

11:14Well, let's look at what would trigger a market crash and then you will have the 5 ingredients that you can watch for to know what to do. Now I think there's a simpler thing to look out for. I'll share that with you in a second. But you want to understand the fundamentals first. First, if we get a weakening labour market. Unemployment is higher than it's been at any time since 2021. Maybe the data is better, maybe it's not. Don't really care. It doesn't look great. It doesn't look terrible, but it doesn't look great.

11:40So unemployment goes up, people tend to spend less money. When people spend less money, companies make less profits. When companies make less profits, they lay off more workers. You get the idea. It's a vicious little beast of a circle. But then they are going to lower interest rates, so we might just be fine.

11:58What about the second part? Stagflation. What the heck is that? That means your growth is slow with rising unemployment, which is what we have at the moment, and inflation remains sticky above target. So say inflation remains at wherever it is right now, 2.8% or something like that, and your GDP growth is neither here nor there. Then what do you do? You can't cut rates because you've got inflation. You can't stimulate the economy because you've got inflation. That's probably the worst case scenario, stagflation. Government can't spend much more money. They're already spending $2 trillion extra that they don't have every single year. So that's a risk.

12:32Now having half a trillion dollars flowing into infrastructure spending from AI, that's a lot of money. That could give us some decent economic growth. So maybe this won't happen. Third, we have extreme valuations. And this is where a lot of people are talking about right now. The PE ratio of the S&P is 28. Historically it was much lower. So say companies' earnings, their profits, start to disappoint. Well, that would become a problem.

12:56So when Nvidia comes out and says we grew at only 30% and we were expecting 60, now stock prices are going to fall. What's going to happen then? People are going to sell their index funds. The index funds have to sell. And when the index funds sell, what do they sell? They'll sell the top 10 stocks. So now people panic because everybody owns the top 10 stocks and they sell even more and then index funds have to sell more and you get the idea.

13:20And we've seen this movie before, by the way. In 2000 the S&P hit 30, the PE ratio, it then dropped by 50%. I don't mean to spoil your holidays, but it can happen. In 2021 it hit 30 and then dropped 25%.

13:36So how do I see 2026 playing out? I think we're going to get a euphoric first half of the year. Going to be a big market surge. Everyone's making money. Middle of 2026, maybe a little bit later, maybe just after midterms, pure coincidence, no politics of course involved there. Unemployment might tick higher or be allowed to tick higher because employment data is whatever you want it to be. Earnings guidance might start to get cut a little bit and the inflation might still be there because they're going to cut interest rates. And therefore the end of the year or in early 2027 the reality might hit that maybe we just partied a little bit too hard. Maybe we need to have a lie down.

14:16And that isn't a doom and gloom scenario. That's just the cycle of the market. The market moves like this. So what do you want to do? Well, two options. You can just stay in the whole thing and enjoy it. Or you can figure out some way where you can take the good bits and you can skip the worst bits, which is what we aim to do by following institutional trading strategies.

15:18You want to learn more about that, you know what to do. Book yourself a call, felix.org/freedom. It's a freedom call. It's like liberation day without the crash. So let me give you 5 warning signs so that when you see 3 or 4 or 5 of these flashing red at the same time, it might be time to get defensive.

15:42The first, I want to take notes, is speculation going parabolic. I'm talking meme stocks, SPACs, dog-themed cryptocurrencies, all the crazy stuff. When people say, "This time it's different. Bitcoin will make me a billionaire." That's when you might think, "I think I've seen this movie before." And then they're going to go up 100 and 200, 500% in a few weeks. And again, that's a sign. It means the dumb money is the last to move in. That's just the reality. And the dumb money tends to chase pretty dumb stuff. Not saying the smart money is any smarter, but it's just the reality of it.

16:16The second is massive gains. So if everyone says, "Oh look, I only made 40% last year. Isn't that terrible?" Again, win at the top because people have normalised crazy returns. The market historically has done about 8 to 10%, not 30 or 40 or 50. That's number 2.

16:35Number 3 is margin debt. As I'm recording this, there's about $1.2 trillion in margin debt. That's people who have borrowed to buy a stock. Now, don't do that. That's what I'd say to you. Unless you have extraordinarily sophisticated risk management, margin is going to bite you in the backside because when it goes down, it goes down twice as fast and you need to come up with the cash. Otherwise, you're going to have to sell. And guess where you're going to have to sell? The bottom of the market, the exact point where you actually would like to be buying. But the problem is that with $1.2 trillion in margin, the market goes down, all those guys have to unwind their margin and $1.2 trillion will disappear from the market very, very quickly.

17:18The 4th thing is there is a great thing out there, probably the only great thing that CNN has ever done, and is called the Fear and Greed Index. Right now it's a scale, a bit like a car dial type thing. Right now it's sitting at about 56 as I'm recording this. That's greed. Not extreme greed. It can hit like 80 or 90. But there's also another way to look at it. When your Uber driver is giving you stock picks, everybody at parties is talking about how much money there is in making stocks, when everybody's an expert, the top is near. It's a little harder for me nowadays because people always come to me and talk to me about stocks. So I'm like, are you talking about stocks because the market's overvalued or are you talking about stocks because you think I know something about stocks? That was a problem for me. Put another way, when Winston starts talking about stocks back there, that's really when we were in trouble.

18:12All of that, by the way, is in the workbook. It's in the free community so you can just download that. So what's the strategy? The simplest thing to do is just dollar cost average into the index. It's just buy VOO or SPY or whatever and just do it every week, every Monday. You're good, or every month or whatever, but more often better. You can't stop. You're never allowed to stop ever, right? Especially in crashes.

18:38A little bit more sophisticated would be to have some cash reserves on the side and then try to go in when the market crashes. You might also want to start adding some defensive stocks when these things get triggered. And defensive stocks to me would be anything at the moment that is non-AI. Hard to find. Well, actually no. There are plenty of companies out there that are not AI related. And I would strongly suggest you eliminate any margin in your broker unless you have some extraordinary risk management signal, which I do think we actually have, but most people don't understand it. Be very happy to teach it to you, but mostly we don't understand it.

19:14And when your meme stock goes up 100% in 3 days, don't have to sell it because I always say, don't sell your winners. But at the very least, set a bloody trailing stop so that when this thing goes to 90 or 80% it sells and you lock in the gains because otherwise it's going to go back down and it'll be at minus 80% before you can say kumbaya. So please, please, please be smart about that. Don't sell your winners early, but you want to have at least a trailing stop on there. You're going to want to have written rules if you're more of an active investor.

20:20And I would strongly recommend you adopt a systematic approach, which is what Wall Street does, which is what we teach. It removes your emotions. That makes you a rules-based beast, which is what I'm doing at the moment, but I'm doing always. But at the moment I'm running a particular experiment where I'm running a million dollars of my own money following purely the system and it's a Wall Street system and the back testing, it's done extraordinarily well, but back tests are imperfect, very much so. So I'm testing it with my own money and you can watch with me, you can learn with me, you can see the whole thing if you wish. How do you do that? Well, start by booking a free call with us and a chat with my team. See if this might be the right thing for you. Zero pressure, zero obligation, and go to felix.org/free.

21:08If you got some value out of this video, share it with somebody else who might get some value out of this. The problem with the COVID crash is a lot of people just forgot the lesson. They then just went all in on the meme stocks which was great for a while and then they lost most of that money when it collapsed. And that's avoidable. You don't have to give the money back. Wall Street would like you to, but it is your option. So your option really for 2026, 2027, do I want to temporarily make money and then hand it all back to Wall Street or do I want to keep it? The choice is yours. Winston says be smart about it. He's lying there behind the table.

21:48I wish you a glorious start of 2026. May all your dreams come true. May it be the most glorious, splendid, and successful for you. But I think for those things to come true, you need to change what you're doing. Whatever you're doing right now, you need to change it. Otherwise, you're very likely to get the same outcomes. And I appreciate the market's been very good for us the last 2 or 3 years, but it won't always do that. And we're going to get a repeat of the post-COVID crash, guaranteed. And you want to be in a better position to act on that and actually make money out of it rather than lose money out of it. There we are. All the best. Felix and Winston here. And if you're worried what your favourite tech stocks are going to do at the end of 2025, in the beginning of 2026, then this is the right video for you. We're going to walk you through.