Nobody truly knows the market’s next move. Not even the most prescient wealth manager on earth.
That said, the ongoing tension between rate expectations, earnings strength and macro ambiguity is making it harder than ever for financial advisors to predict the market’s near-term direction. And the market’s recent volatility in the wake of bellwether chipmaker Nvidia (Ticker: NVDA) has only helped to make the outlook murkier.
Not that they have given up trying to read the market’s tea leaves, of course.
While monetary policy in the short-term remains fluid as Chairman Powell and the Fed debate whether to deliver a rate cut in December, market expectations are starting to creep up again for another 2 to 3 rate cuts in 2026. As a result, Fed Funds Futures are now back to discounting roughly the same Fed rate cut path as the day before the last FOMC meeting in October.
Viraj Patel, head of asset allocation at Fiduciary Trust International, for one, thinks monetary policy is likely to be supportive for both the economy and financial markets heading into 2026.
“We believe that investor sentiment and risk appetite are simply being reset as trades related to momentum and peak Fed dovishness unwind. While we remain mindful of monetary policy risks and can’t rule out more short-term choppiness, the breadth of weakness suggests we’re likely closer to the end of this consolidation rather than the beginning,” Patel said.
Patel says the market’s recent consolidation was driven more by liquidity and technical factors than by fundamentals. Furthermore, he feels last week’s volatility reflected uncertainty over near-term Fed rate cuts and fears of excessive AI capex spending, but those risks appear to be manageable for now.
“While they could linger in the short term, we remain confident in the macro and corporate fundamental backdrop, especially earnings. For now, broader financial conditions remain unusually easy relative to core CPI and historically strong underlying demand,” Patel said.
Elsewhere, Jim Thorne, chief market strategist at Wellington-Altus Private Wealth, agrees that the broader setup is favorable as central banks prepare to shift from tightening to reinvesting and repairing balance sheets, which means liquidity for risk assets stands to improve. He adds that market-leader Nvidia’s recent third-quarter results were outstanding, reinforcing its status as a cornerstone holding for anyone targeting growth and the foundational AI narrative. The lackluster market reaction, in his opinion, is best explained by the timing of the earnings report.
“Options week frequently suppresses both volatility and directional moves, even in response to stellar earnings from bellwether companies. Over the medium term, investor skepticism about an AI bubble is not supported by the reality on the ground: AI capex is scaling, sector demand remains robust, and hardware leadership is justified by hard fundamentals,” Thorne said.
Moving on, Stash Graham, managing director and chief investment officer at Graham Capital Wealth Management, says the recent pullback in risk asset prices, combined with continued discussion of an AI bubble, has been a wet blanket on bullish sentiment. However, his research shows that during periods of notable pessimism, the market may present an asymmetric investment opportunity over an intermediate-term time horizon.
“Pairing our sentiment-based observation with the fact that a majority of our US leading economic indicators (LEIs) are indicating resiliency, we are, for the time being, confident in risk assets,” Graham stated.
When it comes to the market's schizophrenic reaction to Nvidia's earnings, Graham says rich earnings multiples generate such high expectations that companies must not only meet their earnings estimates, but beat them materially just to keep the stock price rising.
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“With valuations this high, a good earnings beat is really the expectation,” Graham said.
Finally, Vance Howard, CEO and portfolio manager at Howard Capital Management, believes the brief rally following the Fed’s openness to a December rate cut shows that investors remain receptive to a more accommodative policy path. The subsequent pullback reflects a market that is cautious but not pessimistic. Market-participants, in his view, are simply waiting for more consistent confirmation that inflation is cooling.
“This is a healthy dynamic at this stage of the cycle, as sentiment remains flexible rather than entrenched. Once policy clarity improves, risk appetite has room to strengthen,” Howard said.
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