Why 2026 May Bring Market Turbulence Without a Major Crash
New York, Tuesday, 30 December 2025.
Current market conditions lack a “distinct culprit” like 2008’s financials, suggesting 2026 will face historical midterm volatility rather than a structural bear market.
Historical Headwinds Meet Record Highs
As investors navigate the final trading hours of 2025, the financial landscape presents a dichotomy between historical caution and current momentum. While the New York Stock Exchange (NYSE) Composite, Russell 3000, and Dow Jones Industrial Average were sitting at record levels as of December 28, 2025 [1], market historians warn of the “midterm scaries” associated with the upcoming year. We are entering the second year of the United States Presidential Cycle, a period historically identified as the most challenging for equities [1]. Data analyzing the period from 1950 to 2023 indicates that the second year of a presidential term is on average the weakest, delivering only a 4.6% gain compared to the typical S&P 500 annual average of roughly 10% [2]. This represents a performance gap of 5.4 percentage points below the historical norm.
Absence of a Structural “Culprit”
Despite the historical precedent for volatility, TrendLabs analysts emphasize a critical distinction in the current economic environment: the absence of a structural bear market driver. Previous significant downturns were often precipitated by the collapse of specific “culprit” sectors that peaked early and led the market lower, such as the technology sector in 2000 or financials and homebuilders in 2008 [1]. In stark contrast, the current market lacks such a weakness; financials continue to hit new all-time highs globally as of late December 2025 [1]. Furthermore, market breadth remains robust, with the NYSE Advance-Decline Line closing at a new all-time high in late December, and the ratio of Consumer Staples to the S&P 500 hitting record highs, suggesting that defensive stocks are lagging rather than leading [1].
Global Resilience and Recent Volatility
The broader economic picture extends beyond U.S. borders, offering further evidence of resilience. In Japan, the Nikkei 225 is on track to surge approximately 28% for the full year of 2025, marking its third straight annual advance driven by economic recovery and easing global trade headwinds [3]. However, short-term volatility remains a factor as the year closes. On Monday, December 29, 2025, U.S. markets saw a modest pullback, with the S&P 500 decreasing by -0.35% and the Nasdaq by -0.46% [4]. Commodities also experienced sharp fluctuations; while Crude Oil rose +1.89% to nearly $58 per barrel, Gold dropped -4.39% and Silver futures corrected sharply, falling -9% after recently hitting an all-time high [4]. This aligns with George Soros’s observation that short-term volatility often rises when long-term trends lose momentum [4].
Navigating the 2026 Timeline
Looking ahead, the timeline for potential turbulence appears specific. Historical data from the Stock Trader’s Almanac suggests that the weakness associated with the midterm year typically manifests towards the end of the first quarter, persisting through the second and third quarters [1]. While friction in Washington could threaten performance in the new year [5], the seasonal pattern also points to a recovery. The “October low” has historically marked the beginning of a powerful seasonal tailwind that extends through the end of the midterm year and into the pre-election year [1]. As TrendLabs founder JC Parets advises, the strategy for 2026 involves respecting the trend and remaining offensive, letting price action rather than the calendar dictate investment decisions [1].