Bullish sentiment remains, earnings season starts next week.

Stock markets around the globe have started the first week about ok, it just feels that major indexes are running out of steam a bit. Although, to be fair, smaller-cap indexes, which lagged the broader indexes last year, have picked up at the start of the year. Smaller-cap stocks tend to do better when investors remain bullish on the economic outlook. The rising geopolitical tensions have so far had little impact on investor sentiment. The latest AAII retail investor survey found that over 40% of respondents expect stocks to be higher over the next 6 months, which is above historical averages.

The Nasdaq index is flat on the month, and Nvidia’s share price remains around 10% lower than its peak, as does Microsoft’s. So one can say there may not have been a bursting of the tech bubble that so many are looking for, but maybe a little air has been released. In the past month, consumer staples have lagged, while materials and financials have been strong; industrials have done well, largely driven by the recent rally in defence stocks. All that would also indicate investors are optimistic about the economic outlook for the coming year.

When we commented on the overall investor sentiment at the start of the year, all the indicators suggest that portfolio managers are all in for the year ahead. So one has to ask where the marginal buyer is coming from, particularly when you know retail investors appear well committed to the bull market. The Vix index has ticked higher over the past few days, suggesting that some speculators are becoming more cautious.

It may be that the S&P 500 remains treading water, with continued rotation away from tech and communication services, or it may be that we get a broader correction to take some of the bullish sentiment out and provide a base for markets to push on from. The 4th-quarter earnings season starts next week with JPMorgan. You will also get Jamie Dimon’s views on the current market positioning and economic outlook.  According to Factset Q4 2025, the estimated (year-over-year) earnings growth rate for the S&P 500 is 8.3%. If 8.3% is the actual growth rate for the quarter, it will mark the 10th consecutive quarter of earnings growth. That feels like quite a high bar, tech stocks are obviously once again expected to provide a lot of that 8.3%.