The Setup Before the Surge

MID CYCLE EXPANSION

Looking back to the 1950s, the average bull market lasts about five years. By year three, things tend to get choppy — and that’s exactly where we are today.

I want to be clear I believe we’ll see a 10% correction in the first half of 2026, most likely between February and April. But before that, we need to talk about the Santa Claus Rally.

Q1 Weakness

When I look at the S&P 500, the trend hasn’t been particularly strong, but after a brief 3% pullback, the setup is there for another push higher. The VIX tried to spike aggressively, got stuck around 28, and has since closed multiple times below 20 — a sign of fading fear.

SENTIMENT

Meanwhile, fund manager positioning (institutional traders) shows leverage returning to the market, and investor sentiment has reset to more balanced levels. That combination often precedes a renewed acceleration. Market breadth peaked in August, pulled back, and now appears ready to expand again.

Active Fund Managers are purchasing Back Stocks 👇🏽

Bullish Sentiment

Leadership is shifting toward AI-driven automation stocks, as well as small-, mid-, and large-cap names tied to battery technology, power technology, and AI compute infrastructure. These areas represent the new engines of growth in this phase of the cycle. Crypto, after an incredible rally earlier this year, has cooled off — but the upcoming Clarity Act could act as the final catalyst before the next major “coin season.”

On the macro side, the most bullish scenario remains intact:

• The Federal Reserve is expected to cut rates twice before year-end.
• Long-term yields are falling as the labor market and consumer spending show signs of slowing.
• We’re entering a phase of pre-ISM manufacturing acceleration and potential tax cuts, which should begin pricing into markets soon.

All of this sets the stage for November, December, and January to be one of the most explosive three-month periods in recent market history — the feast before the fast.

Small Cap Ideas

$FLNC - Energy Storage

$WULF - Power Generation

$NNE - Nuclear Infrastructure

$PATH - AI Agents