Moneyball Resolutions for 2026…

This is it, everyone … New Year’s Eve!

I’m currently in Hawaii, finally getting over the superflu, and getting ready to close out the year with my wonderful family.

But I still wanted to shoot one final episode of Moneyball Economics to close out the year and share my prediction for another year of 15%+ profits in the stock market.

Just like last year, my prediction for double-digit growth in the S&P 500 is being met with quite a bit of skepticism. But just like last year, I’m expecting stocks to over-deliver — thanks in large part to one critical factor that many investors have overlooked entirely.

The whole story is in today’s video. Click below to watch:

Video transcript:

Welcome to Moneyball Economics, or as we say in Hawaii, Mahalo.

That’s right. I’m not coming to you for my usual studio. I am recording this in the conference room with my hotel in Kauai. I am here mending, recovering from the super flu, which started to kick me in the ass about two weeks ago. And trust me, there is no better place to recover than Hawaii.

So here we are, end of 2025, beginning 2026. When I was standing here, same time last year, put a stake in the ground and I said 2025 would be a year of strong growth for the stock market, 15% in fact. Well, we hit 17%.

As I look at 2026, I’m going to do the same thing. I’m going to make a prediction. I think we’re again going to see a strong 2026. I think we’re going to see a year of something along the lines of 15 to 20% stock market growth.

Now this is unheard of, having all these years of double digit growth.

To understand why I feel so bullish about 2026, I want to share with you, I want to paint a picture of where I think we’ve been and where we’re going. I believe 2025 is the last year of what I will call the COVID economic cycle. I believe 2026 is the first year of what I’m going to call the Donald Trump economic cycle. And I want to explain what I mean by the COVID cycle and how it’s different from what’s coming down the pipeline.

Go back in time. It’s 2020. COVID is everywhere. The economy is tanking. So what do we do? We throw about, what, $20 trillion into the bond markets. We bring interest rates down to 0% and we reignite the economy. And man, when I say reignite, the economy takes off and the stock market takes off.

Stock market takes off for two reasons, low interest rates, but also because the stock market reflects profit growth. And profit growth was surging in 2021 and 2022. Again, you throw all this money at people.

Take the position of a company, okay? You’re the CEO, and what do you see? You see all this money coming down the pipeline, stimulus checks. You see people sitting at home, refurbishing their homes, buying homes thanks to 0% interest rates. The economy is surging. There’s a lot of business activity, and so you need to staff up to meet that activity. Along the lines of staffing up, you also need to build in some buffer workers. You need to keep that employment pipeline strong because people are jumping ship much more than they used to. In any event, it’s 2022. You’ve had two robust years of a lot of money out there, but then things start to change.

Shelter in place ends and people start going out more. And so the economy shifts. In the first couple of years of this COVID cycle, people are staying at home and they’re spending their money in certain ways.

But once they’re out and about, the economic activity kind of normalizes back to where it was pre- COVID. And the way that translates to a CEO is corporate profitability starts to slow down. So in 2023, corporate profit growth is good, but it’s not as great as it was.

Now, again, if you’re the CEO or CFO, whatever you are, you’re paid in stock. And the way you’re paid means that you want that stock to go up. And stock prices go up basically if you are showing growth, if your profits are growing. In 2023, we saw profit growth, but it peaked. In the fourth quarter, when we’re looking at corporate profits, corporate profits for non-financial companies year over year was 20% in the fourth quarter of 2023.

Think about that. Companies are printing money. 20% profit growth in one quarter year over year.That’s phenomenal. But you know what? That was the peak. So as we get into 2024, profit growth slows down. It goes from that 20% rapidly down to barely single digits. So again, you are the CEO of a company. Your profit growth is slowing down.

What do you do? Well, you try to expand your sales. But what if your top line isn’t growing? How do you maintain that profit growth? Well, quite frankly, you maintain it by starting to look at operational efficiencies. That’s a euphemism for laying off people, trimming your staff, cutting costs, spending less on travel and entertainment and so on. And so that’s why when you talk about going into this COVID cycle, starting in late 2023, remember, all of a sudden high tech companies are announcing massive waves of layoffs.

Same thing in 2024, massive waves of layoffs. And that’s because they overhired. They overhired because the economy starting from 2020 to 2023 was one way. But then when it started to normalize, it reverted back. You didn’t need as many people. So you’re sitting there, you’re the CEO. It doesn’t matter that there’s an election in 2024.

This downturn in the cycle was inevitable because we had such a mad rush in the beginning thanks to all this money. Okay. The dust is settling. It’s 2024. You are announcing a lot of layoffs. And then comes Trump. It’s now 2025. Profit growth, you’re trying to stabilize it and then Trump throws in this tariff nonsense. Profit growth turns negative. So what do you do? You double down on your operational efficiencies. You fire even more people. And that’s what we’ve been seeing. Now, the latest data that we have for corporate profitability looks at the third quarter.

And guess what? It’s turning up. Now it’s still a little bit negative, but you are now on the upswing. So again, put on that hat. You’re the CEO. Everything you’ve done to date has stabilized in a very challenging environment, has stabilized your profitability. You’re not about to make any changes. You’re still not positive profit growth on a year-over-year basis. You’re still slightly negative.

So there’s no reason for you to change course for you, for example, to start staffing up, but you are improving. And so when we talk about the fourth quarter for which we don’t have data yet, the odds are if you are CEO and you maintain where you’ve been, not much hiring. Maintaining restrictions on travel and entertainment, guess what? You should see some positive profit growth this quarter and heading into 2026. And that’s what I mean by the end of the COVID cycle.

Companies have normalized their operations. COVID’s now a thing of the past. And so what we have in 2026 is a different type of economy. We have companies that are very lean. If we start to see growth, if we start to see more business activity, they’re so lean. Every dollar that comes in is going to be even more profitable than before, but they’re also going to have to start hiring. You want to focus going forward on corporate profitability.

As we kick off January, we’re going to kick off a new earnings cycle. We don’t have the GDP view of corporate profitability, but the next earning cycle will talk about what’s going on in Q4. And I bet we’re going to see some very strong upside surprises, and that sets the stage for 2026. If you’re a CEO and you’re looking around and you start to see more business activity, you start to see higher profit growth, you’re going to start to hire again, and that creates this positive feedback loop in the overall economy.

On top of that, we’ve got the Trump factor. We are almost at the first year anniversary when he slapped down these tariffs. Again, once we get past that, the tariff story is winding down. Things are going to be stabilized. Now companies have predictability. Now we know what’s really going on. We can start investing accordingly. And then you’ve got things like possible throwing out a couple of grand from the tariff dividends. You’ve got things like the April tax refunds. You have new economic stimulus coming into play that’s going to goose up this economy. And again, as we throw money into the economy, it’s going to create activity as interest rates get pulled down. We’re already seeing housing demand start to go up. We are seeing a highly stimulated economy going forward, and that’s just going to trigger profit growth for companies. In turn, that’s going to trigger stock market growth.

We’re in it to win it folks,

Zatlin out.