Summary of "Former Wall Street Bull Now Expects Stocks To Fall 15-20% This Year | Mark Newton, Fundstrat"

Summary of Finance-Specific Content from the Interview with Mark Newton (Fundstrat)

Market Outlook & Macroeconomic Context

Expected Market Movement (2026): Mark Newton anticipates a 15-20% decline in U.S. equities during 2026. The decline is likely to start in late February or early March, lasting into May or June, followed by a summer rally and a third-quarter correction that concludes the consolidation phase. This correction is expected to be volatile and choppy, rather than a straight drop. Despite this, Newton does not believe the secular bull market is over, describing the decline as a “pause that refreshes.”
Historical Context: The market experienced three consecutive years of strong gains: over 20% in the first two years and 17% in 2025. Such streaks are statistically rare, increasing the probability of a correction. Additionally, 2026 is a midterm election year, typically the weakest year in the presidential cycle.
Sector Rotation & Breadth: Recent months have seen a broadening of market participation, with several sectors improving after prior deterioration. There is notable rotation away from large-cap technology (MAG7 stocks), which have been flat for about six months and losing momentum. Consumer staples have outperformed tech by roughly 300 basis points in early 2026, signaling this rotation. Newton downgraded technology from overweight to neutral. His sector overweights for 2026 include Industrials, Energy, Financials, and Utilities, while many other sectors are expected to be neutral.
Tech & AI: Large-cap tech companies (Apple, Nvidia, etc.) are expected to underperform and potentially drag down indices like the S&P 500 and NASDAQ. However, AI beneficiaries beyond core AI developers—including broader corporate America and related sectors—may see gains. Newton describes this as a “changing of the guard” in leadership sectors.
Sentiment & Cycles: Sentiment has shifted from pessimism in 2025 to growing optimism in early 2026, nearing levels that historically precede market corrections. Newton uses various market cycles, including:
- A roughly 41-month cycle (Edward Dwey’s cycle) that has historically predicted major market tops and bottoms.
- Seasonal cycles indicating weakness from late February through October.

He emphasizes breadth deterioration, sector leadership, and sentiment as key warning signs.

Liquidity: Newton does not use liquidity models in his technical analysis but acknowledges their importance. Liquidity is viewed as a longer-term factor, less useful for short-term tactical decisions.

Portfolio Construction & Risk Management

Active Management & Outperformance: Given tech’s expected weakness, active traders and portfolio managers can outperform benchmarks by rotating into sectors like energy, materials, industrials, and transportation. The heavy weighting of tech in indices (Apple + Nvidia ~15% of S&P 500) has made outperformance difficult recently but may ease in 2026.
Risk Mitigation Strategies: Investors should consider reducing technology exposure and increasing allocation to defensive or cyclical sectors showing strength. Newton suggests possibly reducing overall equity exposure from 100% to around 80% long, depending on risk tolerance. Hedging tools mentioned include puts and VIX calls. He recommends watching for trend breaks to decide when to raise cash or increase exposure to safer assets like Treasuries.
Treasuries & Bonds: Newton expects a rally in Treasuries between February and July 2026, with yields pulling back. He notes the potential for the 10-year yield to bottom around 3.85% in the next six months. However, he also highlights longer-term concerns about U.S. debt service exceeding the defense budget and the implications for fiscal policy.

Commodities, Precious Metals & Energy

Precious Metals (Gold & Silver): Both gold and silver have experienced strong rallies, with silver up 11% in a single day recently and quadrupling in 2025. Silver has broken out above previous major peaks (e.g., 1980 Hunt Brothers peak, 2011 peak), signaling a potentially strong but late-stage rally. Newton’s target for silver was $100, which has been exceeded.

He warns the metals rally is in a parabolic phase, which often precedes sharp corrections. He expects a rally into early February 2026 followed by a significant pullback (10-20%). For risk management, Newton advises: - Using tight stops and watching for trend breaks (e.g., 3-day or 3-week lows on a closing basis). - Avoid holding through parabolic blowoffs without protection.

Newton personally has reduced gold and silver exposure after partial profit-taking in late 2025. He also cautions that physical silver is hard to unload at current prices due to dealer constraints.

Macro Factors for Metals: Rising real yields and higher interest rates typically pressure precious metals. Fed policy is expected to be dovish eventually, with potential rate cuts later in 2026, which could support metals longer term. However, the debt situation and tariffs create uncertainty. Some Wall Street firms suggest reallocating part of traditional bond allocations into gold due to a possible end of the 40+ year bond bull market, but Newton remains cautious on this for 2026.
Energy & Crude Oil: Newton is bullish on energy and commodities broadly for 2026, with energy among his sector overweights. Crude oil is expected to bottom in the next couple of months (early 2026) and rally into summer, potentially reaching the mid-$60s per barrel. After hitting mid-$60s, a sharp pullback is expected (final washout) before a sustained uptrend.

Energy ETFs mentioned include OIH (Oil Services) and XLE (Energy Select Sector SPDR). Supply constraints (e.g., Venezuela’s reduced output) and geopolitical factors support the bullish case. Newton also notes the cyclical nature of oil prices (“the cure for low prices is low prices”).

Currency & International Markets

U.S. Dollar: Newton expects a continued decline in the U.S. dollar in 2026, potentially reaching new lows below 2025 levels by summer. This dollar weakness supports commodities and emerging markets. He suggests long positions in EUR and GBP as beneficiaries. The Japanese yen is expected to remain weak through 2026, with potential rallies later. Dollar/yen could fall to 147-150, providing shorting opportunities with targets near 175-200 yen per dollar.
International Equities: Emerging markets ETFs have recently broken out to 10+ year highs, a positive sign for global equities. European and Japanese stock markets are also at or near all-time highs. Japan may see a market correction alongside U.S. equities but is attractive for longer-term investors due to expected inflation tolerance and potential rate hikes.

Methodologies & Frameworks

Market Cycle Analysis: Newton uses multiple cycles including:
- The 41-month cycle (Edward Dwey cycle) for long-term market peaks and troughs.
- Seasonal cycles showing weakness from late February to October.

He emphasizes breadth, sector leadership, and sentiment as key indicators.

Technical Analysis for Metals: Monitoring trend lines and multi-week lows is critical to managing risk. Parabolic moves require tight stops to protect gains.
Portfolio Approach: Adjust sector weights tactically based on cycles and breadth. Use hedging instruments during expected volatile periods. Diversify away from tech-heavy ETFs to include consumer staples, energy, materials, and international exposure.

Key Numbers & Timelines

S&P 500:
- Expected peak near 7,200-7,300 in late February/early March 2026.
- Correction down to 5,600-5,900 by October 2026 (~15-20% decline).
- Three-wave pattern: selloff into late spring/early summer, rally in summer, correction in Q3.
Silver:
- Targeted $100 level exceeded; recent 11% single-day gain.
- Correction expected after early February 2026 rally.
Gold:
- Broke above 5,000 futures level (now ~5,100).
- Expected to peak and possibly correct after early 2026 rally.
Crude Oil:
- Expected to rise to mid-$60s/barrel by March-July 2026.
- Followed by a sharp pullback before a sustained uptrend.
Treasury Yields:
- 10-year yield possibly bottoming near 3.85% in next six months.

Disclaimers

Mark Newton emphasizes that his views are technical and tactical, not personal financial advice. He stresses the importance of respecting one’s own risk tolerance and methodology. Market timing is challenging; trends and cycles provide guidance but are not guarantees.

Presenters & Sources

Mark Newton, Head of Technical Strategy, Fundstrat Global Advisors
Adam Tagert, Founder and Host, Thoughtful Money

Additional Resources

Fundstrat website: fundstrat.com
Mark Newton on X (Twitter): @MarkNewtonCMT
Fundstrat’s institutional and retail products available via FS Insight

Summary

Mark Newton forecasts a choppy 2026 with an overall 15-20% market correction starting late February, primarily driven by weakening large-cap tech stocks amid sector rotation into energy, industrials, financials, and utilities. Precious metals have rallied strongly but face a late-stage parabolic risk and a likely correction after early February. Commodities and energy are expected to perform well, with crude oil bottoming soon and rallying into summer. The U.S. dollar is set to decline, benefiting emerging markets and European currencies. Investors are advised to diversify, manage risk with stops and hedges, and watch key cycles and sentiment indicators closely.