Schwab Market Perspective: Riding the Waves
Fourth-quarter earnings results have been generally solid so far, albeit a bit weaker relative to prior quarters when it comes to beat rates and price reactions. On the international front, weakening global ties may lead to economic disruption and lasting investment implications. Meanwhile, bond market volatility has remained low despite economic and policy uncertainty.
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U.S. stocks and economy: Earnings season
- Earnings season is tracking a healthy path so far, but there has been some deterioration and less concentration within the S&P 500® index, alongside more improvement among smaller-cap companies.
- Earnings that beat expectations are not being rewarded as much as in the past, but misses are getting less punished.
- S&P 500 profits represent a powerful but narrower scope of companies, which is why a comparison to a broader corporate profits gauge is instructive.
International stocks and economy: Geopolitical risk
- Geopolitical shocks such as armed conflicts historically have tended to create short-term volatility but not long-lasting impacts on markets.
- The nature of geopolitical risk may be evolving. Global interconnectedness appears to be weakening, a shift in international relations that could lead to lasting implications like economic disruption and market volatility.
- Defense contractors outside the U.S. could experience increased opportunities. Additionally, the potential for U.S. dollar weakness could increase returns in international stocks.
Fixed income: Anchor in a stormy sea
- Bond market volatility has remained low despite economic and policy uncertainty. Our base case is that most fixed income investments seem likely to deliver solid returns this year, in line with their starting yields, but if volatility picks up from the current low levels, investors may have to ride out some ups and downs to earn those yields.
- We continue to see a steeper yield curve as the dominant trend in the bond market in 2026. A focus on intermediate-term duration can help balance inflation and policy risks.
- A growing economy suggests that taking moderate credit risk is appropriate.
- International bonds can make sense for diversification if the dollar continues to trend lower.
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This material is intended for general informational and educational purposes only. This should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decisions.
All expressions of opinion are subject to change without notice in reaction to shifting market, economic or political conditions. Data contained herein from third party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.
Past performance is no guarantee of future results.
Investing involves risk, including loss of principal.
Fixed income securities are subject to increased loss of principal during periods of rising interest rates. Fixed income investments are subject to various other risks including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications, and other factors. Lower rated securities are subject to greater credit risk, default risk, and liquidity risk.
International investments involve additional risks, which include differences in financial accounting standards, currency fluctuations, geopolitical risk, foreign taxes and regulations, and the potential for illiquid markets. Investing in emerging markets may accentuate this risk.
Small cap investments are subject to greater volatility than those in other asset categories.
Currency trading is speculative, volatile and not suitable for all investors.
The Schwab Center for Financial Research is a division of Charles Schwab & Co., Inc.
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