Happy Monday and a Happy New Year! New year, new investment themes: Citigroup highlighted three market segments (financials, healthcare, and information technology), which it thinks investors should lean into in 2026. The banking giant also named its top stock picks in each group, which we are covering in the deep-dive section below
That said, what a start to the year.
Beyond the dramatic capture of Venezuela's head of state, President Trump has vowed to increase the US defense budget by more than 50%, block defense companies from paying dividends, and make a deal to Greenland. But the wildest moment was when Trump shared a post calling himself the 'Acting President of Venezuela'
Plus, if this counts as evidence for a labor market slowdown, the US economy in December generated a below-forecast 50,000 jobs, meaning that 2025 saw the weakest annual job growth since 2003!
But the stock market couldn't have a better start to the year. Both the S&P 500 and the Dow climbed past the record levels they set just two weeks ago. For the week, the S&P 500 gained 1.6%, the Nasdaq advanced 1.9%, and the Dow rose 2.3%.
Precious metals rebounded from last week's pullback, with gold trading above $4,520 an ounce on Friday, near the record highs set two weeks ago.
As we take a deep dive below, Goldman Sachs has forecasted the S&P 500 to rally 12% in 2026. According to LSEG data, the S&P 500 is trading at roughly 22 times forward earnings, down from about 23 in November but still above its five-year average of 19.
The Deep Dive
This week, we highlight key investment themes and risks heading into 2026 across three stories:
- Which factors pose the biggest threat to market stability in 2026?
- S&P 500 to rally 12% this year: Goldman Sachs
- Citi's Top Sectors and Stock Picks for 2026
Let's take a closer look…
1. Which factors pose the biggest threat to market stability in 2026?
Deutsche Bank, in its 2026 Global Markets Survey, asked participants,
Unsurprisingly, the possibility of the tech bubble bursting tops the risk factors that keep investors worried going into 2026
57% of respondents think that tech valuation may plunge this year. Really?
If so many investors already worry about a tech bubble, the market has probably priced that in already. At least, that's how a fairly efficient market behaves.
For perspective, a global trade war topped last year's concerns at 39%, followed closely by a tech bubble at 36%, making them the two most cited risks.
Surprisingly, the second biggest risk factor, according to the survey, is a new Fed chair pursuing aggressive rate cuts and triggering volatility.
A crisis in private capital takes the third spot.
2. S&P 500 to rally 12% this year: Goldman Sachs
Forecasting market returns is always a gamble, but when the call comes from a Wall Street old guard like Goldman Sachs, it's worth paying attention.
Goldman Sachs projects that the S&P 500 will deliver a roughly 12% total return in 2026. So, where does growth come from? Well, the usual suspects: solid earnings momentum, continued economic expansion, and an easing Federal Reserve backdrop.
The investment bank's strategists forecast the U.S. GDP growth of about 2.5-2.7% this year, while earnings per share are expected to climb by around 12%, forming the fundamental base for the index's rise.
A key theme in Goldman's outlook is how the S&P 500's forward P/E multiple tends to expand in positive macro environments. According to the bank's research, the multiple has historically gone up 5%-10% during stable or high economic growth, while rising a similar amount in non-recessionary rate-cut cycles.
But when both these conditions occur simultaneously, which appears likely in 2026, the multiple has historically increased by 10%-15%.
3. Citi's top sectors and stock picks for 2026
Citigroup continues to favor financials, healthcare, and information technology heading into 2026. It also shared concrete stock picks within each theme.
Citi's financials picks include: Payoneer Global (PAYO), Block (SQ), and Ally Financial (ALLY). These stocks are likely to benefit from stronger earnings and broader credit conditions.
In healthcare, the bank likes Arcus Biosciences (RCUS), Waystar Holding (WAY), and Neurocrine Biosciences (NBIX) as sentiment improves and policy uncertainties fade.
On the technology front, Citi's preferred names are Oracle (ORCL), DocuSign (DOCU), and ServiceNow (NOW). These stocks show robust fundamentals and secular demand trends, reflecting Citi's view that earnings revisions, AI integration, and software demand can drive performance across the sector.
Citi's key triggers for upside remain strong corporate earnings, stabilizing interest rates, and broader market participation beyond mega-cap tech. These are some themes that could help these sectors outperform through 2026.
Before we sign-off
Markets move not just on data, but on how investors interpret them. In each of the stories we cover, it all comes down to market expectations and sentiment. When sentiment runs ahead of fundamentals, what follows is volatility.
At AlphaPro, we track the voice behind the numbers and tone of earnings calls, policy speeches, and analyst commentary. Our Earnings Sentiment Score helps you cut through the noise and see how executives and policymakers are shaping narratives in real time.
Same time next week? See you then.
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