Last week, I noted how December is typically a great time to buy stocks.
Holiday shopping and corporate “use it or lose it” budgets mean that retailers and enterprise software firms alike see their highest sales during this period. It’s also a time for managers to “window dress” corporate results to meet year-end goals.
Since the 1950s, markets have ended December higher 75% of the time.
Markets are also entering this year-end with wind in their sails (and sales). Despite this week’s selloff, the S&P 500 has still risen 15% this year on strong corporate earnings. History tells us that strong earnings momentum typically carries into future months.
However, the excitement could trigger a nasty hangover for 2026.
Over the past two White House administrations, we’ve seen valuations get crushed in Year 2 after the excitement of a new president wears off. That’s when the economic realities of executive agendas begin to take effect, and markets lose their glow. Below is a graph of the S&P 500’s cyclically adjusted P/E ratio (CAPE) from the past two presidential terms:
That pullback in valuations dragged the market down in the past two midterm years, despite earnings rising 6% in each:
| Trump 1 | Biden 1 | Trump 2 | |
| Year 1 | 19.4% | 26.9% | 14.4% |
| Year 2 | -6.2% | -19.4% | ? |
| Year 3 | 28.9% | 24.2% | |
| Year 4 | 16.3% | 23.3% |
In fact, if you examine data dating back to 1928, it turns out that stocks in Year 2 of a presidential term have returned just 3.3% on average, compared to 9.7% return from other years. Data from U.S. Bank finds that this 3.3% figure turns negative if you start counting November-to-November results from the 1960s onward.
The hangover from America’s election cycle is quite real.
I should note that there are other reasons to be cautious about markets in 2026.
Narrow Growth. U.S. growth is becoming increasingly concentrated among a small number of AI firms. Louis Navellier notes that investment in data centers and related AI technologies accounted for 92% of U.S. GDP growth in the first half of 2025. This is starving other capital-intensive sectors of cash; real estate, healthcare, energy, and financials have seen their 2026 earnings estimates get slashed by 10% or more over the past two months, according to FactSet.
Consumers. Consumer confidence is hitting new lows. In October, the University of Michigan survey of consumer sentiment hit its lowest reading on record. PwC’s holiday outlook for 2025 calls for an 11% decline in average gift spending, driven by a 23% drop in Gen Z spending and “trading down” across the board.
Layoffs. Perhaps most worryingly, we’re beginning to see another 2022-style “year of efficiency” round of layoffs, where large corporations cut headcounts to save costs. On October 28, Amazon.com Inc. (AMZN) announced that it would cut 14,000 corporate jobs (not just frontline workers) to save between 3% and 5% in overhead costs. Verizon Communications Inc. (VZ) announced a 15,000-person cut this week, which would eliminate 15% of its workforce.
These are not the kind of moves you see in a booming market.
Fortunately, “smart money” buyers still see value in certain corners of the market. Last week, I introduced three firms that have seen strong insider buying; the value-based trio has risen by a percentage in the past week (despite a drop in the S&P 500) and should continue to move higher as investors seek safe havens.
This week, I’ll leave you with two more that should do the same.
However, before I do that, there’s something even more important I need to highlight:
Investors with neutral market exposure have done even better. And you can too.
The Market-Neutral Trader
Over the past three weeks, our trading expert, Jonathan Rose, has closed out several impressive winners, including trades on:
These gains were possible because Jonathan’s approach doesn’t rely on markets rising or falling. Instead, his strategy takes a neutral stance on markets and profits from volatility instead.
Jonathan does this by using a system that identifies periods when large institutional investors inadvertently “tip their hand.” In calm markets, billion-dollar block trades are easier to mask. However, when volatility increases, these trades become more apparent in the data. It’s also when big players start making mistakes in their haste to move large sums of money.
By analyzing these tells, Jonathan can spot when major buy or sell orders are being queued up, allowing him and his readers to take action before these moves fully play out. If a million-dollar order can push a mid-cap stock up by $1 to $2… imagine the impact of a billion-dollar order hitting the tape.
This trading strategy will become even more important heading into 2026, as rising uncertainty and tighter consumer conditions increase volatility and expand the opportunity set for market-neutral strategies like Jonathan’s.
To explain this all, Jonathan teamed up with Louis Navellier, Eric Fry, and Luke Lango last week for a special Profit Surge Event. In this free presentation, the four explained how Jonathan’s system works in both good times and bad by detecting buying and selling pressures by large players.
But that’s not all. Jonathan also showed how applying a simple tweak can multiply the payoff by 500% or more.
If you missed it, don’t worry. You can still catch a replay here to see how Jonathan and our other Senior Analysts view the current market environment – and show you how to sharpen your strategy for the final stretch of 2025.
Until then, let’s get back to those two more stocks that should hold up even if investors start paying less for every dollar of earnings in 2026.
Two More Stocks to Buy for a Volatile 2026
The first pick this week is Bloomin’ Brands Inc. (BLMN), the owner of Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill, and Fleming’s Prime Steakhouse. Last week, the company saw a massive insider purchase by its chief financial officer of 150,000 shares for $6.38 per share. A director also added 1,500 shares to their retirement account.
These mark the first insider purchases since Bloomin’ CEO Mike Spanos acquired 118,000 shares in March 2025, after “Liberation Day” tariffs sent BLMN below $10 for the first time since the 2020 Covid-19 pandemic. (Spanos was sitting on 20%-plus gains by July.)
Today’s buys are being made at an even more compelling valuation. Shares are trading below 6X forward earnings (compared to their long-term average of 12X) and 2X price-to-cashflow (less than half of their 5.4X average). Bloomin’ is still a profitable company, even if earnings are somewhat diminished from their post-Covid peak.
In addition, the company’s turnaround strategy is starting to show results. On November 6, management announced that comparable store sales growth had turned positive at all four brands for the first time since fist quarter 2023. This turnaround strategy involves simplifying menus, running ad campaigns, and pursuing a “barbell” strategy that offers low-priced options in addition to premium items.
Outback’s Aussie 3-Course Meals, for example, now start at just $14.99, making it competitive with many fast-food chains.
Now, Bloomin’ is obviously coming from a relatively low starting point. Diners have soured on midrange restaurants this year, and even Brinker International Inc. (EAT), the owner of high-growth chain Chili’s, has seen its shares stagnate. (Chili’s saw massive success pursuing a barbell strategy last year.)
Nevertheless, Bloomin’s low valuations give plenty of room for things to go wrong. And if its CFO is correct, we could see shares rise 100% in 2026 as markets pivot back toward low-priced value stocks.
The second firm this week with notable insider buying is Mosaic Co. (MOS), one of the largest U.S.-based fertilizer companies.
As Eric noted in late 2022 in a Fry’s Investment Report update (subscription required), the fertilizer market was upended that year by Russia’s invasion of Ukraine. Prices initially surged on panic buying, and then collapsed as supplies began to normalize. This presented investors with an unusual array of options in commodity-related picks.
Now, opportunity is knocking once again. Shares of commodity-related companies have declined on fears of a new U.S.-China trade war, and Mosaic’s stock has now fallen by a third since July.
The selloff makes little sense. According to data from the Bureau of Labor Statistics, producer prices have actually marched higher since mid-2023, a positive sign for Mosaic’s future profits. Potash, the largest contributor to Mosaic’s profits, has seen prices rise from below $300 per metric ton in January to $352 today.
Some smart money buyers might be catching on. Mosaic’s quantitative “follow-the-money” score, according to Louis Navellier’s Stock Grader, has also risen from a rock-bottom “F” to a more reasonable “C.” Then on November 13, a director made the first “informed buy” by a Mosaic insider in more than three years.Most importantly, Mosaic presents a compelling value play in an industry that’s relatively devoid of them. Potash is an essential ingredient in farming, and record crop yields in the U.S. and Brazil mean that farmers will need to replenish their soil for the 2026 planting season.
If potash prices stay in the mid-$300 range, MOS is worth roughly $35, a 40% upside. Even if the S&P 500 price-to-earnings ratio begins to fall, Mosaic’s attractive 9X multiple gives it plenty of room for error.
Getting Ready for a Rough 2026
By any measure, last week should have been a great one for stock markets.
- The U.S. government reopened…
- The Trump administration cut tariffs to reduce food prices…
- Alternative data suggested U.S. inflation remained muted in October…
Yet, all three major U.S. stock indexes saw a terrible selloff this week after… well… not much. When valuations are so high, it only takes a tiny price drop to trigger a landslide of panic selling by institutional investors.
That’s what we’re seeing now. Smart money investors are selling, while retail traders are holding out for a recovery. (Popular meme stocks like Opendoor Technologies Inc. [OPEN] have not faced as much of a selloff.)
To navigate this market, I encourage you to watch our replay of Jonathan’s Profit Surge Event, where he and our three analysts go deep on how to trade this increasingly volatile market. The Santa Claus rally might still happen… but markets could be due for a nasty eggnog hangover in 2026.
But don’t wait long. The deadline for watching this replay is Monday night.
Until next week,
Tom Yeung, CFA
Market Analyst, InvestorPlace
