2026 Market Outlook: Polcari’s Volatility Prediction, Sector Recommendations

This analysis is based on Kenny Polcari’s interview on “Maria Bartiromo’s Wall Street” [1][2][3] and subsequent market data [0]. On December 21, 2025, Polcari predicted 2026 would open with volatility, citing midterm elections as the primary driver—aligned with historical U.S. market patterns during election years [2]. He specified a potential 10-12% market pullback but noted later-year tailwinds: tax refunds, capital spending, and sustained economic growth [1]. For sectors, he highlighted utilities (e.g., Dominion Energy [D], Eversource Energy [ES], Avista Corp [AVA]) for strong dividends and AI/data center energy demand, alongside industrials, healthcare, and basic materials. He advised caution on tech in 2026’s first half, stating “I don’t want to chase tech” [3]. Post-interview (Dec 22-23), major U.S. indices showed mixed to positive moves: S&P 500 (+0.19% then +0.54%), NASDAQ (-0.09% then +0.66%), Dow Jones (+0.31% then +0.25%), and Utilities ETF XLU (+0.43% then +0.52%) [0].

1. Polcari’s volatility forecast ties to midterm elections, a historical trend, but distinguishes between initial pullback risk and later-year economic tailwinds.
2. Utilities’ appeal is linked to AI infrastructure’s growing energy demand, a structural long-term trend beyond their traditional defensive characteristics.
3. Initial mixed market reactions suggest investors prioritized near-term factors (e.g., potential “Santa Claus rally”) over long-term 2026 forecasts, as two days of data are insufficient to capture sustained impact.

• Risks
  : Midterm policy uncertainty could escalate volatility as campaign proposals emerge; tech sector correction risk if valuations remain stretched; utilities face higher interest rates (increasing infrastructure borrowing costs) and regulatory risks [2][3].
• Opportunities
  : Defensive sectors like utilities may offer stability amid volatility; later-year economic tailwinds (tax refunds, capital spending) could support industrials and basic materials [1].

Polcari’s 2026 outlook identifies midterm elections as a near-term volatility trigger, with clear sector preferences. Initial market reactions reflected near-term focus, rather than immediate digestion of 2026 forecasts. This analysis provides context for monitoring election-related policy developments, tech valuations, and utility sector risks to evaluate the forecast’s relevance over time.