Expect a 3-5% return in the S&P 500 in 2026, says Freedom Capital's Jay Woods

Andrew Ross Sorkin (Squawk Box Co-Anchor) 00:00.070

but joining us right now is a guy who called it right last year jay woods is the chief strategist at freedom capital markets also a CNBC contributor we wanted to talk to him because basically you said the market was going to be where it was right now so i shouldn't say how

Andrew Ross Sorkin (Squawk Box Co-Anchor) 00:18.190

surprised were you because this was this was on your bingo car jay

Jay Woods (Chief Strategist) 00:21.790

yeah it played out the way we thought it would we thought the first half of the year would be a little you know problematic with the tariff implementation we saw that come to fruition i didn't think it would be as rough as it was after liberation day but we then began to just

Jay Woods (Chief Strategist) 00:39.670

slowly rally back and pick up momentum in the second half we you know we you know maybe we got lucky with the call of sixty nine hundred but you know the way things played out with technology leading again strong financials that was the way we thought it would happen now as we

Jay Woods (Chief Strategist) 00:55.510

end this year people want OK well what's the next

Jay Woods (Chief Strategist) 00:58.670

call yeah so do it again jay do it again yeah it's so easy andrew no we think the bull run continues but it's not going to be the stampede that we're you know used to seeing we have three consecutive years of double digit gains that's happened two other times since the

Jay Woods (Chief Strategist) 01:14.230

millennium that happened twenty nineteen to twenty twenty one twenty twelve to twenty fourteen the only time we've had more than three consecutive years of double digit returns in the S and P was dot com now everyone wants to compare this to dot com but i think this time is very

Jay Woods (Chief Strategist) 01:28.790

different i think the bulls are gonna have to pasture for a little while and the leadership is changing we've seen a broadening of this market that broadening is going to continue and the technology side of things there are going to be winners and losers in technology it's not

Jay Woods (Chief Strategist) 01:42.190

AI is lifting all stocks and as a result some of those mega caps may take a little bit of a pause and when they're not leading the numbers won't go as high as we think so we're looking for you know an S and P return into the seventy two hundred three to five percent from current

Jay Woods (Chief Strategist) 01:58.310

levels a boring normal year which will be far from boring but the leadership is what is going to change and then we have a lot of road bumps it's a midterm election year that's never an easy year to get through you know i think it's gonna set us up great for twenty twenty seven

Jay Woods (Chief Strategist) 02:15.870

if there's gridlock we love gridlock at least from a market point of view and then let's look at some of the new leaders i like the transports

Andrew Ross Sorkin (Squawk Box Co-Anchor) 02:24.550

a lot let's talk about that jay because if if you think we're only living at a three to five percent you know up world which you know on a relative basis to what to what's been going on is is not great and other people gonna look at that and say well maybe i should just live in

Andrew Ross Sorkin (Squawk Box Co-Anchor) 02:38.720

the bonds you know live in bonds or something else who become the new leaders is there a group where you say you think there's outperformance

Jay Woods (Chief Strategist) 02:46.040

yeah well i still love the financials and the industrials the financial sectors i've been on a tear i look in in you know the big banks the JP morgan just broke out the new highs yesterday goldman sachs on a run i i think goldman needs to split their stock or the dow is going to

Jay Woods (Chief Strategist) 02:59.800

be parabolic the returns and the volatility we see as a nine hundred dollars stock moves but my favorite group favorite stock there citigroup of what jane fraser has done there has been remarkable she's thin the herd she's turned things around and now we have tailwinds for

Jay Woods (Chief Strategist) 03:15.270

financials we've got M and A activity we've got IPO 's coming to this market and then the one sector that just broke out also is transports so if you want to go back to old dow theory you know the industrials and the transports that's what you want leading at least you know some

Jay Woods (Chief Strategist) 03:29.990

of the old timers want leading but those sectors look strong to me fedex on the verge of a major breakout it's tested this three hundred dollars two ninety three hundred level several times UPS turning around the shippers mats and kirby no love there but they've started to turn

Jay Woods (Chief Strategist) 03:45.870

around broke major downtrends and then the truckers have been on fire so this is the sector that i think is going to lead it's not going to be sexy it's not going to make headlines but it's going to be slow steady growth because growth has been the story the economy is growing

Andrew Ross Sorkin (Squawk Box Co-Anchor) 03:59.990

it's just yeah go ahead here's the thing that i but this is the thing i want to understand if you look at the markets and you say to yourself the two thousand twenty six is going to be a super volatile year not a massive up year that is going to have some impact on confidence

Andrew Ross Sorkin (Squawk Box Co-Anchor) 04:16.070

and to me the financials specifically have always been a barometer of confidence when you have IPO 's when you have mergers and acquisitions when you have you know private equity folks buying and selling stuff in an environment where that where there's questions about where

Andrew Ross Sorkin (Squawk Box Co-Anchor) 04:32.870

we're going next you know that often that often gets hurt no well

Jay Woods (Chief Strategist) 04:37.720

let me push back consumer confidence hit record blows this past year and what did the financials do they're at all time highs so yes it will hurt confidence but the bottom line is these companies continue to hit it on all metrics and earnings matter so for the financials to pull

Jay Woods (Chief Strategist) 04:55.310

back a little bit i think it will be a great buying opportunity because when financials move they move in cycles and we get nice two three four year runs out of them and i think that's what we're seeing now we have an administration that's very you know financial savvy the the

Jay Woods (Chief Strategist) 05:10.000

the roadblocks the stumbles this year there are two that really have me concerned this scotus ruling whenever this comes out if they deem the tariffs illegal what's that going to cause it's going to cause uncertainty what killed the market earlier this year that tariff

Jay Woods (Chief Strategist) 05:23.710

uncertainty we already have costco having litigation saying look if these are deemed illegal we want our money back and that could have a chain of events that could cause a little trepidation for a month six weeks until we figure it out the administration is going to find it

Jay Woods (Chief Strategist) 05:39.950

work around the companies will figure things out once they know what the exact tariff situation is so that's my one caveat that could cause a big stumble out of the gates and then we're going to have a new fed chair i think jay powells legacy the next three meetings are crucial

Jay Woods (Chief Strategist) 05:55.190

because he's going to want to declare fed independence the fed is independent we have four new voters they're going to want to you know get their names out there because you know we know fed officials now this is a new thing that we know who these voting members are they talk a

Jay Woods (Chief Strategist) 06:09.070

lot more i'd rather just not know who these people LAR and let the fed do their business but it's going to cause volatility in the market and it should be interesting to watch