What could shape sharemarkets in 2026? CommSec analysts outline the big themes

Looking back at a turbulent 2025

It’s been a strange year for markets; volatile in the moment but surprisingly resilient in the end. If you had to choose one word for 2025, “interesting” might be the safest option, CommSec Market Analyst Laura Besarati says. Between shifting US tariffs, surging AI enthusiasm and a record-long US government shutdown, there was no shortage of headlines for investors to digest, she says.

Speaking on CommSec’s 2026 Outlook vodcast, CommSec Market Analyst Steven Daghlian said April was a difficult month for investors as US tariff announcements and concerns about reprisals unnerved markets worldwide. But what stands out, he says, is how quickly markets recovered. “The key lesson was not to get caught up in some of these headlines. Even some of the worst things that happened over the year passed, and markets have done OK,” Daghlian says.

By December, the US stock market was up around 16.5 per cent year to date and the Australian market up about 5.5 per cent. Both are on track for a third consecutive year of gains, a reminder of how often markets move beyond the noise.

Where the S&P 500 might end 2026

Forecasting where the ASX 200 or S&P 500 will land in 12 months is always tricky, but long-term averages offer a rough guide. Over the past few decades, the US market has returned around 10 to 11 per cent on average each year, while the ASX 200 has delivered around 8 to 9 per cent, supported by Australia’s comparatively higher dividend payouts, Daghlian says. The US market has improved in 20 of the past 30 years, while the Australian market has risen in 22 of those years.

The first big indicators for 2026 arrive quickly. US full-year earnings season begins mid-January, followed by Australian reporting season in February. With many of the world’s largest companies concentrated in the US, their results will matter well beyond American borders.

AI-linked companies are an especially important group to watch. “It’s hard to talk about earnings without talking about AI,” Besarati says.

The top ten US stocks now make up around 35 to 40 per cent of the entire market, and some of these firms are making extraordinary levels of capital investment, sometimes upwards of US$100 billion each. “They’re investing more in infrastructure in the next two years or so than they have over the past decade or two,” Daghlian says.

But high expectations come with pressure. “There are questions about whether there’s an AI bubble,” Besarati says. “Will AI be a feature just for tech stocks or will it broaden out across some of the other sectors as well?”. How companies frame their plans and when investors can expect returns could influence early-year market direction, she says.

Central banks and interest rates

Interest rate settings remain one of the biggest variables for 2026, with as many as three rate cuts expected from the US’ Federal Reserve. Note that market forecasts predicting interest rate moves have a tendency to shift quickly.

Australia may be a different story, with the possibility of rates remaining on hold - and even a risk of an increase should inflation remain sticky. Europe, the UK and Japan could each move in different directions, highlighting how uneven global monetary policy has become.

“The US is still cutting rates; most of the world is not,” Daghlian says.

Another wildcard is the upcoming change in US Federal Reserve leadership. Jerome Powell’s term ends in May, and the next Fed chair, to be nominated by US President Trump, may influence the tone of rate policy for years to come.

Geopolitics, tariffs and the role of China

Equity markets spent much of 2025 adjusting to shifting US tariff policies. Although early-year volatility was intense, CommSec’s analysts expect some degree of “tariff fatigue” may continue into 2026. Even so, sudden announcements or changes in tone could still spark short-term swings.

China will also be central to how the year unfolds. As the world’s second-largest economy and Australia’s biggest trading partner, its growth settings carry global weight. A 4.5 - 5 per cent growth target is widely expected, though demand may soften if domestic conditions remain weak. Commodity markets, and particularly iron ore and oil, will respond to any shift in Chinese momentum.

Commodities and banks in the spotlight

Several commodities hit record highs in 2025, including gold, silver and copper. Gold-related stocks in Australia even doubled over the year, something Daghlian says is quite rare. While prices may not repeat those gains in 2026, the sector remains sensitive to geopolitical developments and interest rate expectations.

Bank shares will also be closely watched. All major Australian banks reached record highs this year, though some valuations appear stretched and November brought a sharp pullback. Earnings updates in early 2026 will give investors a clearer signal.

US midterm elections and the unknowns

The US midterm elections in November may add uncertainty, particularly around regulation and tax policy. Historically, markets often steady once elections pass, but the lead-up can be volatile. And beyond all the known events, CommSec’s analysts reminded investors to expect surprises.

“It's worthwhile being aware of key upcoming events: central bank policy, the impact of AI on things, the change in the leadership of the Fed, tariffs, and what this could mean for markets,” Daghlian says.

“But there’s uncertainties. You don't know what happens. That's what makes markets exciting,” he says.