Why Investors Should Stick With Stocks This Year Despite Volatility, According to This Wall Street Expert

• It would be 'really rare' for stocks to enter a bear market while interest rates are declining and earnings are rising, according to Lacamp
• Market breadth is improving with sectors like biotechs, banks, natural resources, and small caps all gaining momentum after years of Magnificent Seven dominance
• Key risk: Trump's hot economy push ahead of November midterm elections could keep inflation elevated and prevent Fed rate cuts, which would negatively impact stock valuations and corporate earnings

Market Summary: Wall Street Expert Advises Investors to Hold Through 2026 Volatility

Key Investment Thesis:

Jim Lacamp, Senior Vice President at Morgan Stanley Wealth Management, is urging investors to maintain their equity positions despite early 2026 market turbulence. Speaking on CNBC Friday, Lacamp cautioned against abandoning stocks after three consecutive years of double-digit gains.

Market Drivers:

Two key factors support the bullish outlook for 2026:

• Accelerating earnings growth, boosted by last year's corporate tax cuts and Trump administration deregulation
• Declining interest rates expected throughout the year

Lacamp notes it would be "really rare" for stocks to enter a bear market while interest rates fall and earnings rise simultaneously.

Market Broadening:

A significant positive development is the expansion beyond the Magnificent Seven tech stocks that dominated recent returns. Sectors now showing momentum include biotechnology, banking, natural resources, and small-cap stocks. This broader market participation strengthens the rally's foundation.

Political Headwinds:

President Trump's actions regarding Greenland and tariff threats have created volatility. However, investors have observed the "Trump Put" phenomenon—where the President typically retreats from aggressive positions once markets decline significantly.

Key Risks:

Despite the optimistic outlook, Lacamp acknowledges substantial risks. The administration faces a "really narrow path" on economic policy. Running the economy hot ahead of November midterm elections could keep inflation elevated, potentially preventing the Federal Reserve from cutting rates as aggressively as markets anticipate. Higher-than-expected interest rates would pressure corporate earnings and stock valuations.

Bottom Line:

While acknowledging "fat tails on this rodeo bull," the Morgan Stanley advisor recommends investors look past short-term noise and focus on the favorable combination of earnings growth and monetary easing.