The ASX200 is reflecting an over 5% increase YTD but stretched valuations and lagging financials mean investors should tread carefully heading into 2026. Analysts expect resources to take the lead next year, supported by signs of stabilisation in China, while banks and tech face tougher conditions. With the RBA likely pausing rate cuts through early 2026 and inflation still sticky, sector positioning will be key.

In this week’s video, Sophia covers:

• (0:22): a review of the ASX200 in 2025
• (1:02): the risks heading into 2026
• (1:21): resources, rates & the key themes for next year
• (2:34): how the local market performed this week so far
• (3:33): the most traded stocks and ETFs this week
• (4:76): economic news items to look out for next week.

Overnight, Wall St surged after the Federal Reserve officially approved a quarter percentage point cut to the interest rates, bringing the rate to the range of 3.50% - 3.75%. The Dow Jones rallied 1.1% on the news, the S&P500 jumped 0.8% and closed just shy of its all-time high, and the Nasdaq gained 0.5%. In his remarks, Chairman Jerome Powell ruled out any chance of a rate increase in 2026, and investors are betting that there will be at least one, if not multiple rate cuts to come next year – a bullish sign for equities.

Europe saw another relatively stable trading session – the Stoxx600 index closed up 0.1%, as the FTSE advanced by a similar amount while the German DAX and French CAC declined by 0.1% and 0.4% respectively.

And in Asia, the CSI fell 0.1%, the Hang Seng gained 0.4% and the Nikkei fell 0.1%.

Locally yesterday, the ASX200 edged down 0.1%, however it was only the high flying materials sector which prevented greater losses on the day, as 9 of the 11 key sectors posted losses on the day. Gold miners were particularly strong in the wake of the Fed’s rate cut, with big names Newmont (ASX:NEM) and Northern Star (ASX:NST) increasing 4.4% and 5.1%.

What to watch today:

• Looking ahead to today, the ASX is expected to follow Wall St’s strong session, with the SPI futures indicating a 0.9% jump at the open of trade today.
• Moving over to commodities,
  • Crude Oil has jumped 1.25% to US$58.98 per barrel, continuing its pattern of volatility over recent weeks.
  • Precious metals were buoyed by the rate cuts, with Gold advancing 0.5% to US$4227 per ounce, while Silver has jumped another 1.9% to further extend on its already record high price, and is now trading at US$61.80 per ounce.
  • And Iron Ore is trading up 0.4% to US$106.66 per tonne.

Trading Ideas:

• Bell Potter maintains a speculative Buy rating on emerging online marketplace operator Frontier Digital Ventures (ASX:FDV), with a 12 month price target of 57c per share, based on their projected revenue streams moving into CY26.
• And Trading Central have identified a bullish signal in Newmont Corporation (ASX:NEM), indicating that the price may rise from the close of $139.10 per share to the range of $160 - $164 per share over a period of 25 days, according to the standard principles of technical analysis.

Starting in the US overnight, Wall St saw a relatively flat session, as all eyes remain on the impending Fed meeting later this week. While investors are expecting a nearly 90% chance of a rate cut, focus will be on the economic projections and the general sentiment of Chairman Jerome Powell to help shape how markets will react over the next few weeks. The S&P500 closed the trading day flat, the Nasdaq gained 0.1%, while the Dow Jones fell 0.4%, primarily weighed down by 4.7% drop for JP Moregan Chase, who reported higher than expected 2026 expense projections.

Elsewhere, it was a similar story in Europe as the Stoxx600 index ended the day slightly down 0.1%, where 0.5% rise for the German Dax and a 0.7% fall for the French CAC offset, while the FTSE remained just about flat.

And in Asia, the Chinese CSI fell 0.5%, the Hang Seng fell 1.3%, while the Nikkei added 0.1%.

Locally yesterday, the ASX200 extended on its losses from Monday with a 0.5% slide, mainly in the afternoon after the RBA announced that the cash rate would remain unchanged at 3.6%. Although this was widely expected, the market reacted to comments from RBA Governor Michele Bullock stating that no rate cuts were on the horizon for the “foreseeable future.”

What to watch today:

• Looking ahead to today however, the ASX is expected to rebound from the last 2 days’ losses, with the SPI futures indicating a 0.3% jump at the open of trade.
• Over to commodities,
  • Crude Oil prices have slipped a further 0.8% to US$58.40 per barrel.
  • In precious metals, Gold is trading up 0.5% at US$4209 per ounce, while Silver has jumped another 4.5% to over US$60 per ounce, smashing its previous all time high and reaching 110% price gain year to date. The run is driven by squeezing supply, as well as a surge in demand for industrial usage, as silver is currently used in areas such as electronics and solar panels.
  • Meanwhile, Iron Ore remains stable at US$106.29 per tonne.

Trading Ideas:

• Finally, we’ll dive into some trading ideas for your consideration today. Bell Potter maintains its buy rating on online automative retailer CAR Group (ASX:CAR), with a 12 month price target of $42.20 per share. Their recommendation is based on its steadily accelerating growth, and forecasted earnings for next year.
• And Trading Central have identified a Bullish signal in Vicinity Centres (ASX:VCX), indicating that the price may rise from the close of $2.48 to the range of $2.69 to $2.73 over a period of 24 days, according to the standard principles of technical analysis.