The stock market could be volatile in 2026 but that doesn’t mean investors should panic. Phil Neuhart, Senior Director of Market and Economic Research at First Citizens Bank, breaks down the risks and opportunities ahead.
00:00 Introduction
00:20 Are Tariffs a Real Market Risk?
01:04 How to Navigate Market Noise
01:55 Should Investors Go International?
02:30 Balancing U.S. vs. Global Exposure
02:58 How Much Tech Is Too Much?
03:46 Sector Rotation Explained
04:28 What Modest Market Upside Means
05:27 Handling Market Volatility
05:39 Are Dips Buying Opportunities?
06:26 Cash Positioning in 2026
07:17 Fixed Income Opportunities
08:11 Asset Classes to Avoid
08:46 Biggest Market Risk
09:45 What Could Turn Markets More Bullish
Transcript:
Caroline Woods:
It’s a holiday-shortened week, but we have a lot to get to. Joining us to discuss what’s driving the stock market this week is Phil Neuhart, Senior Director of Market and Economic Research at First Citizens Bank. Phil, great to have you here at the desk.
Phil Neuhart:
Thanks for having me. Excited to be here.
Caroline Woods:
Some potential tariffs seem to have the market on edge today. Do you see this as just noise, or something more serious?
Phil Neuhart:
I think this tariff noise reminds us of a couple of things. One, tariffs are fluid. Just because there’s a particular tariff rate assigned to a country or region does not mean it’s final. Additionally, this administration is using tariffs not only as an economic policy tool, but also as a foreign policy tool.
Times like this, we remind clients to have a plan and stick to that plan. This is noise. As we were reminded early last year, reacting and trying to time the markets during moments like this is when you can impair a portfolio. Try to look through the headlines, make sure you’re allocated properly, and don’t focus on the story of the day.
Caroline Woods:
So dig into what that plan should be to navigate some of this noise.
Phil Neuhart:
We believe in diversification. That can sound boring, but it’s an important tenet of the markets. We are positioned for broadening, which is important in our view. We’re overweight small caps, for example, and we have international diversification.
Also, think about balance in your portfolio. Unlike a few years ago, fixed income is a viable asset class again. You have yield—aggregate bonds are yielding over 4%, and municipal bonds are yielding as well. We think there is return to be had in fixed income through coupons. Don’t focus solely on equities.
Caroline Woods:
I want to talk about international diversification for a moment. The “sell America” trade seems to be gaining traction. Are you recommending international exposure because of current events or because of valuations? Would a potential trade war make you hesitant to buy U.S. stocks?
Phil Neuhart:
It’s more of a valuation story. We are still fully invested in the U.S., but we see opportunities internationally. For example, we’re overweight international small caps—that trade worked for us last year as well.
We are not in the “sell America” camp. Much like last year, a lot of that narrative is noise. The U.S. still stands very strong from a financial markets perspective.
Caroline Woods:
Should portfolios be more heavily skewed internationally, or more balanced with U.S. exposure?
Phil Neuhart:
To be clear, we’re actually underweight emerging markets. We think that’s a volatile asset class in times like this. So it’s not about skewing heavily international—it’s about balance and diversification within the portfolio.
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