💡Edward Egilinsky: 2025 Market Review and a Volatile but Opportunity-Rich 2026

Edward Egilinsky is the Head of Global Sales & Distribution at Direxion, where he leads global client strategy across ETFs and alternative investment solutions.

In his latest market review and outlook, Edward Egilinsky outlines how trading behaviour in 2025 has been shaped by a narrow set of dominant themes—and why 2026 is likely to be more volatile, but also richer in tactical opportunities for active investors.

1. 2025 Review: Trading Activity Concentrated in AI and Mega Caps

Edward notes that Semiconductors, AI, and the Magnificent 7 dominated trading activity throughout 2025, particularly within the leveraged and inverse ETF universe. Data from US-listed products shows trading volumes and fund flows heavily concentrated in Nasdaq-related exposures, semiconductor plays, and selective single-stock leverage strategies .

This concentration reflects a year where AI leadership defined market returns, with mega-cap technology stocks driving both price performance and investor positioning.

However, Edward points out that by late 2025, early signs of rotation began to emerge. After a prolonged period of AI dominance, market leadership has started to broaden, with flows gradually shifting toward US small caps and more defensive sectors.

2. Earnings Growth Is Broadening Beyond Big Tech

While technology earnings are still expected to outperform non-tech sectors, Edward highlights that the earnings growth gap is narrowing meaningfully. Consensus forecasts suggest that:

Nasdaq EPS growth expectations for 2026 are only modestly higher than the broader S&P 500.
Even non-AI and ex-mega-cap baskets are projected to deliver solid earnings growth.

This broadening of earnings momentum suggests that future market performance may rely less on a handful of mega-cap names and more on sector and cyclical differentiation.

3. 2026 Outlook: Higher Volatility, More Trading Opportunities

Looking ahead, Edward expects higher market volatility in 2026, driven by several overlapping uncertainties:

The pace and magnitude of further Fed rate cuts
The transition toward a new Fed chair
Valuations that remain full, leaving markets more sensitive to negative surprises

While increased volatility may challenge buy-and-hold strategies, Edward sees this environment as favourable for active and tactical traders, particularly through instruments that can capture both upside and downside moves.

4. Interest Rates and Bonds: A Key Area to Watch

The Fed delivered multiple rate cuts in 2025, and expectations for 2026 remain mixed. Edward highlights that:

Official Fed projections currently point to limited easing.
Major institutions expect more aggressive cuts in the first half of 2026 to counter slowing growth.

This divergence makes rates and bonds a focal point for active traders, especially as positioning adjusts to shifting policy signals.

5. Key Themes Leading Into 2026

Edward identifies several macro themes likely to shape markets in the year ahead:

Gold regaining leadership amid a weakening US dollar
Asia emerging as a renewed area of investor focus
AI remaining a core structural theme, even as leadership broadens
Continued debate around whether the S&P 500 could approach 7,600 by 2026, with the Magnificent 7 still expected to contribute a significant share of earnings growth

6. Final Takeaway

In summary, Edward believes 2022026 will likely follow a “rocky but still higher” path for US markets. While long-term fundamentals remain constructive, elevated valuations and policy uncertainty suggest a thinner margin for error.

For investors, this points to the importance of flexibility, sector rotation awareness, and tactical tools that can respond to both rising and falling markets—rather than relying solely on a single dominant theme.

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