It's already December, so it's time to start thinking up those new-year resolutions. But what's in store for the market in 2026? Is the worst of the recent 'bubble'-driven volatility behind us? We asked legendary stock picker Jun Bei Liu from TenCap to weigh in.

Throughout December, we'll bring you expert takes on potential 2026 market trends and outlooks. Each instalment will explore the forces shaping the year ahead, from interest rates and global growth to sector trends, company earnings and risks to watch. Our aim is to give readers a grounded view of what 2026 may hold and the ideas worth considering as a new market cycle takes shape. Stay tuned for more.

Speaking on Switzer Investing TV this week, Jun Bei Liu thinks the market may finally be stabilising after a bruising stretch. adding that we may be moving past the worst of the volatility and into a more constructive phase for 2026.

She frames the recent sell-off as a cocktail of forced selling, fear and positioning rather than a sign that the economic backdrop has collapsed. A key part of that story, she says, was the “deleveraging effect” that flowed out of the crypto and high-beta end of the market and washed through growth stocks more broadly.

In her words, the selling pressure has now started to clear:

“Some selling has eased and last week was great. Now we’re seeing a bit of stabilisation… you are definitely seeing a lot more appetite, interest into a lot of those names that’s been underperforming.” 

For Liu, the real turning point is not just sentiment, it is the shift in expectations around US monetary policy. The Federal Reserve’s language has been enough to nudge markets towards an easier setting for financial conditions into 2025 and 2026, even before any official move.

“The Federal Reserve… set the tone for liquidity. They are talking to whether it’s one rate cut, but they’ve got many to come next year. That tone is very important. Financial conditions will continue to loosen.” 

That, she argues, is the key backdrop for any serious 2026 outlook. Looser conditions globally make it easier for risk assets to stabilise, especially in the parts of the market that were hit hardest in the latest correction.

Her starting point is simple. The recent period has been painful, but it looks more like a reset within a longer bull market than the start of something darker. The opportunity, she suggests, lies in recognising that turn before everyone feels comfortable again.

Australia is holding up better than investors think

While global narratives still dominate local sentiment, Jun Bei Liu argues that Australia’s economy is in much better shape than many investors give it credit for. The loudest voices are still focused on the absence of RBA rate cuts and the occasional chatter about further hikes, but Liu thinks this fixation is masking the facts on the ground.

Australia, she says, is not weak, it is simply different. Unlike the US, where looser policy is now expected, the RBA has held steady because the local economy has been more resilient than the commentary suggests.

Her case rests on what she sees in the data:

“Our GDP growth will do pretty well. Our consumers are doing pretty well… although very value conscious. Corporate activity is pretty strong, corporate balance sheets are pretty strong. There’s big dividend coming back.” 

Put simply, we aren’t seeing the kind of demand collapse or earnings deterioration that would justify deep cuts. And that matters for the market narrative.

Investors may be waiting for a “rate-cut rally”, but Liu’s view is that they’re missing the fact that a stronger-than-expected economy is the actual driver of sustainable earnings growth.

She puts it bluntly:

“No one buys a company because of a rate cut… you buy it because the company is great.” 

The irony, she says, is that investors are treating the lack of cuts as a negative when in reality it reflects a market where households, corporates and sectors like housing and financials are still holding together.

This sets Australia up for a slower, steadier climb rather than the whip-saw moves driven by US rate expectations, and she sees that as an advantage rather than a lag.

The payoff, in her view, is an environment where earnings upgrades begin to outnumber downgrades, even without the adrenaline rush of monetary easing.

The long-awaited rotation into small caps?

One of Jun Bei Liu’s strongest calls is that 2026 will finally bring a broader, healthier rally rather than the narrow, mega-cap-driven surge we’ve seen over the past few years. She argues the conditions are lining up for smaller companies to outperform, driven by easing financial conditions and the simple fact that many of them are now undeniably cheap.

She notes that we’ve already seen flashes of this shift.

“We’ve seen a blip of it a few months ago when people moved from larger to smaller… with rate cuts, the smaller companies are benefiting more from the rate cycle.” 

The logic is straightforward. When interest rates fall or even stabilise, small caps – which are more sensitive to financing costs and investor confidence – tend to recover faster. Liquidity helps them more than it helps trillion-dollar giants.

In Australia, that dynamic is even clearer, she says.

“They also get improvement in investor confidence and they’re a lot cheaper normally. These companies generally do better.” 

Liu thinks 2026 will be the year where the rally broadens meaningfully. Not because the big global tech names collapse, but because other parts of the market finally start to pull their weight.

She sums it up this way:

“Next year is going to be that broadening out of the rally, not just a narrow couple of companies that lead the market.” 

This rotation theme anchors much of her 2026 outlook. In her view, the era of chasing only the most obvious winners is ending, and a more balanced market – one where smaller, cyclically exposed and overlooked businesses contribute again – is the natural next step in the cycle.