Economist Warns 2026 Rally May End in Sharp Market Reversal

Source: Coindoo Original Title: Economist Warns 2026 Rally May End in Sharp Market Reversal Original Link: https://coindoo.com/economist-warns-2026-rally-may-end-in-sharp-market-reversal/ Markets may still be climbing, but one macro strategist believes the rally is entering its most dangerous phase.

Instead of interpreting recent gains as confirmation of a healthy expansion, economist Henrik Zeberg views the current environment as the emotional high point of a long-running cycle.

Key Takeaways

• Markets may continue rising into early 2026, driven by momentum and investor euphoria rather than fundamentals.
• The current rally shows signs of a late-cycle blow-off, with growing gaps between asset prices and economic reality.
• Once optimism fades, the adjustment could be sharp, as slowing growth forces a rapid market repricing.

In his assessment, early 2026 could deliver even stronger returns – not because fundamentals are improving, but because speculative momentum has yet to burn out.

Why the rally may accelerate before it breaks

Zeberg argues that late-cycle markets often don’t roll over quietly. They surge. Liquidity remains abundant, positioning stays aggressive, and optimism feeds on itself. That combination can push equities and other risk assets sharply higher in a short window, creating what feels like confirmation that “this time is different.”

He expects that same dynamic to play out again. As the new year begins, confidence around technology-driven growth, resilient consumers, and a soft economic landing could trigger a final wave of buying. From a tactical perspective, that makes the near-term outlook look deceptively strong.

The problem lies beneath the surface

Where Zeberg sharply diverges from consensus is on what comes next. He believes markets are already drifting away from economic reality. Growth indicators are cooling, margins are under pressure, and parts of the real economy are losing momentum – yet asset prices continue to rise.

In his framework, this divergence is not a mystery. It is a hallmark of late-stage cycles, when liquidity and psychology overpower fundamentals. Investors stop asking whether growth is sustainable and focus instead on price action, narratives, and the fear of being left behind.

A familiar pattern from past market peaks

Zeberg draws parallels to previous major tops, where markets printed new highs just as underlying conditions were deteriorating. In those moments, optimism reached its loudest volume right before reversals began.

He sees similar ingredients today: stretched sentiment, speculative behavior, and a widespread belief that prosperity will extend indefinitely into the future. Historically, those conditions have not marked the beginning of new bull markets, but the final phase before sharp corrections.

A short-term opportunity, not a long-term promise

Importantly, Zeberg is not predicting an immediate collapse. His warning is about timing and interpretation. Early 2026, in his view, may still reward risk-taking. But that window could be narrow.

Once the emotional fuel runs out, markets may be forced to reprice around slower growth and weakening fundamentals. When that shift happens, Zeberg expects the adjustment to be swift rather than gradual, as crowded positions unwind and confidence breaks.

The message is not that markets must fall tomorrow. It is that investors should be careful not to confuse late-cycle euphoria with structural strength. If Zeberg’s read is correct, the strongest gains may arrive just before the cycle turns – making early 2026 feel euphoric, but setting the stage for a much harsher second act later in the year.