Whether stock and digital asset markets close out 2026 with significant gains likely hinges on the trajectory of oil prices, which remain the primary hurdle.
Following a rate hike by the Federal Reserve this month, the US 10-year Treasury yield finished Friday at 5.17%, reaching its highest point since 2007. Typically, this environment creates a bearish outlook for stocks and cryptocurrencies as investors pivot toward the relative safety of Treasury bonds.
Nonetheless, David Spika, a strategist at Turtle Creek, maintains that the S&P 500 has room to advance another 5% to 10% prior to the end of the year. His argument begins with the crude market.
Will Oil Prices Go Down By December?
WTI crude finished Friday trading near $92, marking a steep decline from prices surpassing $100 earlier in the month. According to Spika, a sustained drop in oil prices should help alleviate inflationary pressures.
In turn, this downward trend could pull long-term borrowing costs lower, providing richly valued equities with additional upside potential.
Several factors are driving this recent pullback.
- Saudi Arabia has brought its East-West pipeline back online, providing an alternative path for its oil to bypass the Strait of Hormuz.
- Additionally, Donald Trump reported that American officials engaged in a three-hour discussion with Iran’s UN delegation during the week.
For financial markets, lower oil prices would come at an opportune time. The Fed implemented a 25 basis point rate increase on September 16, bringing its benchmark rate to 3.75%-4% and citing persistently high inflation.
Spika suggests that continued declines in oil could push the 10-year Treasury yield down toward 4.75%-4.78%. Such a shift would relieve one of the most significant strains currently weighing on equity valuations.
“I think stocks have in the 5 or 10% upside before year end,” Spika said, while warning earnings growth should slow next year.
Among his top stock choices are Microsoft—noting that Azure revenue surged 43% in the most recent quarter—and Berkshire Hathaway, which maintained approximately $365.5 billion in cash and short-term Treasurys as of late June.
However, a major caveat is that oil markets can pivot rapidly. Flow volumes through the Strait of Hormuz continue to lag behind pre-conflict levels, diplomatic resolutions remain unclear, and market participants continue to factor in the threat of further interest rate increases.
Consequently, Spika’s optimistic forecast relies on a delicate premise: that oil prices remain sufficiently low for long enough to convince the bond market that a key driver of inflation is receding.