Are stock and crypto markets poised to finish 2026 with significant gains? The outcome heavily hinges on crude prices, which remain the primary hurdle.
Following the Federal Reserve’s latest rate hike, the US 10-year Treasury yield finished Friday at 5.17%, reaching its highest mark since 2007. Because investors view government bonds as the safer alternative, this environment typically creates a bearish outlook for equities and digital assets.
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 year’s conclusion, with his thesis centered primarily on crude oil.
Will Oil Prices Go Down By December?
West Texas Intermediate (WTI) crude settled on Friday near $92 per barrel, marking a steep drop from peaks above $100 earlier in the month. Spika contends that a sustained decline in petroleum values should help relieve inflationary pressures.
In turn, this downward trend could pull long-term borrowing costs down, providing high-valuation equities additional room for growth.
Several factors are driving this recent pullback.
- Saudi Arabia has brought its East-West pipeline back online, providing an alternative transit path for its crude that bypasses the Strait of Hormuz.
- Donald Trump also noted that American representatives engaged in a three-hour discussion with an Iranian delegation at the United Nations during the week.
For financial markets, a decline in crude prices comes at an opportune time. On September 16, the Federal Reserve lifted its benchmark interest rate by 25 basis points to a range of 3.75% to 4%, pointing to persistently high inflation.
Should crude prices keep dropping, Spika projects that the 10-year Treasury yield could retreat toward a range of 4.75% to 4.78%, thereby removing a major weight 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 favored selections are Microsoft—noting that Azure revenue surged 43% during its 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 energy markets can pivot abruptly. Flows through the Strait of Hormuz stay depressed compared to pre-war levels, diplomatic resolutions remain fragile, and market participants continue to assess the threat of additional interest rate increases.
Consequently, Spika’s optimistic outlook relies on a delicate premise: that oil prices remain subdued long enough to convince the bond market that inflationary forces are losing another key driver.
Frequently Asked Questions
Why are high Treasury yields bearish for stocks and crypto?
When the US 10-year Treasury yield rises—reaching 5.17% following the Fed’s rate hike—investors often shift capital toward government bonds because they offer safer, guaranteed returns compared to riskier asset classes like stocks and cryptocurrencies.
What factors are causing oil prices to fall?
WTI oil retreated to near $92 per barrel due to Saudi Arabia restarting its East-West pipeline, which circumvents the Strait of Hormuz, alongside US officials holding a three-hour meeting with Iran’s UN delegation.
How much higher could the S&P 500 climb before the end of the year?
Turtle Creek strategist David Spika estimates that the S&P 500 has potential upside of 5% to 10% before year-end, provided that falling oil prices help pull long-term borrowing costs down.
Which specific stocks does David Spika favor?
Spika’s preferred equities include Microsoft (highlighting 43% Azure revenue growth in its latest quarter) and Berkshire Hathaway (which held roughly $365.5 billion in cash and short-term Treasurys at the end of June).
