It will certainly be interesting to write the obituary for 2025. Given that there’s one month left in this fiscal year (plenty of time for lots to take place), I wouldn’t be surprised to either see an incredible Santa Claus rally materialize into year end, or a continuation of some of the bearish momentum we’ve seen build form into a full-blown market selloff as investors reposition their portfolios for more downside as this AI selloff continues.
We’ll have to see. This past week has provided very confusing price action in the equity market, the bond market, and in various alternative assets (such as crypto) as well. I have to admit, I have no idea which side of the fence investors find themselves come New Year.
That said, there are certain stocks I think can provide a pretty clear indication of where market sentiment stands. Here are three stocks I’m watching closely right now to determine which direction sentiment will shift in 2026.
Tesla (TSLA)
Pink Tesla
Perhaps one of the most loved, and simultaneously most hated, stocks in the market is Tesla (NASDAQ:TSLA).
Shares of the EV maker have been on a wild ride in recent years, though the momentum at least of late has been to the upside. Now trading around its all-time high, with a market capitalization of nearly $1.5 trillion, this is a mega-cap company many investors do see as a tech company. Whether that’s because of Tesla’s autonomous driving capabilities, the efforts of its CEO Elon Musk to advance other AI initiatives and incorporate some of the most impressive efficiency-enhancing technologies at Tesla and his other endeavors (which include SpaceX), or the company’s work around robotics, there are clearly plenty of growth drivers at play with Tesla that have allowed this company to realize a valuation that most of its peers simply cannot.
Where bears differ in their view of the company is that the vast majority of Tesla’s sales still come from selling its EVs. In other words, the company may be years or decades away from turning into the autonomous driving/AI/robotics giant that many are pricing in today.
The movements we see in Tesla stock, and in particular the voracity with which its stock price changes (and in which direction) will be important for investors to watch closely in 2026, in my view.
iShares 20+ Year Treasury Bond ETF (TLT)
ETF visual
Now, for a much more boring investment to consider. The iShares 20+ Year Treasury Bond ETF (TLT) is an exchange traded fund that tracks the performance of long-duration bonds. That is, those that trade with a duration of 20 years or longer.
In other words, investors looking for a market signal that might be a decent indicator for the amount of greed or fear within the market at a given point of time may look at long-duration bonds as a place where investors may look to hide out.
Yields and prices are inversely related, so when investors see bond yields decline, that means there’s major buying (which largely comes from central banks and other large institutional investors). When buying activity picks up, either tied to broader concerns around the economy or the potential for additional interest rate cuts (which often come during times of recession), investors can be fairly certain that things aren’t moving in the right direction, at least for equities.
I’ve long thought that TLT is a great portfolio hedge and a way for investors to balance out risk in their portfolios, and there are other factors such as growth and inflation expectations which play into longer-duration bonds, so it’s hard to parse out exactly what moves prices and yields on a given day. And there’s always going to be some underlying buying from investors looking for this diversification.
But if we do see big swings in the value of the TLT, that should indicate to investors where sentiment stands throughout the year.
Strategy (MSTR)
Strategy CEO Michael Saylor
Speaking of top sentiment indicators investors can point to as highly suggestive of how investors are feeling about the market at a particular point in time, Strategy (NASDAQ:MSTR) has to be included in this list.
The Bitcoin (CRYPTO:BTC) treasury company has shifted its focus away from being a software-focused tech company to simply a company that allows investors access to the Bitcoin on its balance sheet.
Previously trading at a very wide multiple relative to the Bitcoin on its balance sheet, Strategy’s stock price has since come down to levels consistent with its holdings. That said, volatility in the crypto market (of which Bitcoin is by far the largest contributor to total market capitalization) can be a broader risk sentiment gauge for the overall economy. If investors are bullish on a continuation of the sort of bull market moves we’ve seen in recent years (gains for equity investors of more than 20%), then holding exposure to a company like Strategy which provides leveraged exposure to Bitcoin makes sense.
But in down markets where investors fear crypto valuations could fall off a cliff, the inverse is true.
I’ll be continuing to monitor the crypto space, and Strategy as well as the best equity indicator of sentiment in the crypto sector, as key to determining which direction we’re going to be headed next year.