Navigating the stock market rally and reality in 2026

The Philippine stock market had a lackluster 2025. A stock market rally in the first days of the new year is a sign of emerging optimism. Still, a look at key economic indicators warrants a cautious outlook and defensive strategy.

The benchmark Philippine Stock Exchange Index (PSEi) was down 7% year-on-year in 2025 amid concerns over weak corporate earnings, subdued economic growth, and political noise.

Analysts’ consensus forecast of 9.5% year-on-year (YoY) earnings growth for PSEi companies is a hard reach. With core earnings expanding 4.6% YoY during the January to September period, achieving that would require a 24% surge in the fourth quarter.

Metrobank’s Trust Banking Group-Equities Team estimates full-year 2025 earnings growth to settle within 5%-6% YoY.

A supportive backdrop alongside emerging market optimism and nascent foreign buying fueled a 7% year-to-date rally. The domestic stock market faces benign inflation, room for further monetary easing by the Bangko Sentral ng Pilipinas, and attractive valuations. It continues to trade at a deep discount historically and among emerging Asian market peers

Still, Metrobank’s Trust Banking Group maintains a cautious outlook, with a base case projecting the PSEi to settle around the 6,600 level by the end of 2026.

This target is based on expectations for tepid 5.4% economic growth, which is expected to limit the upside for corporate profits and leads to a 6% earnings growth forecast for the year. A potential breach of the USD/PHP 60 level presents an additional headwind.

Read Metrobank’s Chief Economist’s take on the trends for 2026, here.

Key upside risks to this cautious view include faster-than-expected economic growth, improved earnings formation, and meaningful Philippine governance reforms, which could trigger a market re-rating.

Until then, a defensive strategy is maintained to start the year.

CHARLES RANDY LUMHOD is an Equity Research Analyst at Metrobank’s Trust Banking Group. His coverage includes shipping, properties, REITS, and consumers, as well as select offshore markets. He holds a Bachelor’s degree, cum laude, in Business Administration major in Financial Management from the University of Santo Tomas. He is also a Certified Treasury Professional and Certified UITF Salesperson, and is currently pursuing other industry certifications. Outside work, he stays active by running and going to the gym.

WILLIE KRISTOFFERSON YU is an Equity Research Analyst at Metrobank’s Trust Banking Group. His coverage includes utilities, telcos, mining, and gaming, as well as select offshore markets. He holds a Bachelor’s degree in Management Engineering from the Ateneo de Manila University. He is currently pursuing industry certifications to better immerse himself in Financial Markets. Outside of work, he enjoys playing the piano and golf.