Two of the country’s top retail stock brokerage firms expect the equities market to continue facing headwinds due to political and economic factors, although some positive factors, such as low inflation and interest rate cuts, present windows of opportunity.

Domestic stocks are currently trading at approximately nine times price-to-earnings, a level COL Financial Group Inc, Chief Equity Strategist April Lee-Tan described as being “just one multiple away” from the lows seen during the 2008 global financial crisis.

“I understand why it's easier to be bearish rather than be bullish right now, because there really are a lot of challenges facing the Philippine economy and the stock market,” Tan in a briefing on Saturday, Jan. 10.

She noted that these challenges include a weak global economic outlook, a corruption scandal that is slowing government spending growth, and global headwinds that could lead to contagion risk.

According to the International Monetary Fund, the world gross domestic product growth for 2026 is expected to slow further to 3.1 percent, and, for the ASEAN five, growth is expected to slow down to 4.1 percent for the Philippines.

In a separate briefing, Abacus Securities Corp. Vice President and Head of Research Nicky Franco said, “Politics is one of the things that will be front and center in 2026… while we are hopeful for 2026, one of the negative factors for this year is that the political noise will likely heat up over the next few months.”

He said these will be headlined by the impeachment proceedings against the Vice President, as well as the ongoing controversy over the corruption-laden flood control projects, which may result in the arrest of some legislators and government officials.

“It's going to weigh down on GDP and market sentiment for most of this year… but we believe that there is a short 18-month window for equities before the next election cycle begins in earnest,” Franco said.

He noted that, while third quarter 2025 GDP was weak, “we believe this is going to reverse, starting the fourth quarter of this year. So, our view is that the fourth quarter GDP will likely be better. The only question is, how strong the rebound is going to be.”

Another positive factor for Franco is that he expects 25 basis point rate cuts in February and April, with the terminal rate now expected to be four percent.

“We believe that there is scope to reduce rates further, because the real interest rate is still quite high relative to historical levels, quite prohibitive,” he said adding that, in the US, the new Fed chairman is also likely to push for lower rates.

Tan also said lower interest rates and inflation are reasons to stay optimistic as well as the cheap valuations of PSE-listed stocks, “which seemed to price in all the negatives already.”

“And then, we're seeing this rotation in the emerging market stocks, which could trickle down to the Philippines. And finally, we are seeing some sectors which have improving fundamentals,” she added.

Tan said “interest rates and inflation are expected to remain low for this year, which should be good for or at least support consumer spending and investment spending, although there are a lot of headwinds, at least the outlook on inflation and interest rates will buffer the negative headwinds.”

For valuation, she said the PSEi is trading at the low end of its valuation at its current nine times the price-to-earnings ratio as against the low of eight times PE seen during the global financial crisis in 2008.

“We're just one multiple away from that. So, really very cheap valuations,” Tan said.