Before we jump into the hard-hitting predictions for 2026, let’s take a minute to put a bow on 2025.
2025 was a good year for almost all risk assets--with the exception of bitcoin and cryptocurrencies in general. International markets outperformed US markets for the first time in what seems like forever and the bond market even joined the party as the Federal Reserve continued its rate cutting cycle. Diversification for the win!
As of this writing, the major asset classes have performed as follows:
- The S&P 500 is up over 19%
- Nasdaq up over 22%
- Mid Caps up over 9%
- Small Caps up over 15%
- Small Cap Value up over 7%
- International Developed up over 32%
- Emerging Markets up over 32%
- US Aggregate Bonds up around 7%
- Gold up over 72%
- Globally Diversified 60/40 Portfolio: up around 15%
- US Dollar down around 10%
- Bitcoin down over 6%
*Source Google Finance
If an investor looked at his/her portfolio today for the first time this year, he or she might think to themselves "Great results, not much happened this year!"
We, of course, remember the tariff tantrum brought on by Liberation (Obliteration?) Day in early April which saw the S&P 500 drop by over 12% in just four trading days. It felt like the end of days. The sun would never reappear. It was scary!
We know now that those who stayed in their seats were rewarded with a rebound of close to 40% over the remainder of the year from the lows experienced in early April. Congratulations, we made it! But the journey is only beginning...
Last year, I highlighted a couple of risks to the economic outlook for 2025. Some of them came true, some of them didn't pan out, but most importantly, the biggest risk was the magnitude of something that no one saw coming--tariffs that went way above and beyond what anyone expected.
Turns out predicting the future is hard. Like really hard. No one has a crystal ball.
Despite not being able to predict the future with any meaningful reliability, analysts across Wall Street have been rolling out their predictions for 2026 over the last few weeks. To sum up a few key recurring points, analysts are expecting the following for next year:
- Continued economic growth out of the US and globally (thanks, in part, to fiscal and monetary policy impacts)
- Double digit earnings growth across the spectrum of US and global stocks
- Inflation continuing to moderate (stay below 3%)
- Unemployment not spiking in a meaningful way (stay below 5%)
- Valuations (ie stocks are quite expensive) could be a headwind to equity returns
Basically, they are projecting that broadly speaking the global economy will continue to be on strong footing, however, we could be in for lower equity market returns (especially in US large caps) due to elevated current valuations.
Of course there are risks--an AI bust? Inflation spike? Unemployment surge? Whatever happens just remember the biggest risk is likely to be something not mentioned here or on CNBC.
Those are the analysts' takes--below are some of my best guesses on what to expect in the year ahead:
So, to wrap up and add some REAL predictions for 2026:
- Some stocks will go up, some will go down, others will remain unchanged. Same goes for most asset classes.
- The world is a surprising place—prepare to be surprised in 2026.
- You will learn something new. Hopefully lots of new somethings.
- The Chicago Bears won't stink in 2026 (Very happy to have been wrong on this one for 2025!).
- New businesses will be created. Others will go out of business. Some will go public, others will be taken private.
- You will visit new places or spend time in the places most meaningful to you.
- You will control your spending and savings decisions.
- Cable news and the media in general will try to scare you.
- You will meet new people.
- The biggest risk(s) to your portfolio is something no one is talking about today (as previously mentioned above).
- Groups of people will be at odds with other groups of people—some may lead to conflict or the continuation of existing conflict.
- You will make lots of decisions. Some will be life altering, others will be trivial. You may decide to revisit a decision you previously made. It's not too late to change course.
- Charity and kindness will continue to pay huge dividends.
- You will (hopefully) turn a year older.
I look forward to working together through whatever 2026 brings.
Wishing you and your family a happy, healthy, and prosperous New Year!
Will