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After a healthy fourth quarter for investors, we feel good about our portfolios. We still enter the new year with some lingering questions including, will 2026 be able to deliver another strong year of returns for the fourth consecutive year?
Analysts are optimistic about 2026, with a consensus that year-end returns will be positive, however, investors are aware that market pullbacks occur on average every year and a half, so statistically speaking, we must remain prepared for a potential pullback of 10% or more sometime in 2026. If 2025 taught us anything, it’s that during challenging times, it’s best to avoid emotional decisions. Although history is not a forecast of future outcomes, in 2025 the equity market rewarded investors who demonstrated patience and discipline during tough times. As we begin 2026, there are numerous concerns that are reasons for investors to be cautious. While we are optimistic about the opportunity for another positive year in 2026, there are still many uncertainties to consider.
KEY TAKEAWAYS
- Equities continued to reach record highs in the fourth quarter. The rally was fueled primarily by additional easing of monetary policy, the AI boom, a resilient labor market, and consistently strong corporate earnings.
- In the fourth quarter, The Fed reduced the federal funds rate twice by a total of 50 basis points to finish the year at a range of 3.5-3.75%, with the potential of additional, but slower, cuts next year.
- Inflation numbers came in better than expected and in November, the Consumer Price Index rose 2.7%. Bonds were relatively muted during the quarter.
- While investors sentiment remains positive, we continue to monitor potential disruptors.
Focusing on your long-term goals and staying the course of a well-guided plan can help you stay grounded and confident during these times of uncertainty.
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