Monthly Outlook: January 2026

As we wrap up another very successful year of investing, Wall Street analysts are busy making their 2026 predictions and recommendations. You’ll see article after blog after post claiming to know, often with great precision, where the S&P500 will end up at year-end 2026, how many times the Federal Reserve will cut interest rates, where inflation will go, how high gold will go, and so on. It’s all bunk.

At year end, we’re always reminded of Yogi Berra’s famous quote, “It’s tough to make predictions, especially about the future.” But that doesn’t seem to keep Wall St. from trying. And you’ll notice that analysts are notoriously optimistic, and consistently wrong. According to Barron’s Big Money Poll, not one of the analysts surveyed expect a negative return for the S&P500, with the average expectation coming in at +9% growth. Over at Standard & Poor’s, the average analyst expectation for 2026 earnings is $286/share, up 18.9% from 2025 levels. The S&P500 has failed to hit the initial earnings expectations for at least the past 20 years. So why do they bother? Because optimism sells and investors want to believe in a rosy future. If they’re wrong, they’ll be wrong together and avoid blame.

Prediction #1

Our first prediction is that Wall St. predictions will be mostly wrong. This is an easy bet, actually, since history proves this to be a near certainty. Consider the most common prediction, which is to guess the S&P500 at next year-end. The 100-year average return for stocks has been about 9%/year. So, analysts often predict about 9% for the year ahead, give or take a couple percent. But the S&P500 has actually only been between 8% to 12% less than 10 times out of those 100 years. And in the past 25 years, it’s ranged from +32% (2013) and -37% (2008).

Other predictions are equally impossible to get right. Interest rates, geo-political outcomes, elections, employment, house prices, earnings, and other indicators are all important but difficult to predict. Even the most prescient of us can’t balance what we know, what we don’t know, and what we don’t know we don’t know. At best, analysts should lay out most likely scenarios, assign “odds” to them given historical precedent, and present weighted average predications. They’d still probably be wrong, but at least we could use them to develop a range of expectations.

Prediction #2

Not all shiny Wall St. packages are gifts. After several good years (since the 2022 correction), stocks are overvalued again and bonds are stagnant as investors weigh sticky inflation vs. recession risks. Our second prediction is that Wall St. will come to the rescue of the retail investor who is invested in traditional 60%/40% stock/bond portfolios. Already, we’re hearing announcements of lots of new packaged products of “alternative” investments ranging from private credit and private equity, buffered funds, infrastructure funds, real estate funds, etc. Their argument is these alternative asset classes and strategies have only been available to high-net-worth investors through private funds with high minimums. But now, thanks to Wall St. packaging, the “little guy” can invest like the “big guys.”

Alternative investments and strategies are sometimes uncorrelated to stocks and bonds. So, they might reduce risk. But they’re often illiquid and complex, requiring very careful analysis before investing. Simply putting them into a wrapper with low minimums smells of dumping assets that are starting to stall on to the retail investor. Please, please do your homework before investing in these new offers, or let us analyze them for you.

Prediction #3

Our last prediction is to expect a few surprises in 2026. Again, history suggests this is an easy bet, too. Every year, there are a few unexpected events that change the course of markets and sometimes history. Wars, pandemics, inventions, political turmoil, natural disasters, etc., all seem to pop up out of nowhere, repeatedly. Some are positive and many aren’t. Knowing this, we advise that the best course is to make your portfolio, and yourself, as resilient as possible. We’ll invest for growth, but at the same time, we’re vigilant for any market downturns, caused by any reason, as our signal to sell and move to protection. We liken it to driving fast, but with big brakes!  In 2026, we’ll ignore most of Wall St.’s predictions, we’ll scrutinize the new shiny packages, we’ll expect the unexpected, and drive portfolios with resiliency and discipline. Happy New Year!