The past year rewarded discipline. Despite headline-grabbing volatility—including April’s tariff announcements and an extended government shutdown in October and November—the underlying economy remained resilient.
The S&P 500 posted its third consecutive year of double-digit gains, led by large- and mega-cap names, while international markets surprised to the upside with many foreign indexes gaining over 30%. Bonds also delivered strong results as moderating interest rates pushed the Bloomberg Aggregate Index up 7.3%.
Opportunities and risks ahead
Looking ahead to 2026, economic indicators are encouraging. Inflation has cooled to 2.7%, and unemployment (while ticking up to 4.6%) is still below historical averages. The Federal Reserve is dovish, signaling readiness to support the economy. Overall, the backdrop is positive. In fact, analysts expect earnings on the S&P 500 to grow a whopping 16% in 2026.
However, risks remain with valuations stretched. The S&P 500 P/E ratios are at levels reminiscent of the late 1990s and 2021, both of which preceded market corrections. And market concentration in technology and communications—fueled by AI-driven enthusiasm and fear of missing out—adds another layer of vulnerability.
Focused on capital appreciation and resilience
Against this backdrop, our portfolio remains anchored in high-quality companies with rising dividend streams. We see areas of excess in the current market but also compelling opportunities in value-oriented and low-volatility names. This approach is designed to capture capital appreciation during bull markets while providing resilience in periods of uncertainty.
Contact us with questions
As always, we appreciate your trust and partnership. If you have any questions, we’re happy to talk with you. Contact us at 800-998-9773.
Data Sources: Koyfin, Black Diamond, FRED, S&P Global, Allied Calculations