2026 Market Forecast

(the one we don't make)

My annual rite — to bastardize the legacy Wall Street ritual of forecasting how markets will perform the next year.

Through January and into February, my firm sits down with each client family to map out the year ahead together, including an overview of their investments. We provide both short-term and long-term expectations for their portfolio.

This is what we will tell clients to expect in 2026 (i.e. the short-term):

Of course there are people who will think this is crazy. Isn't part of your job to have market opinions?

Yes, and these are they. Our opinion is sometimes that we shouldn't have one.

I know Goldman has their S&P 500 forecast. Merrill, Morgan, and Wells Fargo, too.

The S&P 500 is currently around 6,850...so most of these forecasts are for large, U.S. stocks to perform between +4% to +18% in 2026.

But we don't need to do this crap. So my firm doesn't. The data we have available on short-term forecasting success tells us it's a futile exercise. Everyone stinks at it. Just look at how most of these firms "revise" their own target forecast throughout the year!

That's from March 10th, 2025, just a few months after the original forecasts. The whole exercise is a ruse.

To my firm, it's OK if markets are hard to outguess. That's something we build around, not fight.

And so with that, a few clarifying thoughts:

Not all forecasting is silly.

Expected variability of annual outcomes is on a spectrum.

For instance, we know exactly what the 1-year, risk-free rate (i.e. treasury bill) will be on every January 1st for one year ahead. But we have no idea what stocks or crypto or precious metals might do.

Then there are asset classes in between (e.g. intermediate term bonds), where we can construct a reasonable range.

Effective financial planning DOES require the forecasting of volatile assets over long periods.

Even assets like stocks have been reliable over longer periods, even if not promised to ever be so.

• Over 10 year periods, the S&P 500 is positive about 95% of the time.

• Over 20 year periods, the S&P 500 annual return clusters around +8% to +10%.

Again, nothing is promised...but this is useful data. Financial planning requires making educated forecasts at how risky assets will grow over long periods. It helps inform retirement planning, reasonable spending rates, etc.

The science is understanding the investment data, and how to make reasonable extrapolations based on how a portfolio is designed and implemented. The art is how an investor can tie this knowledge to a desired lifestyle that the portfolio endows — an iterative process, typically finding a balance between a high probability of never running out of money, and a high probability of not dying with excessive unfulfilled dreams.

Understand the reliability of your own portfolio.

Something that confounds me at the end of every year is people not knowing if they even got market returns. What is your portfolio doing?

If you meaningfully overweight certain companies or countries, you won't look like the market anymore. So when we say that even some risky assets are expected to be reliable over long periods (e.g. the stock market), that might not be relevant to you if your stock portfolio doesn't look like the market itself.

For instance if you only own a handful of stocks as your entire equity exposure, or only are exposed to a small number of countries, then I don't know how you will do. Your outcomes are being driven by a small number of inputs, not the broad market.

As such, I can't build reliable long-term forecasts. Importantly, it won't necessarily turn out bad...I just can't say with any reliability how it will turn out.

As a financial planner who ties portfolio outcomes to desired lifestyles, I like reliability.

Here is how U.S., International Developed, and Emerging Markets stocks did in 2025.

Another banner year. Whether you use an advisor or not, it's worth knowing whether you captured these market returns. And if you underperformed, being comfortable with why.

So while one-year forecasts aren't that helpful, last year's actual returns can be:

• Are you comfortable with your performance compared to the market?

• What decisions have you made to look different?

• Are you comfortable with those decisions going forward?

Like EVERYTHING at the start of a new year, we can't control all of our outcomes.

But we can control the inputs. Design accordingly.

End.

*Reference indices for long-term CME: Russell 3000 (US Stocks), MSCI World ex-US (International Developed Markets Stocks), MSCI Emerging Markets (Emerging Markets Stocks), FTSE EPRA Nareit Global REITs (Global Real Estate), ICE 0-3 Month Treasury Index (0-3 Month Treasury Bills), 1 Year Treasury Bill Rate (1-YR Treasury Bills), Bloomberg U.S. 1-5 Year Government/Credit Index (Short-Term Bonds), Bloomberg U.S. Aggregate Index (Intermediate-Term Bonds), Bloomberg U.S. Long Treasury Index (Long Term Treasury Bonds), Bloomberg Global Aggregate Bond Index (hedged to USD) (Global Intermediate Bonds), Consumer Price Index (U.S. Inflation). 1-YR treasury yield cited from CNBC on 1/1/2026.