Insightful Ideas

The stock market is poised to deliver double-digit returns for the sixth time in seven years, marking an impressive period interrupted only by the inflation-driven decline of 2022. This sustained strength has positioned many investors favorably as they look ahead. Looking toward 2026, investors face questions about midterm elections, Federal Reserve leadership changes, AI's trajectory, and the dollar's path. Success depends less on predicting each development than on maintaining a well-positioned portfolio. Here are seven themes to guide investment thinking for the year ahead.

With AI everywhere in the headlines and the stock market reaching new highs, a lot of investors are asking the same question: Are we in another bubble, like the dot-com era? It’s a fair question, and one I take seriously. There’s no doubt that valuations are high and that enormous sums are being poured into AI infrastructure. So today, I want to address those concerns directly.

We had it all over the past two weeks- Earnings, Fed decision, and Trade. The status quo generally prevailed, supporting the continued uptrend, albeit with some technical divergences beneath the surface that signal a pause in the momentum may be overdue.

For long-term investors, managing cash is increasingly difficult as short-term interest rates fall. Although cash seems safe, holding too much can undermine long-term financial goals. Right now, there’s a record $7.3 trillion sitting in money market funds, reflecting a shift toward cash as investors wait out market uncertainty.

As we begin the final quarter of the year, investors are facing conflicting signals. The S&P 500 reached new all-time highs in the third quarter as markets continued to be supported by strong corporate earnings and enthusiasm for artificial intelligence. At the same time, the labor market has weakened considerably since the beginning of the summer, raising concerns over the underlying economy and the financial health of consumers. Despite this, GDP growth has been strong, and inflation has largely stayed in check.

The investing adage “don’t fight the Fed,” coined in the 1970s, remains highly relevant today. It reflects a core principle: the Federal Reserve’s monetary policy decisions can significantly influence markets and the economy, and investors should pay attention. However, it’s just as important to maintain perspective; what matters most is the broader trajectory of interest rates, not any one policy meeting.