Jan 7 , 2026
From Speculation to Investing
From Speculation to Investing
From Speculation to Investing
There was plenty of gnashing of teeth about government policy and the future of the economy. The year had the classic 10%+ (really a hair below 20%) market correction early. It was looking a little gloomy. But, market resilience carried the season - balancing solid economic growth against heightened policy and geopolitical risks. Volatility is normal. Embrace it and you’ll benefit from it. The market rewarded investors that stood tough with a 17.9% return for the year.
“You are what your record says you are!” Coach Bill Parcells had it right. Earlier this year, the market looked like a losing team, down double digits during the tariff-driven drawdown. But after some halftime adjustments, the scoreboard now shows a 14.8% gain year-to-date. This isn’t a 28–3 Patriots-Falcons Super Bowl comeback, but the score is the score.
Market resilience has carried the season - balancing solid economic growth against heightened policy and geopolitical risks. The game isn’t over yet.
Market Recap
U.S. Equities (S&P 500)
Q4: +2.3%
YTD: +17.9%
International Equities (MSCI ACWI ex-U.S.)
Q4: +4.6%
YTD: +33.1%
Fixed Income (Bloomberg U.S. Aggregate Bond Index)
Q4: +0.9%
YTD: +7.3%
Alternative Market Neutral (Lipper Global Alternative Long/Short Equity Index)
Q4: +0.7%
YTD: +10.7%
Gold
Q4: +11.5%
YTD: +62.5
Bitcoin
Q4: -22.5%
YTD: -4.6%
Key Highlights and Commentary
This isn’t your meme stock market. Remember SPACs? S***coins? NFTs? Vaporized. The market has shifted from speculation to investing. It’s no longer completely driven by sentiment, it’s a weighing machine on growth and earnings.
The easy money may have been made in this cycle, but the best names continue to execute at a near-perfect level. There are still less crowded opportunities in places like international value (hello European banks!) and emerging markets.
While it’s not the time to be a gambler, it is the time to be an investor. Our view beginning 2025 was growth, but slowing. Massive increases in artificial intelligence and government spending on infrastructure, aerospace, and defense have backed us off that a bit. We think those two themes can continue to bolster the economy enough to maintain or even accelerate the current level of growth.
Scared of stocks? Anyone who's been a post-GFC bond investor should be on their knees thanking Jerome Powell for hiking rates. Yields are attractive and provide a real opportunity to return a mid single digits return with a fraction of the risk of stocks.
Mortgage rates have remained pretty sticky despite the recent cuts to the Fed Funds Rate. A continual reminder that the mortgage market determines current interest rates, not the Fed. If mortgage rates will ever decline there’s a big rocketship ready for the ignition to be started. What remains to be seen is if mortgage rates will soften without a broad weakening in the economy. If they’ll come down without outside damage driving the decline, it would be huge additional growth. All bets are off if they decline from a weakening economy. At that point, it could either provide a floor for the decline or a catalyst for recovery.
Tax refunds will start being sent out later this month. With the impacts from the One Big Beautiful Bill not being implemented in the W4, it is very likely that many will receive a larger than expected tax refund. What do Americans do with their tax refunds? They spend them! We think this could provide some better than expected growth and consumer spending numbers, but we also think it’s the perfect time for companies that have absorbed the impact of tariffs through pulling forward inventory or holding on price increases to release both of those to the market. While our view is inflation has moderated and unlikely to reignite, this may provide a few spooky inflation readings.
Ultimately, we continue to believe the economy can continue in growth mode. Yes, valuations are above historical averages (read more about valuation as a future predictor here, but so is growth. We’re not going to provide a 2026 market forecast because the truth is it’s a complete guess. If you’d like to check out how the pundits did on that, we wrote about it on our Exact Miss blog here. Now is the time to be an investor.
Scared of stocks? Anyone who's been a post-GFC bond investor should be on their knees thanking Jerome Powell for hiking rates. Yields are attractive and provide a real opportunity to return a mid single digits return with a fraction of the risk of stocks.
Mortgage rates have remained pretty sticky despite the recent cuts to the Fed Funds Rate. A continual reminder that the mortgage market determines current interest rates, not the Fed. If mortgage rates will ever decline there’s a big rocketship ready for the ignition to be started. What remains to be seen is if mortgage rates will soften without a broad weakening in the economy. If they’ll come down without outside damage driving the decline, it would be huge additional growth. All bets are off if they decline from a weakening economy. At that point, it could either provide a floor for the decline or a catalyst for recovery.
Tax refunds will start being sent out later this month. With the impacts from the One Big Beautiful Bill not being implemented in the W4, it is very likely that many will receive a larger than expected tax refund. What do Americans do with their tax refunds? They spend them! We think this could provide some better than expected growth and consumer spending numbers, but we also think it’s the perfect time for companies that have absorbed the impact of tariffs through pulling forward inventory or holding on price increases to release both of those to the market. While our view is inflation has moderated and unlikely to reignite, this may provide a few spooky inflation readings.
Ultimately, we continue to believe the economy can continue in growth mode. Yes, valuations are above historical averages (read more about valuation as a future predictor here, but so is growth. We’re not going to provide a 2026 market forecast because the truth is it’s a complete guess. If you’d like to check out how the pundits did on that, we wrote about it on our Exact Miss blog here. Now is the time to be an investor.
Scared of stocks? Anyone who's been a post-GFC bond investor should be on their knees thanking Jerome Powell for hiking rates. Yields are attractive and provide a real opportunity to return a mid single digits return with a fraction of the risk of stocks.
Mortgage rates have remained pretty sticky despite the recent cuts to the Fed Funds Rate. A continual reminder that the mortgage market determines current interest rates, not the Fed. If mortgage rates will ever decline there’s a big rocketship ready for the ignition to be started. What remains to be seen is if mortgage rates will soften without a broad weakening in the economy. If they’ll come down without outside damage driving the decline, it would be huge additional growth. All bets are off if they decline from a weakening economy. At that point, it could either provide a floor for the decline or a catalyst for recovery.
Tax refunds will start being sent out later this month. With the impacts from the One Big Beautiful Bill not being implemented in the W4, it is very likely that many will receive a larger than expected tax refund. What do Americans do with their tax refunds? They spend them! We think this could provide some better than expected growth and consumer spending numbers, but we also think it’s the perfect time for companies that have absorbed the impact of tariffs through pulling forward inventory or holding on price increases to release both of those to the market. While our view is inflation has moderated and unlikely to reignite, this may provide a few spooky inflation readings.
Ultimately, we continue to believe the economy can continue in growth mode. Yes, valuations are above historical averages (read more about valuation as a future predictor here, but so is growth. We’re not going to provide a 2026 market forecast because the truth is it’s a complete guess. If you’d like to check out how the pundits did on that, we wrote about it on our Exact Miss blog here. Now is the time to be an investor.
Key Takeaways – Portfolio Positioning
Recap of Prior Portfolio Adjustments in 2025
Added Gold and Liquid Alternatives for diversification in Q1.
Upped quality and size of equities, tilted back towards the US from international profits.
Added AI as a secular thematic position.
Remained overweight value-oriented developed international stocks.
Added digital assets for the most aggressive portfolios.
Introduced Private Equity to portfolios with lowest liquidity needs and longest time horizons.
Initiated a secular thematic position in aerospace & defense.
Current Portfolio Adjustments
Increase equity overweight to 3%, in response to lower inflation, stronger earnings, fiscal stimulus, and a calming outlook on global trade.
Adjust factor tilts, moving back towards Expansion from Slowdown, reducing quality and reallocating into cyclical value.
Rebalance the strong performance from outside the US equities, reallocating to the largest US equities that continue to grow at above-trend levels and emerging markets that are benefiting from the softening stance on trade and tailwinds from A.I.
Broaden fixed income holdings, diversifying across geography, issuer, and credit quality, while being nimble with allocation and duration to take advantage of changing market rhythms.
Looking Ahead
The market rewards patience and discipline. Let the pundits guess what the market will do. Stay focused on your strategy, your goals, the real data, and ignore the noise. Your record will speak for itself over the long-term.
If you’d like to discuss how these views impact your portfolio specifically, please connect with us here.
Key Takeaways – Portfolio Positioning
Recap of Prior Portfolio Adjustments in 2025
Added Gold and Liquid Alternatives for diversification in Q1.
Upped quality and size of equities, tilted back towards the US from international profits.
Added AI as a secular thematic position.
Remained overweight value-oriented developed international stocks.
Added digital assets for the most aggressive portfolios.
Introduced Private Equity to portfolios with lowest liquidity needs and longest time horizons.
Initiated a secular thematic position in aerospace & defense.
Current Portfolio Adjustments
Increase equity overweight to 3%, in response to lower inflation, stronger earnings, fiscal stimulus, and a calming outlook on global trade.
Adjust factor tilts, moving back towards Expansion from Slowdown, reducing quality and reallocating into cyclical value.
Rebalance the strong performance from outside the US equities, reallocating to the largest US equities that continue to grow at above-trend levels and emerging markets that are benefiting from the softening stance on trade and tailwinds from A.I.
Broaden fixed income holdings, diversifying across geography, issuer, and credit quality, while being nimble with allocation and duration to take advantage of changing market rhythms.
Looking Ahead
The market rewards patience and discipline. Let the pundits guess what the market will do. Stay focused on your strategy, your goals, the real data, and ignore the noise. Your record will speak for itself over the long-term.
If you’d like to discuss how these views impact your portfolio specifically, please connect with us here.