2026 Investment Outlook
As we close out a resilient 2025, marked by a powerful mid-year rebound in the S&P 500 and upward earnings revisions, investors appear to be approaching 2026 with measured optimism. Historical patterns, robust corporate fundamentals, economic tailwinds, and supportive policy create a constructive backdrop. Meanwhile, emerging opportunities in artificial intelligence (AI), crypto, and blockchain point to the potential for equities and digital assets to extend their gains, offering a year of strong returns, though not without careful consideration of the challenges ahead.
Volatility and shifting macro dynamics underscore the need for discipline and selectivity. This outlook distills six key signals into actionable strategies that provide a balanced perspective for navigating the opportunities and changes in the year ahead.
Earnings Momentum Anchors Outlook—with Election Tailwinds Adding Fuel
Summary
Strong earnings growth and favorable post-election trends set a constructive stage for 2026, though volatility underscores the need for disciplined positioning.
Earnings Build Solid Foundation
Analysts have steadily revised S&P 500 earnings higher throughout 2025, with full-year growth now estimated at 11.7% and 2026 projections climbing to 13.9%.1 This resilience amid cooling inflation provides a strong foundation for equity markets
heading into the new year.
Seasonal Tailwinds
Post-election tailwinds often fuel strong gains and 2025 followed that playbook: muted early performance gave way to a robust second half, with the S&P 500 up more than 15% year-to-date.2
Average S&P 500 returns exceeding 16%
Strong earnings growth and favorable post-election trends set a constructive stage for 2026, though volatility underscores the need for disciplined positioning.
As 2026 begins as a midterm year, historical patterns provide a constructive backdrop. Midterm periods often start with slower momentum, yet the 12 months that follow midterms have historically delivered strong equity performance, with average S&P 500 returns exceeding 16% driven by reduced policy uncertainty and improved investor confidence.3 While not a guarantee, this seasonal tailwind provides additional context for 2026, especially if gridlock in Washington persists—a scenario that has historically correlated with above-average equity performance. Combined with strong earnings momentum, these factors create a compelling case for optimism as we enter the year ahead.
2026 also carries a wildcard
2026 also carries a wildcard. While seasonal patterns often support strong post-midterm gains, they coexist with heightened volatility risk with an average peak-to-trough correction of 17.5% (the largest of any election cycle) making 2026 a year where patience and positioning matter.4
The encouraging part? One year after those midterm-year lows, markets have historically delivered an impressive rebound of nearly 32% on average. Importantly, these lows tend to occur later in the year—typically late August to late September—underscoring why staying the course during periods of turbulence can be critical for long-term success.4
The Takeaway: Volatility Investment Implications
International Opportunity
U.S. equity valuations remain elevated, with the S&P 500 trading at 22.4x forward earnings—above its 10-year average. While this premium reflects strong profit growth and confidence in an economic soft-landing scenario, it also underscores the need for selectivity. The Federal Reserve’s pivot toward an interest rate easing cycle provides a tailwind for risk assets, but lofty multiples leave less margin for error—particularly if growth expectations falter.
International Opportunity: Attractive Multiples and Currency Tailwinds
International markets tell a different story. Regions like Europe and Japan trade at far more compelling valuations, with the MSCI EAFE index near 14x forward earnings. These discounts are paired with improving fundamentals—Europe benefiting from fiscal support and energy normalization, Japan from corporate governance reforms and shareholder-friendly policies.
A weakening U.S. dollar could further amplify returns abroad. Several factors are driving this trend:
The Takeaway
Global diversification matters more than ever. Investors should look beyond headline benchmarks to capture relative value opportunities across geographies and sectors, while avoiding concentration risk in the most expensive pockets of the market. Pairing U.S. exposure with international allocations can help balance valuation risk and position portfolios for potential currency-driven upside.
Summary
Beyond headlines, AI’s growth depends on critical infrastructure—power, cloud, blockchain technology and cybersecurity—creating multi-year investment opportunities.
The Broader AI Ecosystem
Artificial Intelligence (AI) remains a transformative force, but its durability hinges on more than algorithms. The buildout of power capacity, cloud infrastructure, blockchain technology, and cybersecurity defenses forms the backbone of AI adoption. These areas represent structural growth themes that extend well beyond short-term cycles.
69% of CEOs plan to allocate 10-20% of their budgets to AI
Companies and entire industries are racing to integrate AI, a shift requiring substantial investment in both technology and physical infrastructure. According to KPMG’s Global CEO Outlook, 69% of CEOs plan to allocate 10–20% of their budgets to AI over the next 12 months, signaling sustained demand across the value chain.6
Infrastructure and Cloud: The Foundation for Scale
Analysts project a 23% compound annual growth rate for AI-related infrastructure—spanning hardware, data centers, semiconductors, and networks—as well as managed cloud AI services. These segments enable the computational scale and flexibility required for enterprise AI deployment, positioning providers of chips, servers, and cloud platforms as
critical beneficiaries.
Power: The Hidden Enabler
AI’s energy appetite is enormous, and natural gas is the main source of power for AI data centers in the U.S. AI data centers depend on affordable electricity, making natural gas a critical resource. With energy independence now a national priority to support AI infrastructure and U.S. technological leadership, reliable and cost-effective power has never been more essential.
Federal initiatives to fast-track permitting and expand grid capacity underscore the strategic priority of energy independence. Reliable, affordable power isn’t just an operational need, it’s a national objective tied to AI leadership.
Natural gas is the main source of power for AI data centers in the U.S.
Cybersecurity and Blockchain: Securing the Future
As AI adoption accelerates, so do risks. Cybersecurity solutions are essential to safeguard sensitive data and prevent AI enabled attacks. Meanwhile, blockchain technology adds a trust layer—enabling verifiable transactions, authenticating data exchanges, and supporting automation through smart contracts and tokenized payments within AI applications. Together, these capabilities protect and unlock the full potential of AI-driven ecosystems.
The Takeaway
Investors should focus on quality companies aligned with secular transformation themes, cloud infrastructure, energy solutions, blockchain, and cybersecurity—rather than chasing short-term hype. These underpinnings of AI adoption represent durable growth opportunities that extend well beyond the current news cycle.
Summary
Healthy household balance sheets and potential rate-driven refinancing could unlock discretionary spending, even as economic benefits remain uneven.
Household Strength and Spending Power
Consumers enter 2026 on solid footing. Household balance sheets remain healthy, supported by strong labor markets, rising wages, and wealth gains from equity markets over the past two years. This resilience has fueled discretionary spending and demand for services, which are critical drivers of corporate revenues and broader economic stability.
The Rate Effect: Unlocking Liquidity
As the Federal Reserve pivots toward easing, lower interest rates could free up additional consumer cash flow. Consider the refinancing angle:
This dynamic could reinforce consumption trends, though benefits may skew toward homeowners—creating a bifurcated effect where homeowners gain more flexibility than renters or those without housing equity.
Portfolio Implications
The Takeaway
Consumer resilience—amplified by potential refinancing tailwinds—provides a stabilizing force for the economy. Investors should consider emphasizing quality, resilience, and income-oriented strategies designed to capture upside while cushioning against volatility.
Summary
Clear rules and accelerating institutional participation are transforming crypto from a fringe asset into a mainstream investment theme.
Regulatory Clarity has Changed the Game for Crypto
The GENIUS Act, signed into law in July 2025, delivered the first federal framework for stablecoins—a milestone that removes uncertainty and aligns U.S. oversight with global standards like the EU’s MiCA. This clarity sets the stage for innovation in decentralized finance, tokenized assets, and even AI-integrated applications. With clear rules and oversight, institutional confidence is rising, and that could help propel Bitcoin and other major cryptocurrencies toward new highs in 2026.
Institutional Adoption Is Accelerating
Crypto is no longer a niche play—it’s evolving into a mature asset class with real infrastructure behind it.
Evidence Includes:
These developments underscore a structural shift toward digital assets, supported by regulatory clarity and institutional scale.
Volatility Remains—but it Creates Opportunity
Crypto remains volatile, but history shows that deep drawdowns often precede strong rebounds. Strategies like covered calls may help investors “protect and participate,” turning volatility into income while preserving upside potential.
For those seeking diversification, crypto offers not only growth potential but also a hedge against inflation—particularly assets with finite supply like Bitcoin or XRP.
The Takeaway
The convergence of regulation, institutional adoption, and innovation signals a generational opportunity for investors willing to lean into this evolving asset class. While volatility is part of the equation, disciplined exposure and risk-managed strategies can unlock meaningful upside.
Summary
Easing monetary policy and resource scarcity are reshaping portfolio strategies, creating opportunities in income, liquidity, and hard assets.
Policy and Interest Rate Dynamics
The Federal Reserve is expected to begin easing in 2026 as inflation moderates and growth slows. Markets currently anticipate 75–100 basis points of rate cuts over the next year—a shift that could reinvigorate housing markets and other credit-sensitive sectors while boosting fixed income and dividend-oriented strategies.8 Lower borrowing costs may also support broader risk appetite as capital becomes more accessible.
Markets currently anticipate 75-100 basis points of rate cuts
Uncertainty remains, however. Persistent (albeit relatively low) inflation or potential labor market strength could slow the pace of cuts, while a sharper economic slowdown might accelerate them. For investors, this underscores the need for flexibility and readiness to adjust allocations as policy signals evolve.
Liquidity & Tactical Positioning
After years of tightening, liquidity conditions are expected to improve in 2026 as central banks adopt a more accommodative stance and funding markets stabilize. This shift could enhance credit availability, support risk assets, and create tactical opportunities.
Portfolio Considerations
Finite Resources as Strategic Plays
Resource scarcity remains a defining theme in 2026, positioning finite assets as both a hedge and a growth lever. Inflation and geopolitical uncertainty have heightened the focus on safe-haven investments while structural trends underscore their importance.
These dynamics highlight how specific finite resources are not merely defensive allocations—they are integral to structural trends shaping the next wave of technological and industrial transformation. We believe they offer a compelling hedge against inflation, currency volatility, and geopolitical uncertainty, while providing exposure to long-term growth themes.
The Takeaway
The intersection of Fed policy shifts, easing liquidity, and resource scarcity will shape allocation decisions in 2026. Investors should considering staying flexible—positioning for rate-driven opportunities in income and credit-sensitive sectors—while incorporating finite resources as strategic hedges and growth levers tied to structural trends like electrification and energy security.
The outlook for 2026 is defined by opportunity amid complexity. Strong earnings momentum, easing monetary policy, and structural growth drivers—from AI infrastructure to resource security—create a constructive backdrop for investors. Yet, midterm-year volatility, shifting valuations, and evolving global dynamics demand engagement and adaptability. As renowned business strategist Peter Drucker observed, “One cannot manage change. One can only be ahead of it.” By anticipating shifts, focusing on quality, diversification, and exposure to transformative themes from AI to energy security, investors may position for upside while navigating a market shaped by both resilience and rapid change.
1Factset, December 2025
2Amplify Data as of 11/30/25
3Stock Market Performance After Mid-term Elections | U.S. Bank, 12/18/25
4Carson Investment Research, Market Commentary What May Lie Ahead for Stocks in 2026, 11/16/25
5A covered call refers to a financial transaction in which the investor selling call options owns an equivalent amount of the underlying security.
6KPMG: KPMG 2025 Global CEO Outlook, 12/18/25
7Tradingview.com, “Harvard Increases Bitcoin ETF Holdings by 257%, Ranks Above Microsoft, Amazon”, Nov. 2025.
8A basis point (bps) is a unit of measure equal to one hundredth of a percentage point.
9doi.gov/pressreleases/interior-department-releases-final-2025-list-critical-minerals
Indexes are unmanaged and it’s not possible to invest directly in an index. The S&P 500 Total Return Index is a market-capitalization-weighted index of the 500 largest U.S. publicly traded companies. The MSCI EAFE Index is designed to measure the equity market performance of developed markets outside the U.S. and Canada. MSCI Emerging Markets (EM) Index is designed to measure large- and mid-cap representation across emerging market
countries. CBOE Volatility Index (VIX) is a measure of implied volatility, based on the prices of a basket of S&P 500 Index options with 30 days to expiration. The Bloomberg Solana index is designed to measure the performance of a Solana token in USD. The Bloomberg XRP Index is designed to measure the performance of an XRP token in USD. The Bloomberg Bitcoin Index is designed to measure the performance of a single bitcoin traded in USD. The Bloomberg Ethereum Index is designed to measure the performance of a single Ether traded in USD.
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