Year-in-Review & 2026 Outlook

👉 Click HERE to listen to the call.

After a volatile start to 2025, U.S. equity markets finished the year on firmer footing, supported by improving macro conditions and resilient earnings. Early momentum gave way to a sharp tariff-driven selloff in April, followed by a rapid reversal that reset sentiment and leadership. By year-end, the narrative had shifted away from a tariff-induced slowdown toward reacceleration, even as market concentration and valuation extremes continued to shape outcomes.

In this quarter’s Market Views, CEO Will Muggia reviewed the forces that defined 2025 and outlined how leadership, earnings, and risk dynamics may evolve in 2026. The discussion emphasized a potential transition toward broader market participation, increased scrutiny of AI-driven investment, and a more selective opportunity set for investors.

Inside the call:

• Market Reset Signaled Early Leadership Rotation:
  The April tariff shock exposed crowded positioning but failed to break the broader uptrend. The subsequent rebound marked an inflection point, with improving macro conditions into the fourth quarter helping catalyze early shifts in market leadership beneath the surface.
• Mega-Cap Concentration Began to Ease:
  While index-level returns remained concentrated, only a narrow subset of mega-cap stocks outperformed during the year. Strength in equal-weight indices and improving breadth suggested an early move toward a less concentrated market, with implications for relative performance in 2026.
• AI Leadership Shifts Toward ROI Discipline:
  AI remained the largest structural earnings driver, but market focus moved from enthusiasm to execution. Differentiation increasingly centered on companies demonstrating pricing power, margin leverage, and measurable revenue outcomes versus those scaling investment without clear returns.
• Cyclicals and Small Caps Showed Early Inflection:
  Health Care, Financials, Industrials, and small caps exhibited improving relative performance, supported by positive earnings revisions. This quiet broadening pointed to a healthier earnings backdrop beyond the largest stocks.
• Retail Activity Continued to Shape Market Structure:
  Rising retail participation amplified short-term momentum and volatility. Preferences for leverage, high beta, and non-earning exposures contributed to faster rotations and challenged traditional quality leadership throughout the year.
• Policy Support Offset by Labor Market Risks:
  Easier financial conditions and modest fiscal tailwinds supported continued expansion, but early signs of labor market softening emerged. Hiring trends and wage dynamics were highlighted as critical swing factors for growth and earnings into 2026.

Looking ahead, 2026 appears positioned to reward selectivity, fundamental analysis, and balance sheet discipline rather than broad beta exposure, as earnings dispersion and leadership rotation continue to evolve.

👉 Click HERE for the slides.