2026 May Look Different Than 2025, and That Could Be a Good Thing

Written by the William Allan team · Published 2025-11-17

As 2025 approaches its final weeks, it’s natural to look at the year so far and try to project it forward. Through mid-November, stocks had recovered strongly from a sharp spring selloff. That path included exceptional volatility in April, followed by a more sustained recovery.

But markets rarely repeat themselves. They evolve.

The year ahead could look different in ways that create opportunities for long-term investors. That is an outlook, not a prediction of a particular return or turning point.

2025 Has Been a Strong Year, With a Rough Path

Major US equity indices recovered and reached new highs, but describing the year as a series of shallow pullbacks would overlook the spring decline. Cboe’s April market review documents the sharp selloff and exceptional volatility.

Several characteristics deserve context:

Concentration: The largest companies have an outsized influence on capitalization-weighted indices, making leadership and diversification important considerations.

Positive earnings growth: By mid-November, third-quarter S&P 500 earnings growth remained positive. Whether prices had outrun fundamentals depended on the company, earnings measure, and comparison period. FactSet’s November 14 earnings review provides the dated earnings context.

Changing volatility: The sharp spring decline and subsequent recovery are reminders that a strong year-to-date result can conceal a difficult investing experience.

Crowding risk: When investors favor the same companies and narratives, a change in expectations can affect many portfolios at once.

Leadership can broaden, but concentration can also persist. There is no timetable that requires either outcome in 2026.

How 2026 Could Look Different

We would welcome a backdrop in which a broader range of companies contributes to returns and investors pay close attention to business fundamentals. Here are the possibilities we are considering.

1. A Broader Market

Companies outside the largest index names may offer opportunities worth researching. That assessment requires evidence about each company’s valuation, cash flow, balance sheet, and prospects. A smaller market value or a lower share price does not by itself make an investment attractive.

2. More Realistic Return Expectations

Strong recoveries can create complacency. Looking only at the latest index level can make progress appear smoother than it was. The experience of 2025 so far is a useful reminder to allow for substantial declines when building a plan.

3. Continued Price Discipline

When prices outrun reasonable estimates of business value, patience matters. Our focus remains on cash flow, balance sheet strength, operational quality, and the price paid for those characteristics. That discipline informs decisions; it does not assure a favorable result.

4. Volatility and Opportunity

Volatility can reveal opportunities, while also creating losses and making liquidity needs and risk capacity more important. Lower prices may justify another look at a company, but they can also reflect a deteriorating business. An investor must be able to bear further declines.

Why Different Could Be Better

We welcome markets that give investors more choices:

To assess quality at reasonable prices.

To consider diversification across companies and sources of risk.

To allocate based on fundamentals instead of recent headlines.

To prepare for the long term without assuming the recent recovery will repeat.

Broader leadership could expand the opportunity set. It would not eliminate risk, and investors can lose money in both concentrated and broadly participating markets.

Looking Ahead

No one can script the next twelve months. What we can do is evaluate portfolios using quality, durability, valuation discipline, and each investor’s circumstances.

Strong markets are welcome. Preparation matters even when the market has been rewarding.

We look forward to navigating the year ahead with a steady hand and a long-term mindset.

Editorial clarification, September 10, 2026: This outlook retains its mid-November 2025 perspective. The description of 2025’s market path and the discussion of risk have been corrected.

This commentary is for informational purposes only and is not investment, tax, or legal advice. All investing involves risk, including the possible loss of principal, and past performance does not guarantee future results.