Welcome to 2026! Time is moving fast and we are not getting any younger. As a World War II (WWII) history buff, it remains as somewhat of a historical benchmark in my mental time-reference. My parents grew up in that era and I had some relatives who fought in that era. My great uncle, Reginald Thayer had what is thought to be the most missions in the B-17 Flying Fortress; 79. For reference, only 1 in 4 B-17’s survived 25 missions early in the war so this was an incredible feat. WWII started 87 years ago. If you go back in time 87 years from the start of WWII you end up in the year 1852; ancient history! My point is that time tends to sneak up on us and the world seems to be changing faster. With that in mind, it is very important to be forward thinking to help establish your own financial stability. Forward thinking in a financial sense really means taking action today with strategic portfolio allocations that have weathered the test of time by reducing the probability of mistakes while allowing for participation in opportunities relevant to your personal circumstances.

One of the biggest mistakes investors can make is acting on predictions by often well-educated and experienced industry “experts”. I’m sure you’ve recently read any number of articles predicting how the markets will perform in 2026, what companies or sectors to focus on, what to do with your cash, how to leveredge the digital asset hype, or taking bets on real estate. And, without proper guidance, you could be unduly swayed, make mistakes, or miss opportunities. You might also get lucky. But as they say, luck is not a good long term investment strategy.

You know me, I don’t say things without some data to back it up so let’s look at how these “experts” who predict what markets will do for the year have fared in the past. I think you’ll find that if previous forecasts are any indicator, you might want to read their forecasts for their entertainment value only.

The first data set comes from Dimensional Fund Advisors article “When The Crystal Ball Is A Little Cloudy”, 12/23/2025. This shows the absolute difference between equity analyst forecasts and actual calendar year S&P 500 price returns. As can be seen in the chart below, for each year from 2021-2024 there are 13 forecasters. In 2024 (top row), the best forecaster (#5) was 16.4% off from the S&P 500’s actual returns, while the worst forecaster (#8) was off 35.3% from the S&P 500’s actual returns. And the other years tell a similar story; meaningless predictions. As I said previously, the data indicates that we might want to consider forecasts as click bait entertainment content only.

Past Performance is no guarantee of future results. 

In USD. A forecaster’s best prediction is defined as their prediction with the smallest absolute difference between prediction and actual return. A forecaster’s worst prediction is defined as their prediction with the largest absolute difference between prediction and actual return. Source: Bloomberg, using the “Strategists’ S&P 500 Index Estimates for Year-End . . . ” Analyst predictions for each year are as of December in the year prior. There were 13 analysts that made predictions for each of the past five years (2025, 2024, 2023, 2022, 2021). Analyst forecasts and returns are price returns. Price return represents the change in price of an investment and does not include dividends and other earnings. S&P data © 2025 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio.

The second data set comes from Avantis Investors entitled “2025 Market Forecasters’ Report Card”, and you can actually read the full article via the link. It’s very eye opening and tells a similar story of the failure of forecasters. The article concludes with the following:

“Of course, this is just one example in time, but it illustrates the broader implications for market forecasting. Those who attempt it and take action in their portfolios based on those views may often end up worse off than had they simply remained disciplined.”

I wanted to share this information with you as mental focus and reset into 2026, and a re-establishment of the foundations of our investment philosophy. I hope this helps.

Market Review: 2025 Q4

KEY TAKEAWAYS

• US stocks continued climbing in 2025, with the S&P 500 gaining almost 18%², while international stocks soared nearly 32%.
• The Fed reduced interest rates by 0.75 percentage points even as it coped with stubborn inflation, citing labor market worries.⁴
• Value lagged growth in the US, but international small value was among the best-performing asset classes of the year.⁴

US stocks notched their third year in a row of double-digit gains, but it wasn’t the smoothest ride. The S&P 500 hit records in the winter that were followed by a spring swoon. After powering past that to new highs in the fall, the markets cooled a bit along with the temperatures.¹ Still, the S&P 500 was up 17.9% for the year and closed near record levels.² The climb came despite tariff uncertainty, interest rate changes, and concerns about the durability of AI’s gains—not to mention the longest government shutdown in US history.³ Global stocks rose (see Exhibit 1), with returns in developed international and emerging markets better than those in the US. In the bond market, US Treasuries were higher for the year, and the benchmark 10-year yield fell to just above 4%.⁴

MSCI data © MSCI 2025, all rights reserved. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio.

But no recap of stocks in 2025 would be complete without discussing the meaningful outperformance of non-U.S. markets. Not only did non-U.S. stocks best their U.S. peers for the first time since 2022, but the MSCI ACWI ex USA Index, which includes both non-U.S. developed and emerging markets, beat the S&P 500 Index by about 14.5% in 2025, as shown in Figure 3 below. That’s by far the highest margin of outperformance for non-U.S. stocks in the past 15 years. This is just another reminder that focusing only on the U.S. market and not having a well diversified portfolio that includes non-U.S. stocks can hurt your overall performance in the long run.

Data from 1/1/2025 – 12/31/2025. Source: Bloomberg, Avantis Investors. Past performance is no guarantee of future results.

Morgan H Smith Jr. is an investment advisor with WorthPointe, LLC, a registered investment adviser  in San Diego, Calif. WorthPointe is registered with the Securities and Exchange Commission (SEC). Registration of an investment advisor does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the commission. WorthPointe only transacts business in states in which the firm is properly registered or is excluded or exempted from registration. A copy of WorthPointe’s current written disclosure brochure filed with the SEC, which discusses among other things, WorthPointe’s business practices, services, and fees, is available through the SEC’s website at https://adviserinfo.sec.gov/firm/summary/143996.

Please note, the information provided in this document is for informational purposes only and investors should determine for themselves whether a particular service or product is suitable for their investment needs. Nothing provided in this document constitutes tax advice. Individuals should seek the advice of their own tax advisor for specific information regarding tax consequences of investments. All investments involve risk and are not suitable for all investors. 

This document may contain forward-looking statements relating to the objectives, opportunities, and the future performance of the U.S. market generally. Forward-looking statements may be identified by the use of such words as “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” “potential,” and other similar terms. Examples of forward-looking statements include, but are not limited to, estimates with respect to financial condition, results of operations, and success or lack of success of any particular investment strategy. All are subject to various factors, including, but not limited to general and local economic conditions; changing levels of competition within certain industries and markets; changes in interest rates; changes in legislation or regulation; and other economic, competitive, governmental, regulatory, and technological factors affecting a portfolio’s operations that could cause actual results to differ materially from projected results. Such statements are forward-looking in nature and involve a number of known and unknown risks, uncertainties and other factors, and accordingly, actual results may differ materially from those reflected or contemplated in such forward-looking statements. Prospective investors are cautioned not to place undue reliance on any forward-looking statements or examples. None of WorthPointe or any of its affiliates or principals or any other individual or entity assumes any obligation to update any forward-looking statements as a result of new information, subsequent events or any other circumstances. All statements made herein speak only as of the date they were made.

1 Past performance is no guarantee of future results. Any indices and other financial benchmarks shown are provided for illustrative purposes only, are unmanaged, reflect reinvestment of income and dividends and do not reflect the impact of advisory fees.  Investors cannot invest directly in an index.  Comparisons to indexes have limitations because indexes have volatility and other material characteristics that may differ from actual trading.

Neither Dimensional Fund Advisors LP nor Avantis Investors are an investment advisor registered with the Securities and Exchange Commission with no affiliation to WorthPointe. Index performance does not reflect the expenses associated with the management of an actual portfolio. References to specific company securities should not be construed as a recommendation or investment advice. 

Market segment (index representation) as follows: US Stock Market (Russell 3000 Index), Developed ex US Stocks (MSCI World ex USA IMI Index [net div.]), Emerging Markets (MSCI Emerging Markets IMI Index [net div.]), US Bond Market (Bloomberg US Aggregate Bond Index), and Global Bond Market ex US (Bloomberg Global Aggregate ex-USD Bond Index [hedged to USD]), Global Stock Market (MSCI All Country World IMI Index [net div.]). 

Sector returns are derived by Dimensional using constituent data from the MSCI All Country World IMI Index. Returns for specific securities are sourced from the MSCI All Country World IMI Index using daily security returns. Securities without a Global Industry Classification Standard (GICS) sector are excluded. Sectors are classified according to GICS Industry code. GICS was developed by and is the exclusive property of MSCI and S&P Dow Jones Indices LLC, a division of S&P Global. S&P data © 2025 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. MSCI data © MSCI 2025, all rights reserved. Bloomberg data provided by Bloomberg.