2025 Market Recap and 2026 Outlook

Happy New Year to you all!  We cannot wait to see what is in store for the rest of 2026.

First, a recap of 2025 which represented the third positive year in a row for the stock market.  The first half of the year presented us with above average volatility and a market downturn, mostly due to tariff uncertainty.  Then we rallied throughout the rest of the year to a strong finish.  The significant change from April’s low to where we are today shows the importance of not timing the market.  We encourage disciplined, diversified investments and proactively aligning each account with your financial goals and cash needs.

2025 themes:

• Tariff introduction – but global trade war fears largely overcome

• International equities with strong performance

• Bonds increased in value with interest rates moving down

• Companies with strong links to AI dominated 2025 and continue to grow

Where does that put us at the start of 2026?  While US consumers continue to maintain strong balance sheets and companies expect continued growth, a lot of success is already baked into current stock market prices.  We are optimistic about the future of AI but the rapid increase in valuations in this sector presents one of the largest challenges for increased market returns ahead.

Blue Summit has always had a slight overweight towards value and profitability focused companies (i.e. priced attractively or have real profits, not just hypothetical).  Many of the gains in smaller US companies came from those that have great ideas but are yet to be profitable.  About 40% of the Russell 2000 does not currently make a profit.  Our bias towards profitability makes us underweight in these types of companies and we believe positions us for success going forward.

Now for some 2026 trends and themes:

• Inflation has continued to come down towards the 2% Fed goal

  • Prices are not coming down but the increase has slowed

  • Expectations for reduced energy prices should help here

• Interest rates are coming down from recent highs

  • Favorable to homebuyers and businesses

  • Implications for bond performance and private credit

• Mid-term election year can cause uncertainty and drive volatility

• Geopolitical uncertainty

  • Venezuela, Ukraine

• Federal deficits

How are your Blue Summit investment accounts positioned for these themes? We actively choose which sectors to participate in and which to avoid while focusing on profitable companies.  In some one-on-one conversations, we have made a push into private markets for added diversification.  We do believe that the increase in private market availability is a positive that should be taken advantage of.  We see the reduced liquidity in these markets as a benefit when used in the correct allocations.  Panic cannot force the funds into fire sales like we saw in public markets during 2020 and many other times.

Soon, we will be hosting a webinar which will cover the themes shown here and dive into why we are increasing our use of private markets.  You will have the opportunity to ask questions in advance or during the presentation, so please keep an eye out for that invitation.

As always, we look forward to continuing to work with you on your personalized plan.  Focusing on your individual goals, risk tolerance, and time horizon are the key to success.

Thank you for your continued trust.  Here's to a prosperous 2026!

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