Thank you to everyone who joined us for our 18th Annual Economic Outlook Breakfast. For those who couldn’t make it, or for those who were there and want a clean recap, this post pulls together the key takeaways.
As always, we’ll share everyone’s favorite chart, the Asset Class Returns Quilt for 2026, revisit a few important lessons from 2025, and then summarize the major themes for 2026 from our special guest, Gargi Chaudhuri of BlackRock.
We don’t make predictions. What this event does give us is a chance to step back, look at the data, and put the year ahead into proper context.
Recap of 2025: Volatility Showed Up. Discipline Worked.
When we wrapped up last year’s breakfast, we left you with two simple ideas:
First, after two strong years for markets with below-average volatility, we cautioned that more volatility was likely in 2025.
Second, we reminded you not to let politics interfere with your investment strategy. Markets and the economy have historically done well under both Democratic and Republican leadership.
Those ideas were tested much sooner, and more sharply, than most expected.
Early in the year, markets struggled with uncertainty around policy, trade, inflation, and economic growth. By early April, the S&P 500 had experienced an 18.75% correction, a perfectly normal but uncomfortable, part of investing in stocks.
Our message at the time was straightforward: sit tight. Don’t let headlines drive portfolio decisions. Volatility is not a flaw in markets, it’s the price of admission for long-term growth.
That discipline was rewarded. From the April lows through year-end, U.S. markets staged a powerful recovery, with the S&P 500 rallying 38.65%. By December, U.S. stocks had reached 37 new all-time highs in 2025.
*Index performance is unmanaged, cannot be invested in directly, and is shown for illustrative purposes only.
Much of that volatility wasn’t driven by deteriorating fundamentals, but by markets reacting, sometimes emotionally, to a steady stream of unsettling headlines.
Asset Class Returns: Diversification Did Its Job
Click here to download the Asset Class Returns Quilt for 2026
Looking across major asset classes in 2025, one thing stands out: every major asset class finished the year positive.
- U.S. large-cap stocks delivered strong returns.
- Bonds had a solid year, providing both income and ballast.
- A sample diversified portfolio performed well across the board.
Once again, holding too much cash was a drag on returns, underperforming nearly every major asset class.
This is exactly what our Asset Class Returns Quilt is designed to show. Leadership rotates. The best-performing asset class in one year is often nowhere near the top the next. Diversification doesn’t eliminate volatility, but it does reduce the need to be “right” about what comes next.
The Story of 2025: International Stocks Reasserted Themselves
The most interesting investment story of 2025 was the performance of international stocks relative to U.S. stocks.
After a decade of U.S. dominance, it’s easy to question the role of international equities in a portfolio. 2025 was a reminder of why they’re there.
A weaker dollar and improving fundamentals helped both developed international and emerging market stocks outperform U.S. equities. Leadership shifts can persist for long stretches and they often change when investors least expect it.
The takeaway is simple: diversification across regions matters, even when patience is required.
A Reasonable Question: Is This a Bad Time to Invest?
After three strong years for U.S. stocks, many investors are asking a reasonable question:
“If I invest now, am I just setting myself up for a painful drawdown?”
That concern is not new. It shows up after nearly every period of strong returns.
One of the hardest parts of investing isn’t just market risk, it’s headline risk. There is always something in the news that makes investing feel irresponsible in the moment.
To illustrate this, I often tell the story of my fictional friend, Unlucky Larry the worst investor in the world. Larry only invests at major market peaks: 1929, 1987, 2000, 2007, and just before COVID.
Despite his terrible timing, Larry still earned attractive long-term returns because the length of time invested would have mattered more than timing. Historically, even investing at all-time highs, long-term returns were strong.
The data is clear: while short-term outcomes vary, staying invested over time has performed better than waiting for the “perfect” moment.
That said, investing doesn’t have to be all-or-nothing. For those sitting on cash in excess of their emergency fund or retirement cash reserve (perhaps from a business sale, real estate transaction, or inheritance) a systematic approach over several months can potentially reduce regret and put diversification to work.
Looking Ahead to 2026: Key Themes from BlackRock
We were fortunate to have Gargi Chaudhuri, Managing Director and Chief Investment and Portfolio Strategist for the Americas at BlackRock, join us to share her outlook for 2026.
Her message was thoughtful, data-driven, and refreshingly balanced. A few themes stood out:
A resilient economy.
Despite early-year noise, economic growth surprised to the upside in 2025. Inflation has cooled meaningfully from its 2022 highs, and while it remains an important risk to watch, the backdrop is far healthier than many feared.
Rate cuts without recession.
Historically, periods where the Federal Reserve cuts rates without an accompanying recession have been constructive for both stocks and bonds.
AI is real—and broadening.
Artificial intelligence continues to support earnings growth, but leadership is expanding beyond a handful of mega-cap stocks. Adoption is spreading across sectors, regions, and industries, including international and emerging markets.
Diversification is back.
With stock market concentration elevated, diversification across U.S. stocks, asset classes, geographies, and strategies is becoming more important, not less.
Gargi also cautioned that 2026 is likely to bring its share of “tormenting headlines,” particularly with midterm elections approaching. Historically, markets tend to digest political rhetoric long before it turns into lasting economic impact, but the headlines can still feel unsettling along the way.
Closing Thoughts
If 2025 reinforced anything, it’s that volatility is normal, diversification works, and patience remains an investor’s greatest advantage.
We don’t know what markets will do next year. No one does. What we can do is build portfolios grounded in data, aligned with your goals, and designed to weather uncertainty, because uncertainty is always part of the deal.
Headline risk is constant. The opportunity to stay disciplined is what changes outcomes.
If you missed the event or would like to talk through any of these themes, please reach out. We’re always happy to continue the conversation.
Wishing you a happy and abundant 2026!
Happy planning,
Brian
This material is for informational purposes only, not investment advice, and does not represent a forecast of future events. Forward‑looking statements are opinions and may not occur.