2026 Investment Outlook

Summary

00:00 Introduction & agenda
01:30 Reviewing 2025 market headlines
03:20 2025 performance overview
05:05 Purpose of market predictions
05:45 Midyear prediction review: gold
06:55 Energy stocks performance
08:05 International stocks vs U.S.
09:10 Bonds and fixed income results
10:00 Missed call: U.S. stock timing
10:45 IPO activity and market health
11:45 What are capital market assumptions?
13:05 Updated fixed income assumptions
14:05 Updated equity return assumptions
15:10 Real assets & alternatives outlook
16:10 Risk management: why losses matter
17:30 Risk management: inflation risk
18:55 Portfolio changes for 2026
20:10 International vs U.S. tech exposure
21:05 Marketable alternatives explained
22:25 Bonds vs dynamic bonds
23:05 Energy, nuclear & critical materials
24:45 What is not changing
25:35 Final thoughts & conclusion

00:00 – Introduction & Agenda

Hello, this is Ben Hockema. I’m the founder and advisor at Illuminate Wealth Management, and today we’re going to talk about our investment review and outlook for 2026.

We’ll look back at 2025 and then look ahead as we’re building portfolios going into 2026. Today is Wednesday, February 4, and most of the numbers you’ll see are as of December 31, with some data running through the end of January.

01:30 – Reviewing 2025 Market Headlines

Looking back at 2025, a few big headlines stand out.

One of the biggest themes early in the year was tariffs, particularly in March and April. Markets were down roughly 10% during that period, followed by a sharp rebound of about 7% in the S&P 500 when policies were reversed.

Another major theme was AI-driven market highs. Artificial intelligence continued to dominate headlines and drive performance, particularly in tech-heavy areas of the market.

Gold and silver also hit new highs. We’ve had gold in client portfolios for about four years, and while there may be volatility, commodity cycles often last 15 to 20 years.

Global markets also outperformed U.S. markets for the first time in a while, helped by currency effects and improving fundamentals overseas.

03:20 – 2025 Performance Overview

For the full year:

Gold was up about 64%.
International markets were up roughly 32%.
Emerging markets gained about 26%.
Broad real assets returned about 20%.
The total U.S. stock market was up around 17%.
Bonds delivered about a 7% return.

The U.S. dollar was down about 9%, which explains a large portion of international outperformance.

05:05 – Purpose of Market Predictions

Before revisiting our midyear outlook, it’s important to clarify the purpose of these predictions. The goal is not to be exactly right.

The goal is to establish a base case. When markets deviate from that base case, it helps us understand which assumptions were wrong and how we should adjust going forward.

05:45 – Midyear Prediction Review: Gold

At midyear, I said I expected gold to approach $4,000 by year-end. Gold peaked closer to $4,600 and reached nearly $4,900 by late January.

At the time, many expected gold to crash. Instead, it moved significantly higher.

06:55 – Energy Stocks Performance

I expected energy stocks to outperform for the remainder of the year. Through December, they slightly underperformed, but including January, energy stocks were up about 18%.

Energy had been out of favor for years, and we stayed invested.

08:05 – International Stocks vs U.S.

International stocks continued to outperform in the second half of the year, gaining about 11%, compared to roughly 7.5% for U.S. stocks.

I expect that trend to continue into 2026.

09:10 – Bonds and Fixed Income Results

We expected positive bond returns in 2025, and bonds delivered about 7% for the year.

10:00 – Missed Call: U.S. Stock Timing

One clear miss was my expectation that U.S. stocks would perform better in the fourth quarter than the third quarter.

The third quarter was strong, and the fourth quarter was modest. Importantly, we didn’t make portfolio changes based on that expectation.

10:45 – IPO Activity and Market Health

IPO activity picked up significantly. The third quarter of 2025 was the most active since 2021, with activity up 54% year over year.

That’s generally a sign of a healthy market environment.

11:45 – What Are Capital Market Assumptions?

Each year, we create 10-year return assumptions for every major asset class. These assumptions form the foundation of how we build portfolios from the top down.

13:05 – Updated Fixed Income Assumptions

For fixed income, we now expect about a 4.5% annual return for U.S. bonds over the next decade, which reflects recent bond performance and interest rate changes.

14:05 – Updated Equity Return Assumptions

We expect U.S. stocks to return just over 5% annually, while international developed and emerging markets are closer to 8%.

15:10 – Real Assets & Alternatives Outlook

Real assets and alternatives are expected to deliver returns above 6% and continue to play an important role in diversification and inflation protection.

16:10 – Risk Management: Why Losses Matter

Losses matter because of how compounding works. A 10% loss requires an 11.1% gain to recover. A 20% loss requires 25%. Larger losses require disproportionately larger gains.

17:30 – Risk Management: Inflation Risk

Inflation erodes purchasing power over time. At 4% inflation, $10,000 needs to grow to nearly $15,000 in 10 years just to break even.

Portfolios must both protect on the downside and outpace inflation over decades.

18:55 – Portfolio Changes for 2026

We’re not making wholesale changes going into 2026.

We’re increasing exposure to developed international stocks, largely funded by trimming U.S. large-cap tech.

21:05 – Marketable Alternatives Explained

We’re increasing exposure to marketable alternatives, which move independently of stocks and bonds and help with diversification and downside protection.

22:25 – Bonds vs Dynamic Bonds

We’re reducing some core bond exposure and increasing dynamic bonds, which can adjust across global bond markets and interest rate environments.

23:05 – Energy, Nuclear & Critical Materials

We’re expanding exposure beyond traditional energy and uranium into critical materials like copper, lithium, and nickel, which are essential for energy infrastructure and data centers.

24:45 – What Is Not Changing

We’re maintaining exposure to real assets and traditional energy stocks. These are incremental adjustments, not dramatic shifts.

25:35 – Final Thoughts & Conclusion

We’re focused on long-term investing, diversification, risk management, and compounding. Most of these changes are already implemented, and volatility creates opportunities for disciplined rebalancing.

Thanks for watching, and we’ll revisit this outlook again in a few months.