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If 2025 felt like a roller coaster you never asked to ride on, you weren’t imagining it. Markets swung harder than most forecasts predicted, and plenty of bold calls – on rate cuts, earnings and inflation – missed the mark. That’s not unusual, but this year was a master class in humility for anyone trying to outwit the market.

The good news? Even with all the twists, diversified investors ended up in a solid spot. Like an old-timey roller coaster, it sure was a bit bumpy, but portfolios built with a mix of stocks, bonds and other assets held their ground, and often finished ahead.

That’s the big takeaway heading into 2026: You don’t need ESP to foresee every headline. You need a plan that works when the world gets noisy.

Here’s a look at some of the big stories we’ll be watching going into the new year.

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RECESSION WATCH: FASHIONABLY LATE BUT FINALLY PULLING UP IN THE DRIVEWAY?

The recession predictions have been coming for years now. You’ll likely see more of them for 2026, but are they for real this time? Here’s the reality: Recessions are part of the economic cycle so there’s always one ahead somewhere. Knowing exactly when one will happen isn’t the key to surviving them. It’s having a plan and a portfolio built to withstand them.

Predicting a recession is so easy, anyone could do it

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TARIFFS AND PRICES: INFLATION IS STICKING FOR SOME

Inflation has cooled from pandemic highs, but for many households, it sure doesn’t feel that way. Tariffs (which can impact lower-income households more due to spending patterns) kept goods expensive, and even nontariff-impacted services like child care stayed pricey. The Fed is still steering inflation toward 2%, but progress has been slow and a weakening jobs market now offers another challenge.

For investors, the silver lining is that bond yields look better than they have for most of the last decade and a half, making diversification even more valuable.

A not-so-fun new way to spend more on groceries: Tariffs

The Fed is stuck between a rock and … another rock

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THE JOBS MARKET: STUCK IN THE MIDDLE WITH YOU

Hiring has cooled, “job hugging” is the new “job hopping” and Big Tech layoffs grabbed headlines. But a smaller supply of workers is keeping unemployment modest, preventing a classic recessionary spiral – so far. It’s wise to have a plan in place in case your job is affected, and to remember that employment figures are just one measure of an economy’s health.

What’s up with work?

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AI: FROTHY OR FOUNDATIONAL?

AI dominated seemingly every conversation in 2025, including investing ones. No doubt, some stock moves felt extreme and, dare we say, a little bubbly. But unlike the dot-com era, today’s tech leaders have real earnings, cash flow and customers. Still, plenty of smaller AI names may not live up to the hype.

Our advice? Own some exposure, but as with any single sector or industry, don’t bet the farm. Diversify and stay focused on your goals.

Is the market riding an AI bubble?

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U.S. DEBT: BIG NUMBER, MANAGEABLE REALITY

Yes, the national debt number is huge – and the government isn’t exempt from higher interest rates that make borrowing pricier. But context matters. The U.S. still has advantages most countries envy: a massive economy and the ability to issue debt in its own currency. So while debt is worth watching, it’s not a near-term crisis. For investors, Treasurys can remain a portfolio building block.

$38 trillion in debt: Will the bill come due for Uncle Sam?

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THE DOLLAR: STILL THE WORLD’S DEFAULT SETTING

The dollar wasn’t always on the firmest of ground in 2025 – thanks to tariffs and inflation jitters – but it’s still the currency the world trusts for trade and safety. When markets get jumpy, global investors look to dollars and U.S. bonds. It turns out that while headlines may sound dramatic, it appears the dollar remains king of the hill.

Is the U.S. dollar losing its crown?

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WHAT WE’RE WATCHING

Many of the factors that moved markets in 2025 are still in play. These are the risks we’re monitoring as we oversee the investment policies for our clients.

Tariff escalation: Tariffs could ratchet higher, pushing prices up. U.S.-China tensions are a specific area of concern – trade, tech and Taiwan are all smoldering embers that could quickly ignite. Even the threat of tariffs could rattle supply chains, causing companies to hunker down and slow the overall economy.

Stagflation: We wouldn’t say a recession is the most likely scenario for 2026, but slower hiring plus more limited room for Fed maneuvering mean it’s not off the table. It would put the Fed in a particularly tough spot and be especially painful if a recession were accompanied by higher inflation. The good news is that if the economy does contract, diversified portfolios may hold up better than you might think.

Geopolitical shocks: Middle East energy disruptions or U.S. midyear election drama could spike volatility.

AI bubble burst: If hype starts to outrun earnings, the stock prices of some highfliers could stumble. Again, diversification can be the key to blunting the impact when one area of the market is falling.

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SO WHAT’S ON TAP FOR 2026?

If 2025 taught us anything, it’s this: Surprises are not a surprise. Markets react to new information fast. “Predictions” shift to match the prevailing winds. Headlines exaggerate.

In 2026, the surprises, information, predictions and headlines won’t stop just because the calendar flipped. But don’t confuse them with your reality. Focus your time and energy on the big news in your life: buying a house, sending children to college, retiring with confidence. Those things are real and important.

Challenges will come – to all of us as a nation and sometimes, to your household specifically. That’s why we’re here.

Trust in diversification (it’s not dead yet). Maintain discipline. Stay focused on your goals. And know that our team of advisors is ready to support you and help you be successful no matter what next year holds.