2026 Outlook and Strategy

By Jason@vigilarewealth.com on January 27, 2026 in Investor Lounge

Climbing Everest or K2 requires much preparation and training. And even the most experienced climbers can suffer a severe injury or even lose their life on one of these majestic mountains. Until recently the fatality rate for K2 was 25%, meaning for every four who summit, there was one casualty.

So why do so many set their sights on summitting one of these magnificent beasts? Because it’s there? Connecting with nature in a way that can only be experienced by being in its presence, feeling the power and personal vulnerability. There is a spiritual honesty and humility to mountaineering as there is investing in the markets. Both deserve intense respect and risk management. And complacency can prove disastrous.

How does this relate to investing? Markets have traveled to new heights beyond any before. Valuations are among the highest in history. If one equates the altitude of scaling a mountain to the current “altitude” of equity valuations, we are probably at least at the “base camp” of one of these mountains.

We ask ourselves how high they can go? The answer is usually much higher than we think is possible. The other question is why climb the mountain/markets at all? In the case of the markets, the alternative is to be left behind by the rapid erosion of purchasing power and simply not keeping up with the rising standard of living. We must climb the mountain just to be able to retire on time and maintain a desired level of spending in retirement!

Vigilare is your Sherpa to guide you up the market mountain. The 60/40 (stock/bond) portfolio was killed in 2022 when the bond portion did almost as bad as the stock portion. And in a rapidly inflating environment, that is probably a preview of what will be experienced by a static 60/40 portfolio. The strategy in today’s market environment will need to be much more active than normal, as well as making timely risk adjustments based on changing conditions.

When we combine fiscal policy, monetary policy, deregulatory policy, coupled with an AI renaissance, it is likely that this will end up being the largest bubble in the history of the modern stock market. Does this mean it will be a straight line to the top. Of course not. Does this mean that it will at some point end badly? Probably yes.

How does this feed into our thoughts for 2026? We expect more volatility both upside and downside but with the longer trend still moving higher. All the forces described are pushing this at the time being.

We anticipate that the U.S. economy will exceed growth expectations both in stock earnings and GDP growth. This is due to the lagging effects of fiscal and monetary policy combined with a surge in productivity due to AI adoptions. Our view is that AI adoption will have more of an impact on productivity than most economists predict. The downside to this is that we could experience a lower-than-expected growth rate in jobs. But all this is a net positive to stocks.

Market tactics:

• Fiscal Policy starts to become a tailwind in 2026 leading to higher-than-expected GDP and earnings growth
• Monetary policy uncertainty in early 2026 with Fed transition, however we believe there will be a strong push for lower rates and quantitative easing along with Fed reform when new leadership arrives in the spring
• AI implementation will lead to an increase in productivity and lower than expected inflation. This could be the big “positive” surprise of the year
• Market returns broaden away from just the Magnificent 7 to the other sectors
• AI and EV revolutions will amplify the importance of resource acquisition and energy infrastructure investment
• The next decade will involve an escalation in fighting for resources on the global sphere.
• Geopolitical uncertainty will remain extremely elevated
• Mid-term elections cycles can create a pendulum effect which creates market uncertainty, leading to a possible selloff in the fall
• We favor cyclicals, innovative tech, energy, banks, small caps, industrials, and international over bonds and the U.S. dollar.
• We will also avoid companies/industries that will be negatively impacted by AI adoption and those in the crosshairs of the prevailing administration

Dangers and crashes lurk, and we need to be prepared. Remember we are operating at record valuations, just like climbing at high altitudes. The risks are just amplified, avalanches, rockslides, weather changes, altitude sickness, etc. Our portfolio strategy may require us to reduce risk significantly due to risk flare ups. Just like a Sherpa might guide the group back down from camp 3 to camp 2 due to the risks being too high at that given moment. But then trek back to camp 3 when conditions change.

To put in simpler terms our view for 2026 is that markets can move higher but not in a straight line and we are expecting at least one severe correction, even in the most of optimistic cases. However, if we separate the signal from the noise many of the factors that propel markets higher are in place today. These include supportive fiscal and monetary policy, deregulatory policy framework, improvement in GDP and earnings, and improving productivity (higher growth and lower inflation) via AI and deregulation

We are cautiously optimistic about the market but will not hesitate to pivot more conservatively if conditions warrant. And after three years of solid returns, markets could be due for a mediocre year. Strategic rebalancing will continue to play a pivotal role in managing risk in a high valuation environment. We will also take advantage of extreme volatility by buying dips but always be mindful of an inevitable bear market in the horizon.

The lesson here is that investing in a maturing bull market can be treacherous, but also extremely rewarding. Historically, markets experience some of the strongest returns in the latter stages of a secular bull market, but the range of outcomes is also the greatest. This is not the time to casually climb the mountain. We are in an environment where the stakes are high and weather can change quickly. And our goal as your Sherpa is to not die on the mountain but to reach those summit goals.

Thank you for your trust.

The Vigilare Wealth Management Team

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