The Investment Riddle for 2026

So here’s a question for investors: What’s the stock market going to hand you in 2026? More? Less? The answer points to the ongoing bull market.

After a pretty wild 2025—a year that caught almost everyone off guard, except maybe a few astute observers—there should be more gains ahead. Just, uh, temper your expectations. We probably won’t see any massive booms or busts. It was quite a ride, with political shifts pushing from negative beginnings to a more favorable situation later in the year. But in the end, patience really did pay off.

Reflecting on my 2025 forecast, I had mentioned that the rough sentiment, especially in Europe, indicated we were in for a challenging year. I anticipated global stocks to rise by around 15-25%, especially led by Europe. And, well, I wasn’t far off. Global stocks ended up climbing over 21%. Europe, in particular, saw a notable 35% increase, nearly twice the US’s 18%.

So where do we stand now? Despite the slowing momentum, claims of this bull market’s demise are, let’s say, overblown.

Critics are quick to point out that the S&P 500’s 86% rise since the end of 2022 seems excessive and too rapid. They worry stock prices are fragile and hint at a potential tech bubble driven by the current AI craze. But let’s be honest here—no, that’s not quite right. This bull market isn’t just about tech. Take a global view. Out of 47 countries tracked in MSCI’s All-Country World Index, 35 saw their local currencies hit record highs in 2025, most of those in the fourth quarter.

Many of those countries? They have little to do with technology. Plus, interestingly, five of the so-called “Magnificent Seven” US tech stocks are actually lagging behind. The S&P 500’s growth fell short compared to global figures.

Concerns about the rapid rise forget an important point: U.S. stocks historically average a 10% annual return over the past century, including bull and bear markets. When it’s bull time, that number jumps to 23%. The annualized return for the past three years? Exactly 23% on average.

Looking ahead to 2026, I expect it to land somewhere between these averages—above the long-term average, but beneath the bull market figure.

Sentiment seems to be improving a bit, too. Among 72 expert forecasts I’ve been tracking, only four suggest that U.S. stocks will drop by more than 1% in 2026. It’s quite a rare breed of pessimists out there. Most predictions center around a 9.6% growth. Conversely, where’s the optimism? Not much of it to be found.

As for Europe, well, the forecast is pretty bleak. The Euro Stoxx50 index projections by 17 strategists average 5.3%, with a high estimate of just 10.5%. There’s a heavy cloud of pessimism hanging over Europe.

It’s worth noting that consensus among professionals doesn’t always hit the mark. From my experience, similar training tends to lead to similar conclusions. Many play it safe due to career risks—wrong predictions are one thing, but being wrong and alone? That’s a real nightmare. As a result, the market tends to price in this consensus and acts differently.

This suggests that a return within the parameters of 0-10% is quite unlikely. We’re left with two likely scenarios: either stock prices decline, or they increase by over 10%. Personally, I’m leaning toward the latter. The global yield curve, a key factor in loan growth, has gotten much steeper. Lending growth in the U.S. is doubling that of last year and numbers in the Eurozone are at their highest since early 2023.

More lending typically fuels economic growth. However, economists are cautious, citing concerns about ongoing issues like tariffs and inflation, leading them to predict weak growth in the U.S. and even worse overseas. With European expectations low, there may be room for unexpected moves.

When it comes to politics, the medium-term hype is probably going to steer the narrative. Challenges might emerge in the early stages, but then we can expect some “miracles” later on. The usual outcome in midterm elections? The president’s party often loses seats, which amplifies gridlock.

And guess what? Stocks tend to thrive on that gridlock. Big legislative pushes create uncertainty and disrupt markets, but the midterm outcomes help relieve some of that risk.

Thus, the S&P 500 usually sees modest performance in the first three quarters of election years, but it often rebounds in the fourth, gaining about 6.4% on average. In the following year, stock prices have historically increased 88% of the time between the first and second quarters following a midterm election.

Given the close Republican majority in Congress, it’s possible Democrats could take control of one or both chambers. Love it or hate it, stocks seem to favor a bit of political stalling.

So, hang tight and don’t sweat any early 2026 fluctuations. Another potential “miracle” might just be on the horizon.