Growing up, my mom decorated my childhood home with the kind of word art that lined many American suburban walls: “Live, Laugh, Love,” and “In this house we…”. I never paid much attention to them, but one plaque my dad chose always stuck with me. It read: “You can’t control the wind, but you can adjust your sails.”
I never expected that line to apply to my professional career, but it felt especially fitting for investing over the past year. In many ways, 2025 was a transition year, with crosscurrents from the economy, markets, technology, and geopolitics shifting in real time. In an environment like that, the goal isn’t to predict every gust of wind. Instead, the goal is to focus on what we can control: staying disciplined, not letting fads, fear, or greed drive decisions, and building portfolios that can hold up across more than one outcome.
Here are three themes from 2025 and what they may mean for how we adjust our sails in 2026.
Source: Bloomberg: "The Stock Market's Wild 2025 Roller-Coaster Ride in Six Charts" - 12/21/25
In 2025, government policy stopped being a background headline and started taking a more direct role in market volatility. Trade and immigration policy, government spending and debt levels, and geopolitical shifts began to influence inflation expectations, interest rates, and investor risk appetite.
The trap to avoid is trying to predict every twist and turn. At the start of each year, the best and brightest on Wall Street publish their S&P 500 targets for the end of the year, and almost every year they end up being wrong. 2025 was a good reminder. As the year unfolded and tariffs sparked a market tantrum, forecasts moved down quickly, then moved back up again as markets found their footing. Rather than predicting the market, these estimates followed the market. The most realistic takeaway is that we can’t reliably predict the future, and chasing headlines usually leads to chasing prices. Some of these policy effects can also take time to filter through the economy, which is why it’s often clearer in hindsight than in the moment.
These policy forces matter because they tend to show up quickly in currencies, energy and commodity prices, and inflation expectations. A good example is the U.S. dollar. In 2025, the dollar weakened meaningfully, and large budget deficits can be an important contributor to that trend, along with relative growth and interest rate expectations. When the dollar weakens, international and emerging market assets can become more competitive, and real assets like gold and broad commodities often get more attention as diversifiers. As 2026 plays out, the lesson isn’t to make political predictions, but to expect more market sensitivity around policy announcements and stay intentional about diversification.
A phrase that popped up repeatedly in 2025 was the “K-shaped” economy. It describes an environment where higher-income households and asset owners are doing well while lower- and middle-income households face economic pressures like elevated prices, higher borrowing costs, and rising debt burdens. This dynamic is shown clearly in the chart to the right, which depicts the S&P 500 near all-time highs and the consumer sentiment index (how the average person feels about their personal finances and the economy) near cycle lows. The year showed that even as inflation cooled and overall growth proved resilient in aggregate, we are not simply returning to a pre-COVID “normal” economy. It also remains to be seen how much further labor markets and consumer sentiment could weaken for the bottom half of households.
Looking ahead, the key tension in 2026 is the tradeoff between inflation and growth. If inflation stays range-bound or re-accelerates, it can limit how far interest rates can fall. If growth slows at the same time, markets can become more volatile because investors must reprice both earnings and interest rates. This is further evidence that rather than forecasting or speculating, the true power of diversification is being a framework for building portfolios that can participate if growth holds up and remain resilient if parts of the economy come under more pressure.
AI remained the dominant market narrative in 2025, but market leadership and near-term productivity gains from AI were less broad than many investors assumed. The “Magnificent 7” technology stocks did not move as a single group. At times, it looked more like a “Magnificent 2,” with several Mag 7 stocks underperforming the broader market.
At the same time, the AI story did broaden, just in a different way. Rather than the general economy immediately benefiting from tools that boost overall productivity, the more direct beneficiaries were often the companies tied to the buildout itself, like data centers, power and infrastructure, and parts of the industrial supply chain supporting that expansion.
As we enter 2026, valuations across large parts of the U.S. market are elevated, which means future returns depend more on earnings delivering, not just enthusiasm staying high. If AI investment remains strong, there may continue to be second-order winners beyond the most crowded trades. If that investment slows or the narrative shifts, leadership can rotate quickly. The practical response is to stay selective, avoid overpaying for growth, and look for areas where fundamentals and reasonable valuations meet in the middle. Another potential beneficiary of the buildout is the commodities and materials sectors, since building data centers and power infrastructure requires large amounts of raw materials.
Across all three of these trends, a common theme emerges. Regardless of what’s happening in government, the economy, or technology, discipline and diversification matter. That includes diversification across geography and company sizes, and across different drivers of returns, including allocations to gold and other real assets that can help when the dollar weakens, or inflation uncertainty rises.
The classic “60/40” portfolio (60% equities, 40% fixed income, often with a heavy home-country tilt) can work well in some environments. However, a 60/20/20 framework, with a dedicated sleeve for gold and hard assets alongside a balance of U.S. and international equities and traditional fixed income, may be better suited for a world where inflation uncertainty and sharper, policy-driven shifts are part of the landscape.