The decade of the 2020s has already been remarkable in many ways:
- We began the decade fighting a pandemic that brought the world to a standstill, and we witnessed the astonishing response of a new vaccine in less than a year. The impact of this global calamity is still being felt today.
- We saw Russia’s aggression toward Ukraine turn into a war that is still being fought today.
- Cryptocurrencies shook their “fad” label and established themselves as a legitimate asset class.
- Inflation returned in a big way, peaking at over 9% in 2022. It has since retreated to more normal levels, however, the possibility of it bubbling back up is ever-present.
- Driven by cutting-edge innovation and thought leaders, we are in the infancy stage of Artificial Intelligence. A technology enterprise that could end up rivaling the invention of the internet or the personal computer in its impact on daily life.
- In a nod to the music industry, Taylor Swift completed the largest-grossing music tour in history, bringing in over $2 billion dollars worldwide. All of that happened in the first half of this decade!
The events of this decade have influenced our lives in ways that are still being understood, both personally and financially. With an eye to the first year of the decade’s second act, we are intently watching on these developments:
Stretched Domestic Equity Valuations
- The S&P 500 index, which measures the performance of the 500 largest publicly traded companies in the United States, began 2021 at roughly 3800 points. As of December 31, 2025, the S&P closed at over 6800 points. The nearly doubling of this index’s value over the last five years has many industry professionals wondering how much longer US Large Cap stocks can produce positive returns. This, again, becomes an argument for diversification and having a good understanding of what investments comprise your current portfolio.
The Re-emergence Of The International Markets
- Developed international equity investments have had an interesting run over the last ten years. From 2017-2023, the FTSE index, which tracks the 100 largest companies on the London Stock Exchange, was mostly range-bound between 7000-8000 points. That said, over the last two years, the index has grown from roughly 7500 points to over 9500 points! This is a very encouraging development as we seek investment opportunities with greater growth potential.
The Impact Of The Next Federal Reserve Chairman
- The current Fed Chairman, Jerome Powell, will see his term end on May 15, 2026. At that point, he will remain on the Fed’s Board of Governors until early 2028. The Open Market Committee, which is made up of the seven board members at the Federal Reserve and the five Federal Reserve Bank presidents, guides monetary policy. This is an important distinction to understand because interest rate changes are voted on by the 12-member Committee, not solely by the Fed Chair. We will be watching closely to see who is named as the new Fed Chair in May, but, possibly more importantly, how much influence this person may have on the other members of the committee. The Committee helps shape the country’s economic decisions.
Inflation: Is 3% the Real Fed Target
- Jerome Powell and the Open Market Committee have been adamant that they want the inflation rate to get to 2%. Even though the inflation rate has fallen drastically from over 9% in 2022 to 3% year-over-year in September 2025, getting from 3% to 2% could be quite challenging. The current economic environment is full of uncertainty: what will be the long-term impact of the tariff policy, will the employment market remain resilient, how will the Federal Reserve operate with a new fed chair, etc. Powell’s comments at his December press conference indicated that they see the economy slowing in 2026. The economic data in the first couple of months of 2026 will be very telling.
ENCORE
The Artificial Intelligence Trade And Its Global Implications
- One of the main themes of 2025 is the speed of growth in the arena of AI. The top five companies in the S&P 500 (Nvidia, Apple, Microsoft, Amazon and Google) have all committed hundreds of billions of dollars of AI investment this year alone. As the use case of AI expands and becomes more clear, our opinion is that the business world will more fully adopt the technology to improve efficiency. That said, the path will be anything but linear and will likely be influenced by the health of the economy as we work through the second half of this decade. A recession would absolutely affect future AI development and capital expenditures, however, we believe that scenario simply slows the speed but, in no way, stops the show.
As we close out 2025 and look forward to the possibilities a new year presents, we want to take this opportunity to say thank you to all our clients who make Walkner Condon what it is. It is never lost on us the trust and confidence that each and every one of our clients instills in us every day. We hope you found our 2026 Market Outlook informative and interesting. Our collective love of music, especially live music, is a passion of our entire staff. Thanks again for allowing us the freedom to be creative in delivering our thoughts on the market and practice of financial planning.
