A Data-Driven Look at Markets Heading into the New Year
This video focuses on key market data, including valuations and interest rates, to provide prospective on the market environment.
Full Transcript
Hi, this is Mike Walter with Oak Wealth Advisors, sharing our 2026 market outlook. For those of you who have been with us before, you know that we don’t actually make market predictions—and there’s a good reason for that. When you look at historical market forecasts across the financial services industry, the data clearly shows how unreliable predictions tend to be. Going back to 2018, market expectations consistently missed the mark. In 2018, for example, the average forecast called for a positive return of about 7.5%, yet the market actually declined by roughly 6%. From 2019 through 2021, predictions underestimated market performance by a wide margin—sometimes by as much as 14% to 26%. In 2022, expectations once again missed reality, forecasting a modest gain while the market experienced significant losses. The takeaway is simple: no one is consistently good at predicting short-term market returns. That said, while predictions are unreliable, evaluating current market valuations can still provide useful context. When we look at stock market valuations across different segments—small, mid, and large companies, as well as value, blend, and growth—we see meaningful differences. Large-cap growth stocks, often represented by companies like Apple, Microsoft, NVIDIA, Meta, Alphabet, Amazon, and Tesla, make up a significant portion of the market and are currently trading at historically elevated levels—around 150% of typical valuation norms based on forward price-to-earnings ratios. In contrast, areas such as small-cap value, small-cap core, and mid-cap value are much closer to historical averages, roughly in the 105% to 108% range. This suggests that, under current conditions, there may be more attractive long-term value in smaller companies with a value tilt, while large-cap growth stocks may face headwinds due to higher prices. Turning to fixed income, the challenge of prediction remains. Even Federal Reserve officials, who set the federal funds rate, have historically struggled to accurately forecast future rate movements. While current expectations—from both the Fed and the broader market—suggest that interest rates may decline from today’s levels over the next year or so, the exact path remains uncertain. What we do know is that rates peaked in 2023 and have since moved lower, which has been beneficial for bond investors. Declining rates can increase the value of existing bonds, and today’s relatively higher starting yields provide the opportunity for meaningful income. If current expectations play out, fixed income could deliver another solid year of returns in 2026—but, as always, there are no guarantees. Ultimately, the most important takeaway is discipline. Rather than chasing predictions, investors are best served by working closely with their advisor to ensure their portfolio reflects their goals, time horizon, and current market conditions. If you’d like to learn more about planning strategies or tools to help support your family’s future, we invite you to visit us at oakwealth.com and explore our resources, including The Special Needs Voice podcast. As always, the information shared here is for educational purposes only, and you should consult your advisor regarding what is appropriate for your specific situation. With that, best wishes to everyone, and happy holidays.
