2025 in Review / 2026 Outlook
Last year reinforced something we’ve always believed: markets rarely behave predictable ways. Despite plenty of reasons for concern such as trade tensions, political noise, stubborn inflation, the list goes on- the economy continued to move forward. Consumers kept spending, employment softened without unraveling, and business investment, especially within the data center space, helped fill in some of the gaps left by other slowing areas. Markets reacted sharply at times, but they also recovered just as quickly when conditions stabilized.
When we zoom out, the longer-term picture is being shaped by a handful of forces that we believe will be themes and trends to follow for months, quarters, and years to come. Advances in artificial intelligence have the potential to change how businesses operate and how productive workers can be, but those benefits won’t arrive on a fixed schedule. As anyone who has built a home can appreciate, unexpected issues arise constantly; we expect this AI build out to be no different. Layer on persistent government deficits and heightened interest costs, and it becomes clear that the future won’t be defined by one dominant trend, rather it will be shaped by how these forces coexist.
From an investment perspective, today’s biggest tension lies in the contrast between excitement and concentration. As we highlighted in our 2025 Outlook – Resetting Expectations, a small group of very large companies now drives a significant portion of U.S. market performance. These businesses generally have strong balance sheets, innovative spirit, great management teams but in our view have a small margin for error on the execution of their business plans. When a narrow set of inputs dictate outcomes, portfolios become more sensitive. Diversifying exposure allows investors to reduce reliance on a handful of storylines.
This brings us back to how we approach investing in the first place and how our investment models are crafted. Markets will pull back. Periods of discomfort such as Liberation Day are unavoidable. Trying to step in and out of the market sounds great in theory but rarely worked in practice. As Nobel Prize winning economist Paul Samuelson said, “the stock market has predicted nine of the last five recessions” Our long-term investment philosophy is that the investors who do best over time aren’t the ones who attempt to dodge every downturn they’re the ones who build plans that can live through them.
When portfolios are properly allocated, volatility becomes something to expect and manage accordingly. In an environment shaped by powerful trends and real uncertainty, the advantage doesn’t come from being right about what happens next. It comes from being prepared for a wide range of outcomes and staying disciplined no matter which one shows up.
Information in this commentary is gleaned from third-party sources, and while believed to be reliable, is not independently verified. This content is not intended to be tax, legal, investment, or fiduciary advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The strategies and/or investments discussed in this material may not be suitable for all investors. Bernardo Wealth Planning recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial advisor. Past performance does not guarantee future results.