How to Invest in 2026
Every January, I like to step back, examine what happened in the market, and revisit the timeless principles that truly matter for long‑term investing. This year, I’m pulling highlights from J.P. Morgan’s latest Guide to the Markets, which we recently discussed with Meera Pandit, Global Market Strategist, during our 2026 market outlook webinar.
2025 was one of those years that reminds us how unpredictable and rewarding markets can be when you stay disciplined.
2025 in Review: How did tariffs impact markets in 2025?
If you glance at the “jelly bean chart” above, it’s easy to see how hard it is to guess what will outperform each year.
The early‑year turbulence
2025 opened with tariff turmoil, and at one point in early April the S&P 500 was down 15% for the year. That kind of drop tempts investors to panic.
But as the year went on, markets clawed their way back, ultimately finishing with strong double‑digit gains, largely driven by renewed enthusiasm for AI.
The real stars of the year weren’t U.S. stocks
One of the biggest surprises?
International developed and emerging‑market stocks outperformed the U.S. by a wide margin, ending the year significantly higher even after the U.S. recovery kicked in. This reminds us that often the winners are the ones investors least expect.
Is the S&P 500 heading for a correction in 2026?
It’s natural to feel anxious when markets reach record levels. The S&P 500 hit 39 new all‑time highs in 2025, which leads many investors to wonder whether we’re “due” for a correction.
The data shows a bigger picture.
Looking at the “all‑time highs” chart from J.P. Morgan:
- Almost one‑third of all‑time highs become permanent market floors (meaning the market never falls back below that level again).
- Investors who buy on a day when the market hits a new high actually outperform investors who buy on an “average” day over the subsequent 1-, 3-, and 5-year periods.
In other words:
New highs are not automatically a danger sign. They’re a normal byproduct of long‑term market growth.
Is the Magnificent 7 overvalued?
Another concern many investors have is the growing concentration of the U.S. stock market. Nearly 40% of the S&P 500’s total market cap now sits in just seven companies – the so‑called “Magnificent 7.”
The chart above shows both price performance and year‑over‑year earnings growth. And while concentration is real, there are some important nuances:
- Earnings are actually supporting valuations. The Magnificent 7 posted consistently strong, double‑digit earnings growth in the last several years. They’re real profits, not speculative hopes. And it’s encouraging that the rest of the S&P 500 is beginning to catch up.
- The AI buildout is being funded differently than the dot-com era. A lot of people want to draw comparisons to the late 1990s tech bubble. It’s true that massive investments are being poured into AI infrastructure before we know exactly how and when it will pay off.
A lot of people want to draw comparisons to the late 1990s tech bubble. It’s true that massive investments are being poured into AI infrastructure before we know exactly how and when it will pay off.
Much of today’s investment is being funded with cash generated by profitable companies, not borrowed money or speculative financing like we saw in the dot‑com boom.
Could we see volatility? Absolutely. But volatility does not mean it’s a bubble, and market cycles are a normal feature of investing.
This is one reason why we emphasize diversification: broadening exposure beyond the U.S. mega‑caps to small‑ and mid‑cap companies, as well as international equities.
Why Does the Economy Feel Bad?
There’s a real disconnect between strong corporate earnings and persistent consumer pessimism. Sentiment surveys have been unusually low ever since the pandemic, even as inflation has cooled, unemployment remains low, and earnings are solid.
Part of this gap is psychological:
People tend to feel economic pain like high prices more intensely than economic gains.
Part of it is structural:
Housing affordability, wage pressures, and lingering inflation all weigh heavily on day‑to‑day life, even while corporate indicators improve.
The important takeaway:
Feelings are real, but they don’t always reflect economic fundamentals.
And markets don’t wait for sentiment to improve. Markets move long before people feel optimistic again.
Investing Principles for 2026 and Beyond
Regardless of what headlines say, smart investing still comes down to a few core ideas:
1. Invest for the long term
Money you need in the next 5 years should not be in the stock market.
2. Stay diversified
International stocks and precious metals were among the unexpected leaders in 2025. Last year’s jelly bean chart is another reminder: No one can reliably predict next year’s winners.
3. Maintain strong cash reserves
Having adequate cash on hand allows you to ride out volatility without disrupting your investments.
4. Know the difference between investing and speculating
Speculation isn’t “wrong” but it isn’t investing. And it should never form the foundation of your financial plan.
5. Work with an advisor you trust
Good planning helps you filter out noise, stay disciplined, and make decisions aligned with your long-term values and goals, not the latest market trends.
Final Thoughts
2025 reminded us that markets can fall sharply, recover strongly, and reward disciplined investors all in the same year. It reinforced that diversification matters, that predicting market leadership is nearly impossible, and that long‑term investing wins.
As always, we’re here to help you make sense of the data, stay grounded using timeless principles, and chart a course that aligns with your long‑term goals.
If you’d like to dig deeper into the takeaways from the Guide to the Markets or revisit your 2026 investment plan, let’s set up a time to talk.
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