Outlook 2026: The Policy Engine

The year 2025 exemplifies the prevailing regime — markets driven less by fundamentals and traditional business-cycle dynamics and more by fiscal and monetary policy influence. Today, policy decisions have emerged as one of the most impactful forces driving market direction.

What does that mean for 2026? We believe investors should remain patient and avoid overreacting to short-term sentiment swings — as policy and momentum-driven markets cause severe fluctuations in price, which can challenge behavioral biases. We saw this when stock prices swung wildly in 2025 and expect higher volatility to persist.

The good news is that we expect policy to be a tailwind for markets and for the Federal Reserve (Fed) to continue easing policy, as economic conditions downshift and inflation remains contained. Corporate earnings may help, though there will be little room for error. Core bonds will quietly offer some value, which should be aided by a more dovish Fed. In this policy and momentum-driven market, we strongly encourage investors to look at non-correlated alternative investments.

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