Taking a look back, to adjust for the future

Henry Jennings | Marcus Today 

It’s that time of year when the great and the good — the Masters of the Universe — head off to Palm Beach, Sorrento, or far-flung Rottnest Island to get sand between their toes and a little perspective on what 2025 was all about, what lies ahead, and how to plan for 2026.

Similarly, it’s time for investors to take stock of how their portfolios performed over the past year. What themes worked? Which strategies paid off — and which failed? Where were the mistakes, and where could things have been done better?

Just because the date rolls over from December 31 to January 1 doesn’t mean the trades that worked in 2025 suddenly won’t work in 2026. Many will — but they will also evolve as the year progresses.

It’s shaping up to be an interesting year for global markets. We’ll continue to question the AI bubble, the rates of return on the massive amounts of capital being poured into AI, and where all the energy to power it will come from. Will retail and business users actually pay for the privilege of having an AI assistant or app do their work?

It will also be a year of change at the US Federal Reserve. While a decision hasn’t yet been made on leadership, we do know that whoever takes the helm from May will likely want to drive interest rates lower — even to the point of running the US economy hot and tolerating higher inflation. That could be a concern for bond markets.

Even Fed Reserve Governor Chris Waller is now talking about a neutral Fed funds rate around 100 basis points below current levels. Add prospective US tax cuts and the looming mid-term elections in late 2026, and it’s easy to see why the American economy could be running hot.

All of this contrasts sharply with what’s happening in Australia, where we’re seeing a re-emergence of inflation. The latest monthly CPI print of 3.8% sent a shudder through markets and put rate rises back on the agenda. The RBA, already cautious on cuts, could just as easily remain cautious on hikes — especially given the economy isn’t exactly firing on all cylinders.

As we head into 2026, it’s natural for investors to start thinking about resolutions for the year ahead: a few mental sticky notes, some core themes, and a handful of strategies to put in place.

So here are my New Year’s resolutions:

• Remember not to fight the Fed.
• Embrace volatility because it is here to stay.
• Know the difference between an opportunity and a warning!
• Wait until the train is moving before jumping on board.
• Do not try to pick the bottom.
• Ignore the noise.
• Don’t blindly follow analysts.
• Be braver.
• Be more cautious.
• Check your ETF holdings. – See where the Venn diagram overlaps.
• Enjoy dividends.
• Don’t expect to make 20% every year.
• Stay humble.
• Watch for signs of silliness — data centres on the Moon are definitely a silly moment.

Themes for the New Year:

• New Fed chief will run the economy hotter than Powell.
• USD will continue to devalue.
• US debt concerns will re-emerge.
• Nothing lasts forever, even the gold and silver boom.
• The AI bubble will not burst but will deflate.
• The RBA will be on hold for 2026. Inflation will ease.
• There are more themes and markets to make money in than just the US.
• Diversify.
• M&A activity will increase.
• Signs of valuation extremes will continue.
• Avoid crypto.
• China will continue to push ahead with open-source AI models that compare with the US.
• The new Cold War will continue. And the winner is?

Most importantly, look after yourself, your loved ones, and your family. Health = wealth — don’t neglect it. There’s no point in dying with the biggest SMSF in the cemetery. No one ever said on their deathbed, “I wish I’d bought lithium stocks!”

Enjoy the break. Feel that sand between your toes. Dance like no one is watching. Give your loved ones an extra-big hug. Life is random. It is precious. Enjoy the little things.

Enjoy the break.

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