Markets ended the year on a strong note, overcoming a stretch in the Spring of volatility fueled by tariff headlines. Despite those bumps, major asset classes, including U.S. and international stocks, bonds, and precious metals, delivered solid gains for both the quarter and the year. International equities outpaced U.S. stocks for the first time in several years, which reinforces the importance of global diversification.
Several key factors supported this year’s results. The economy proved more resilient than many had anticipated, weathering tariff pressures with minimal long-term impact. The Federal Reserve stepped in with three rate cuts during the year. Just as importantly, market leadership broadened. After years of tech-led gains, a broader range of companies drove returns and helped lay a healthier foundation going forward.
Investment Strategy
As we begin the new year, your portfolio remains fully invested and aligned with your long-term strategy. Here’s how your investments are currently positioned:
Stock Allocation
We maintain a global orientation, aiming to reflect the overall stock market:
- 67% U.S. stocks
- ~90% in large- and mid-cap companies
- ~10% in small-cap stocks
- 33% international stocks
- ~80% in developed markets
- ~20% in emerging markets
Why Diversification Matters
The 10 largest U.S. companies now represent 40% of the U.S. stock market and 25% of the global stock market. While we continue to own these leading companies—and remain optimistic about their long-term outlook—we believe that broad diversification is increasingly important. We’ve positioned your portfolio to be balanced not only across sectors in the U.S., but also across a wider range of global markets, reducing the impact of concentrated leadership.
Bond Allocation
We are optimistic about your bond portfolio heading into 2026. One of the most important indicators for future fixed income performance is the starting yield, and right now those yields are attractive. Our taxable bond portfolios are yielding close to 6%, and our municipal bond strategies offer slightly higher than 6% yields on a tax-equivalent basis. These elevated income levels provide a strong foundation for returns over the next year.
Outlook
After three consecutive years of double-digit gains, 2026 presents a more complicated outlook. We remain positive on markets, but it’s time to set realistic expectations. Over the next 3 to 5 years, we expect stock market performance to more closely align with the long-term average returns.
The earnings outlook is a key reason for our continued optimism. S&P 500 profits are projected to grow by 14% in 2026—an acceleration from 2025’s already impressive pace. That growth is supported by several tailwinds, including tax provisions in the 2025 tax bill that should help profit margins, especially for capital-intensive businesses. AI continues to play a significant role too, with both the build-out of infrastructure and the resulting productivity gains boosting earnings potential. Importantly, this growth isn’t limited to a handful of companies— 8 of the 11 sectors in the S&P 500 are expected to post stronger earnings in 2026 than in 2025.
Economic growth is expected to remain stable, though not spectacular. The job market has settled into a “low hire, low fire” dynamic. While overall labor demand is softening, consumer spending remains resilient—especially among high-income households, who now account for nearly half of all spending. This concentration of spending power has helped support the recovery, but it also creates some fragility. A potential bright spot early in the year: updated tax policy could lead to higher-than-expected refunds, giving consumer spending activity a temporary lift.
Politics will be front and center in 2026. All 435 House seats and one-third of the Senate are up for election. Historically, midterm years come with more volatility in the months leading up to the vote but returns often rebound strongly in the fourth quarter. Since 1948, the S&P 500 has delivered an average gain of just 4.6% in midterm election years, posting positive returns only 58% of the time. Another area we’re watching closely is the upcoming appointment of a new Federal Reserve Chair. President Trump has been openly critical of current Chair Jerome Powell, raising concerns about the Fed’s future independence. Any erosion of this independence could create uncertainty in interest rate policy and potentially weigh on investor confidence.
There’s also growing chatter around a possible AI bubble. While valuations in some areas are elevated, we don’t believe this is a classic late-cycle environment. So far, the gains we’ve seen are rooted in earnings growth and less on speculation. We’ll continue to monitor this closely in the year ahead.
Stocks look poised for another positive year, though we expect much of the return to come later in the year. Bonds remain attractive given high starting yields, providing ballast and income across a variety of economic scenarios.
About Andrew
Andrew Comstock, CFA®, is Principal & Wealth Advisor at Beyond Wealth, a fiduciary financial advisory firm in Overland Park, Kansas, dedicated to empowering clients to make impactful financial decisions. Serving the Kansas City metro area, Beyond Wealth specializes in helping wealth-building professionals and business owners navigate life transitions. With a mission to provide comprehensive wealth management services, Andrew’s proficiency lies in leveraging his background in institutional investment management to create tailored investment strategies. He provides research-driven portfolio management, focusing on helping clients build wealth for key milestones, whether it’s buying their forever home, purchasing a business, or funding their children’s education. Alongside Brandy, Andrew combines comprehensive planning with a long-term investment approach, helping clients grow their wealth while enjoying life.
Andrew began his career in institutional investment management, managing portfolios for insurance companies, pension funds, and mutual funds. Inspired by a desire to make a more personal impact, he transitioned to advising individuals directly, bringing his passion for financial empowerment to Beyond Wealth. Known for his commitment to high standards and always seeking to grow and discover, Andrew is dedicated to delivering thoughtful, tailored strategies for his clients’ unique financial needs.
Andrew graduated from the University of Tulsa with a BSBA in Finance and obtained the Chartered Financial Analyst® designation. Active within his professional community, he’s a member of the CFA Institute, Kansas City CFA Society, and the Overland Park Rotary Club. Andrew is a past president of his Rotary club, served on the University of Tulsa’s Board of Trustees, and was the National Board President of the Alumni Association at TU. He is the Investment Chair for the Catholic Foundation of Northeast Kansas. Outside of work, Andrew is a devoted Chiefs, Royals, Sporting KC, and Everton fan who loves exploring KC’s vibrant restaurant scene, especially the BBQ hotspots. With dual citizenship in the U.S. and Ireland and experience living in Switzerland, he’s an avid traveler who’s visited 37 countries and counting. Andrew is also a proud cancer survivor, a perspective that reinforces his commitment to helping families feel confident about their financial futures while embracing the present. To learn more about Andrew, connect with him on LinkedIn.
