2025 was one of the better years to be an investor, but what’s next for 2026? As part of their annual “Prediction Podcast”, Steve and Dave look back at who was right and wrong last year, and what the “experts” are forecasting for 2026. You’ll also learn who Ned Davis* is and why Dave inexplicably called him out. All this and more on episode 125 of Plan For Life Now.
*No, not a character on “The Simpsons”, but good guess!
Review of 2025 market predictions
Steve:
Welcome to Plan for Life Now, episode 125. Happy New Year to everyone. We are recording this on January the 5th of 2026. Dave, welcome. How are you?
Dave:
Hi, I’m good. Happy New Year to everybody. Yeah, another year. They go by fast.
Steve:
They certainly do go by fast. We can do
Dave:
That. I’m getting old. You’re still young.
Steve:
I don’t know. Feels like it’s going by pretty fast for me. Anybody who cares what I’ve talked about when they ask about my kids, my oldest is a junior, so we are launching into college mode, searching for colleges, stuff like that. And as many of our clients say, “I remember when your first kid was born 17 years ago.”
Dave:
Yeah, I remember.
Steve:
Yeah. Well, I hope you remember, but yeah, a lot of our clients go, “I remember when you were just becoming a father.” So it’s weird for me, and I’m sure it’s weird for everybody how quickly time goes by.
Dave:
Yeah. When I met you, you weren’t that far removed from college yourself.
Steve:
No. When you met me, I was a year out of college.
Dave:
Wow.
Steve:
I did that ever so fun year working as an analyst for Capital One. Little bit of sarcasm there. It was kind of boring, just sitting behind spreadsheets and calculating default rates for credit cards, blah, blah, blah. And then I interviewed with West Financial Group and you were one of the four or five people who interviewed me. And I remembered you specifically because you were pretty new there. You didn’t even have a West Financial Group business card.
Dave:
Wow. That sounds so much like me because I’d already been there probably a year and a half,
Steve:
But
Dave:
That sounds like me.
Steve:
You didn’t have that card yet. But I just remember that because I took them all back and I had to write thank you notes. I had to. It was recommended that I write thank you notes, which I’ve never been great about throughout my life, but I’m pretty sure I did.
Dave:
Yeah. Well, I’m glad we hired you. What else is there?
Steve:
The rest is history. But
Dave:
The rest is history.
Steve:
I’m glad I joined. Yeah.
Dave:
Yeah. And time goes fast. And yeah, here we are another year.
Steve:
All right. So I told you, I actually put together quite an outline for today’s show. So we’ve got plenty to talk about. Before we dive into the meat of everything though, just a little bit more fluff here. After Christmas, my family and I, we took a trip down to Marco Island, Florida, which if you’re not familiar, it’s about an hour south of … You fly into Fort Myers, about an hour south of there on the Gulf Coast. And the reason why I wanted to bring this up is about halfway between Fort Myers and Marco Island is a town called Naples, Florida. And I think a lot of people have probably heard of it. I’d certainly heard of it, but I had never been there before. And while we were there, we took a boat tour all around Naples and also drove through and walked around downtown there.
And my God, Dave, I was just amazed by the money in Naples. And of course, I’d heard this before, but in particular, when you’re looking at the houses, and there’s a lot of houses that are right on the water there, which is very beautiful. It’s nice. And the kind of thing where in our area here in the DC area, we think of ourselves as having a pretty expensive housing market, but an expensive house in this area, we drive down River Road and we think, “Oh, that’s a really nice house.” What is that? Five million, seven million.
Dave:
They’re pretty nice.
Steve:
Maybe 10 million, right? Really nice houses. And down there in Naples, I started doing the classic thing, pulling up Zillow or Redfin and oh my God, the houses are 20 million, 30 million. I mean, it’s crazy the prices down there.
Dave:
Isn’t that the area where, was it last year or the year before there was a hurricane or something, the major hurricane? This is probably because time always goes fast, maybe it was a couple years ago, wiped out a bunch of those super expensive, I think it was Naples.
Steve:
Yeah, it could be. I know that we took a boat tour and the boat guide, the captain, told us that, “Oh yeah, we’ve been crushed by hurricanes a bunch of times.” So yeah, I imagine. And I mean, these houses are right up on the water there, so it wouldn’t take much for a rise in the water levels to flood all of these very expensive houses.
Dave:
Yes. But it’s important when you see those houses to always, when you’re with your spouse to say, “Yeah, you know what? How does anyone raise a family in those houses? They’re so cold.” It’s the exact mechanism that you’re looking for to make sure that you’re not jealous of this huge palace. I personally believe in that. I don’t understand why you would need a huge palace unless you just start a bed and breakfast immediately.
Steve:
Which
Dave:
Case- Okay, here’s the thing.
Steve:
Here’s the thing, Dave, is they don’t … I mean, of course they look beautiful and they’re nice, but a lot of these don’t look like huge palaces. You look at the house and you’re like, “Okay, that’s nice. What is that? A couple million? No, sold last year for 16 million.” It’s like-
Dave:
Damn, I hate those people. Now they’ve taken away that one argument I had on River Road. Those nice, not too big house in an incredible location.
Steve:
Those are huge palaces. Okay. I don’t know why I went down that road. It was just people talk about how much money there is out there and how we have these kind of two different economies that really rich and then everybody else. That just kind of struck me when I was down there. Now, of course, this is our first podcast of 2026, and we didn’t actually even do one in December. I was a little embarrassed, Dave, when we looked back that, God, how did we let December slip away without doing a podcast? But we did. So we’ll get into all of that, a summary of 2025 and projections, not ours, but other banks and whatnot. But first, we’ve got to talk about this ranking that came out in early December, and it’s from the ever prestigious website, publication, whatever, called Millions Podcast.
Dave:
Right. And if you don’t know Millions Podcast, you’re like everybody else on the planet.
Steve:
Right. Never heard of it before, but they sent us an email in early December and they said, “Hey, congratulations. You are on our list.” And by the way, I’m pretty sure this was just a list generated by AI or some sort of generic search where they just said, “Okay, give us the hundred best financial advisor podcast.” But I will say that I looked at the list and there are plenty of legitimate financial advisor podcasts that I know of. And when we looked at this in early December, Dave, we were number 67 on the list. Now, I happened to go back and look at it again, and somehow we moved up to 66. Oh, wow. I don’t know if somebody dropped out or if we-
Dave:
But remember what I said when I first heard about this in our … Well, actually our listeners don’t know this. In our business, you get a million emails and letters about awards that you pay somebody something and they’ll give you an award. So what I was impressed by this one is we didn’t have to pay anybody anything. We don’t do that, yet we were still given an award. So to me, that’s somewhat legit, whatever you want to call it, a somewhat legit recognition when you don’t have to pay for the recognition.
Steve:
Yep. So I’m going to include links to a lot of this stuff just so you can see it in the podcast notes here, but you could check out that millions podcasts and see us. Maybe we’ve climbed even further. I haven’t checked.
Dave:
That should be a New Year’s resolution is to maybe crack the top 50 of the millions podcast financial planning podcasts.
Steve:
Okay. I don’t know how we actually accomplished that, but-
Dave:
I don’t either.
Steve:
We can try. All right. So that’s a lot of fluff there at the beginning.
Dave:
This is incredible. We’re starting the year with absolutely no real content. Keep going.
Steve:
Wow. Let’s dive into it. So let’s go through, first of all, a summary of 2025 and talk about some of the surprises from 2025, the themes, the narratives. So we finished the year, the S&P 500 up a little bit over 17% on the year. The NASDAQ, which as you know, is more tech heavy up around 20%. The Dow Jones industrial average finished up over 13%. So the consistent theme in the market … Well, I should say after we got through the first half of the year, because the first half of the year, the discussion in the market was all around tariffs. What’s going to be impacted by tariffs? How are those going to impact the economy and everything? But from there, it went back to the technology, AI, artificial intelligence focus, and that really drove most of the returns there. Now, something I did find interesting, because most people, if you ask them and they pay a little bit of attention, they go, “Oh yeah, all of the returns came from the Magnificent seven.
All of the returns came from those big seven technology stocks, and that’s actually not the case. Only two out of those seven magnificent seven companies outperformed the market.” Now, they did so in a big way, Nvidia and Google, they call themselves Alphabet now, but I’m still sticking with Google. Those two companies dramatically outperformed, but the other companies in the index, in the Mag seven, really underperformed the market. So I thought that was an interesting little tidbit there. Now, if we go into some of the other surprises from the market, I had this one chart here talked about the fears of a recession, and this is always interesting to track. We went into the year with an implied chance of recession at around 20%, which seems kind of standard in any time period. There’s always going to be a chance of recession, but we went into the year 20%.
That spiked all the way close to 70% chance by the end of April.
Dave:
Yeah.
Steve:
People were just assuming that all of these tariffs were going to push us into a recession. And now we finished the year, I don’t know, I can’t even read this chart. I mean, it looks like less than 5% chance of recession. Right now, that’s what the market’s implying. That seems surprising to me.
Dave:
We’ll see. I don’t like these signs when they’re too good. We’re better off with the negative stuff. Now it’s like, okay. But yeah, that’s incredible.
Steve:
I totally agree. I like it when the market is a little bit more cautious, a little bit more hesitant. It feels like as soon as everybody agrees that there’s no risk and everything is rosy and it’s all perfect, that kind of feels like the time when the other shoe drops.
Dave:
I know. But to me, the story of 2025 is just, wow, April happens. We have to have an emergency webinar. We didn’t have to, but we wanted to. We talk about the things that you talk about when you’re a financial advisor, like you don’t panic when things are down this much. And almost overnight, everything shifted to this incredible year from the bottom of April to the end of the year.
Steve:
Oh, absolutely.
Dave:
That is the story of 2025. Sure.
Steve:
We had that podcast or that webinar for clients on April the 8th, which is just going to go down as our best timing of those things. Not that you can ever time it, but it was just, we felt the time was right to do it and boom, the market turned around. And then I think the other big story for investors was that international stocks outperformed and I’ll say finally with that, they finally outperformed because this has been one of those things that for the last decade that a lot of big analysts and publications will say, “Oh, international stocks are undervalued.” They’re trading these really cheap price to earnings ratios. They’re undervalued relative to the US, and then year after year, they sort of underperform. So finally, for the first time in a while, international developed markets up 31% on the year, emerging markets up 34%.
So pretty handily beat the US markets there. But I do think that’s something that’s just purely a reversion to the mean, that it’s been too long that they’ve underperformed and it was kind of a catch up there. It’s not necessarily saying, “Hey, is Europe a more dynamic business economy place to create a business than the US?” No, I don’t think so. I don’t think anybody would argue that.
So we finished 2025, really solid year, a great year to be a diversified, well-rounded investor. So what’s coming next for 2026? Actually, before we get into what’s coming next for 2026, I forgot in this detailed outline that I put together, I did go back and pull up, or at least pull up an article that summarized it all. What were the predictions going into 2025?
Dave:
I love when we do this every year, actually.
Steve:
And believe me, I get it. These companies, these big firms that make these predictions, they a lot of time understand how difficult it is and how, I don’t want to say ridiculous it is to make the predictions, but the fact that you’re going to be wrong, you’re going to make these predictions and it’s impossible. There’s too many factors that go into it. So if we take a look at last year, the predictions were for a gain of 8%, which by the way-
Dave:
Shout out to data trick research.
Steve:
Why? Did they nail it?
Dave:
6,840.
Steve:
Oh yeah, they were right on it. So if you take a look at these predictions year after year, the predictions usually have an average gain of around 8% because you know what doesn’t get you fired as an analyst, as a whatever. It’s a prediction of eight to 10% because that’s historically what the market usually does. What does potentially get you fired is, let’s call out a few of these bad ones down here from last year. BCA Research had a prediction ending S&P target of 4,450.
Dave:
Wow. Ouch. Very bearish BCA.
Steve:
Yeah. And I didn’t even look into what their rationale was, but that’ll get you fired because you’re wrong there and you’re very publicly wrong.
Dave:
One of these companies I think works completely out of their basement with exactly one employee and that would be, and I’m not knocking their prediction, it’s in the middle of the road there, but not great. Ned Davis research. I’m pretty sure that’s just Ned Davis.
Steve:
That is not. Ned Davis is a pretty big … I mean, I don’t know if they’re a fund company or they’re research. They’ve been around for a while. I don’t think it’s just one guy.
Dave:
I’m just joking.
Steve:
All right. So predictions for last year, I mean, the market was up 17%. Most of the predictions were in that, like I said, 8% range somewhere in there. So let’s take a look at what should we expect in 2026. So not surprisingly, the predictions, they range anywhere from a 3.7% gain up to an 18% gain. I think the average, I’m scanning this summary here, I think the average is right about 8% again, which like I said-
Dave:
I did a little research for this show and I looked up what was the average of all the major predictors and it was basically around eight or 9%.
Steve:
Yeah. Like I said, good way to keep your job. You predict eight to 10% returns in the market. Something goes wrong. Okay. You can blame external factors, blah, blah, blah. But for the most part, you’re right and you look okay. So we’ve got on the most conservative side of things, Dave’s favorite whipping boy, Ned Davis.
Dave:
Right. And I shouldn’t have just ad libbed something because now the whole Ned Davis team, they could be the biggest operation in the country for all I know. They’re going to be like, “Yeah, buddy, I’m going to make sure you don’t crack the top 50 in your million podcast thing after that stupid comment.” Anyway.
Steve:
Seriously, you’re going to add the whole of Ned Davis out to get you. So Ned Davis and Bank of America, which I’m pretty sure that’s not an operation out of the basement, but I think they’re pretty legitimate. Both at a 7,100 price target, which is only a gain of 3.7% there. And then all the way at the top, you’ve got Oppenheimer at 8,100, which would be about an 18% gain from the end of year values there. So whenever we look at these things, I think the big takeaway is that nobody can predict anything. We can take a look and we can say, “Okay, well, we expect earnings to grow at a certain level.” But what you can’t figure out from there is what valuation or what multiple is the market going to put on it? Because if earnings grow at 10% and then there’s multiple expansion of 10%, if you allow me to use rough math there, there’s a 20% gain in the market.
But if earnings grow at 10% and the earnings multiple contracts at 10%, you’ll basically have no gain.
Dave:
Do you think there’s something to the fact that these look … I guess these are the top 16, 15 or 16 companies that do this predicting thing. Nobody’s predicted a down year.
Steve:
Yeah.
Dave:
The down year is up over 3%.
Steve:
Yeah. I mean, there’s usually, like we saw from last year, and I think it probably also depends on exactly who you’re including in there, because you can always go find somebody who probably is operating out of their basement, who’s going to predict that negative year. I mean, there’s always going to be a couple of them, but usually for these big firms, they’re going to be predicting something more. It’s a gain, but maybe not a ridiculous gain there. All right. So it was a really good year in 2025. For whatever it’s worth, the analysts are predicting another good year this year. I will say we didn’t spend any time talking about the bond market. Bond market had a pretty good year last year as well. I think it was up or- I
Dave:
Hope the bond market had a great year.
Steve:
Yeah. I mean, depending on what index you’re looking at, broad bond market up seven and a half percent. I don’t think it’d be quite that strong this year because there’s not as much room … Well, I don’t know. Take that back. There’s room for interest rates to drop, but maybe the expectations aren’t quite as much there for as much of a decline and yields have come down a little bit as well, but it’s important to note that bonds did what we hoped they would do in 2025, which is provide that ballast against the volatility of the stock market. So when tariffs were wrecking the market back in April, bonds were still cruising along, still positive, still doing well there.
Dave:
Do I have an opportunity to do my own prediction for this year? Passing that by.
Steve:
We don’t do predictions here.
Dave:
I
Steve:
Know.
Dave:
But if we do do them, then people would take it with a grain of salt. Sure, we’ve done them before. I’m sure I’ve been wrong every time, but I definitely have thought based on these other people’s predictions.
Steve:
Yeah. I mean, you can give us kind of a general thoughts on how things might play out.
Dave:
Okay. Here’s my general thought. I think that the market’s going to do really well. This could be 100% wrong, but I think it’s going to do well up say almost 10% by the next election. And then I think the Democrats are going to win something in that election. Let’s say the House, let’s call it the Democrats winning. And that beginning of the Trump lame duck scenario to me would then make the market go down. So I’m going for an overall, I sound just like, this is so ironic. My prediction is almost exactly the same as Ned Davis research. I think it’s going to be probably ending up about 3% gain for the year, having got most of the year up in or close to double digits and then going down because of the election. And whether you like Trump or not, he’s been good for the markets.
So that’s my prediction. Now we know what’s not going to happen.
Steve:
That seems reasonable there. Yeah. If you wanted to paint the bear case and some of these analysts as they go through make these predictions, they’ll say, look, this is what our base case is, but there’s a 20% chance of the bear case. And the bear case would be that a lot of this AI related spending, all these capital expenditures that these companies pull back on that significantly and basically say, “Oh, we’re not going to spend these billions of dollars on data centers and GPUs and all that kind of stuff.” And that could trickle down to a larger slowdown in the economy. I think most people would look at that as the biggest risk. Of course, there’s always external shocks that could happen, geopolitical stuff, all of that.
Dave:
Well, that’s why predicting all … I predicted the commanders would at least not have their season end before it got cold out. So predicting only gets you so far.
Steve:
Right. All right. Thank you for joining us. I think we’ll wrap it up there. Hope everybody is enjoying a good, happy new year so far and hope we can do another wrap up a year from now that will be as good as this wrap up.