Bloomberg reported in late 2025 that analysts from firms across Wall Street are predicting big things in 2026 — another year of at 9% returns on the S&P 500, with the possibility of double digit returns. This would mark the first time since the 90s dot-com bubble that the S&P would mark four years of double-digit returns (1).
The market rally is being driven by a number of factors, including the cooling inflation rate, the Fed’s interest rate, continued corporate profits, and the resilience of the stock market in 2025, which beat out investor’s early predictions of a bear market after Trump’s trade war rocked investor confidence. Other factors like a looming AI bubble and doubts about the President’s next move were also keeping analysts on their toes.
While the forecasts are sunny, this moment calls for disciplined investing strategies that balance risk and reward. The factors that made analysts worry over the last few years are mostly still present, including the potential for tech stocks to tumble.
Here’s why you should prepare to invest for the long-term, and choose a risk-balanced portfolio. Plus, our tips on how to invest if you’re a newbie, what to invest in and how to prepare to ride the waves.
According to data from the Federal Reserve (2), Americans have more money in stocks than ever before, with 45% of households’ financial assets tied to direct and indirect stock holdings. CNN notes that this is a major risk, as Americans’ stock ownership has surpassed the levels of the late 1990s, just before the dot-com bubble burst (3). With so many people now owning stocks, the stock market has a bigger impact on the economy overall, whether it performs or dives.
So while optimists are cheery, history shows that the market rarely moves in straight lines. Moreover, optimistic forecasts can sometimes breed market volatility or disappointment.
“It’s tricky because I think there’s been a great amount of uncertainty in the last five years, and particularly this year,” said Michael Kantrowitz, chief investment strategist at Piper Sandler & Co., speaking to Bloomberg. “When there’s a lot of uncertainty, investors are very myopic and reactive to different data points and it doesn’t take much to change the opinion and consensus (1).” Kantrowitz noted that his firm no longer issues annual forecasts for this reason.
In spite of the predictions of the experts, everyday investors should not try to time the market. Even professional traders can’t guarantee wins. Chasing returns, adding too much risk to your portfolio or investing gains can lead to disappointment. Bloomberg notes that in spite of issuing a sunny prediction for 2026, Bank of America Corp.’s Savita Subramanian is still cautious, warning that a recession could see the market lose 20% of its value.
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Manish Kabra, head of US equity strategy at Societe Generale SA, urged investors to stay focused, saying to Bloomberg, “Just because the year is changing, you don’t change your views.”
With this in mind, here’s how you can set up your investments to have a good year, without chasing major gains or worrying too much about a downturn.
Getting started with investing can be as simple as downloading an app, however, most experts recommend beginning with investments through your workplace 401(k). Try to funnel 15% to 20% of your gross income into this account, or at least enough to get your maximum employer match if available.
Your first considerations should include:
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Your financial goals: Are you simply saving for retirement, or do you have other plans like buying a home or saving for your children’s college expenses? Identify your list of reasons to save, order them in terms of importance and attach a potential dollar amount to each.
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Your cash flow: Make sure your budgeting is solid and that you understand how much you spend vs. how much you make each month. This will help you set a monthly goal for savings and investment.
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Do you have an emergency fund? Before you begin investing, build up a cash reserve so that you don’t need to pull your funds out of the market in the event of a financial emergency.
New investors will likely be safest sticking to tried and true investments like index funds, ETFs and mutual funds that are managed by a firm with a good track record. Trying to stock pick is a risky strategy, and even investments in companies with a good track record can take a tumble. Spread your risk by investing in funds that track the whole market.
If you’ve been impressed by the historic gains in precious metals in 2025, you may be tempted to invest in gold and silver. However, there are also index funds that track the performance of precious metals, and these can be a less risky option than direct investment in the commodities market.
Balancing risky and stable investments is a function of understanding your own risk tolerance, and how long you intend to remain invested in the market. Younger investors can usually tolerate more risk, as they have a long timeline for the market to rebound in case of any downturns. Older investors should gradually weight their portfolios towards less risky investments in order to ensure that a market crash before their retirement date doesn’t wipe out a substantial part of their gains. Understanding your time horizon, projected income, how liquid you need your investments to be, and your overall net worth can be done with the help of a professional financial advisor.
Finally, remember that even the optimistic market predictions for 2026 could turn around. If the Fed holds interest rates steady for longer than traders are currently expecting, if the President opts for new tariffs, or if corporate earnings cool, the market could slow as a result.
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Bloomberg (1); Federal Reserve Bank of St. Louis (2); CNN (3)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
