Episode Summary: Tim and Tony kick off the new year with their annual market outlook—though they’re quick to remind listeners that “forecasting is for fun.” They review 2025’s lessons in resilience, explore the major economic themes shaping 2026, and discuss how AI is transitioning from enablers to users. The conversation closes with timeless investing wisdom about creating resilient portfolios built on solid financial plans.
Key Topics Discussed:
2025 Year in Review
Third consecutive year of double-digit gains for U.S. large-cap stocks
International stocks delivered best outperformance since 1993
Diversified portfolios rewarded across asset classes (small caps, commodities, bonds)
The April “Liberation Day” tariff shock nearly triggered a bear market
Crypto underperformed despite favorable policy environment—a lesson in “pricing in” anticipated news
The K-Shaped Economy
Diverging economic fortunes since the pandemic
Higher-income households benefiting from elevated interest rates and asset appreciation
Lower-income households squeezed by inflation on necessities and stagnant wage growth
Credit card delinquencies at highest levels since 2011
Consumer sentiment remains near recessionary lows despite strong labor market
AI: From Enablers to Users
The “Magnificent Seven” and AI infrastructure companies dominated 2022-2025
Valuations for AI enablers now elevated—market may be looking ahead
2026 theme: Shift to rewarding AI adopters and users
Profit margins improving across sectors, potentially driven by AI adoption
Personal productivity lesson: Deep expertise in select tools beats novelty-chasing
Low switching costs for AI-as-search could challenge future profitability assumptions
Timeless Investment Principles
Nobody knows the future—earning above risk-free rates requires embracing uncertainty
Portfolio resilience trumps prediction
Align investments with specific time horizons (short-term vs. long-term goals)
The foundation: Have an actual plan, not just a collection of investments
Quotable Moments:
“We forecast for fun—nobody knows what’s in advance, but we do have major themes we can talk about.”
“By the time you get the good news, a lot has already been priced in.”
“The tools I use get to know me better through time—there’s institutional knowledge built in.”
“The reason we earn more than the risk-free rate is because we take on the risk of an uncertain future.”
“The only way you can stick with the plan is if you have one.”
