This Week in Review | Fed Developments, 2026 Outlook, Gold

Transcript

Mathew White:

Hello, and welcome to This Week in Review. This weekly segment is designed to highlight a few important developments you may have missed this week, what they may mean for markets, and most importantly, the potential impact for investors. To stay up-to-date with our latest market insights, subscribe to our YouTube channel or visit fisherinvestments.com. Now, let's review what happened this week.

First, the Federal Reserve's January meeting.

On Wednesday, the Fed announced it was leaving its policy rate unchanged, noting that inflation data has stayed at 2.7 percent year-over-year while the labor market remains reasonably strong. It's unclear if the Fed will resume cutting rates this year, but betting markets are predicting they will. We don't attempt to forecast interest rate changes because we believe the fed itself often doesn't know in advance how it will act. What they say and what they do can be very different. For some additional context, as one of our recent MarketMinder articles stated, "cuts aren't a gamechanger for stocks." Rate cuts, and hikes, rarely shift the direction of markets materially. For example, in 2008, the Fed's significant rate cuts and quantitative easing didn't end the bear market. And in 2001, rate cuts didn't stop that bear market, which ran through October 2002. Additionally, this week, President Trump announced Kevin Warsh as his nominee to replace Jerome Powell as Fed Chair. While many are analyzing Warsh's background to determine what this means for the future of the Fed, we caution that the Fed Chair is just one of a dozen voting members making policy decisions. For long-term investors, we think it's important to monitor broader market trends and fundamentals, alongside monetary policy developments, to determine where the market may be headed next.

Next, as January comes to a close, a look at our 2026 market outlook.

In the wake of a strong year for stocks in 2025— something many forecasters didn't see coming— we expect this bull market to continue in 2026. Although we don't expect returns to be as strong as we saw last year when global stocks rose 21.1 percent. Some investors fear that three years of greater than 20 percent returns signal euphoria with a bear market on the horizon. That said, this year, the median professional forecast is for the S&P 500 to rise just 9.6 percent. While markets usually don't do what forecasters expect, a median forecast of 9.6 percent shows sentiment isn't as overheated as some fear. Though the landscape isn't risk free, we believe there are several underappreciated positives that outnumber and outweigh current risks. We believe non-US stocks should continue to outperform in 2026, even as the US and Tech stocks do just fine. Politics add another wrinkle to markets in 2026. This is because during US midterm election years, like 2026, stocks often experience a volatile grind as campaigning heats up before rising later in the year as the election is held and political gridlock likely sets in. We refer to this trend as the "Midterm Miracle," and it could provide a tailwind to stocks later in the year. While we're always monitoring potential risks, it's important to remember that markets move most on probabilities. And when looking at the market drivers today, we believe the highest probability is another strong year that extends this very normal bull market.

Finally, gold hits a new record high.

On Monday, gold hit a historic milestone, reaching an all-time high of $5,000 per troy ounce. The surge was partially driven by growing concerns surrounding President Trump's proposed tariffs on Canada. Some think that gold prices will continue to rise thanks to geopolitical uncertainty, and that could happen. But to us, it isn't a foregone conclusion, and we'd caution long term investors from rushing out to add gold to their portfolios. As we noted in a recent MarketMinder article, gold is a boom-and-bust prone commodity that hinges mostly on sentiment. As a result, while gold has gone on some amazing runs in amassed big returns in short periods, it has also had some real awful stretches. Gold may be up over 3,500 percent since it started trading free of legal restraints in 1974, but these gains are dwarfed by US stocks being up nearly 7,000 percent over the same period. For example, despite the ups and downs along the way, by early 2001, gold was net flat since mid-1979. Ultimately, we think long-term investors are better served by viewing gold for what it is: a commodity with limited capacity to hedge against inflation or volatility, and with significantly lower return potential compared to stocks.

That's it for this week.

Thanks for tuning in to This Week in Review. If you're looking for more insights, then don't miss our other series, 3 Things You Need to Know This Week, released every Monday. You can also visit fisherinvestments.com any time for our latest thoughts on markets. Thanks again for joining us and don't forget to hit "like" and "subscribe".