In this week’s episode of Retire in Texas, Darryl Lyons, CEO and Co-Founder of PAX Financial Group, breaks down what Wall Street’s biggest firms are predicting for 2026 – and what it could mean for your portfolio.
After reviewing market outlooks from BlackRock, Goldman Sachs, Schwab, Pimco, and more, Darryl shares a curated summary of the trends shaping the year ahead. From stock valuations and artificial intelligence to bonds, global markets, inflation, and alternative investments, this episode cuts through the noise to highlight key points that could matter for long-term investors.
Drawing from industry research and real-world context, Darryl walks through where opportunity may exist, where risks are building, and why diversification and thoughtful strategy matter more than ever in today’s market environment.
Key highlights of the episode include:
· Why U.S. stocks are historically expensive – and what that means for future returns.
· How artificial intelligence is driving massive investment and reshaping global markets.
· What falling interest rates could mean for bonds and fixed income strategies.
· Why international markets like Japan and Germany are gaining renewed attention.
· How inflation, tariffs, and policy decisions may influence market stability.
· The growing role of real assets, infrastructure, and alternative investments.
If you’ve been wondering how to position your portfolio for 2026, this episode offers a clear framework for thinking through risk, opportunity, and long-term strategy. Whether you’re concerned about market volatility, curious about AI’s impact, or simply want a better understanding of what’s ahead, Darryl provides perspective to help you make more informed decisions.
For more insights and to connect with a PAX Financial Group advisor, visit http://www.PAXFinancialGroup.com. If you found this episode helpful, consider sharing it with someone who’s thinking about their financial strategy for the year ahead.
Transcript:
Good money decisions happen much better in conversation. So, let’s have a conversation about money today. I don’t want to use a lot of numbers. I have to use a little, but not too much. This is Darryl Lyons, CEO and Co-Founder of PAX Financial Group, and you’re listening to Retire in Texas. This information is general in nature only. It’s not intended to provide specific investment, tax, or legal advice.
Visit PAXFinancialGroup.com for more information. So, every year at the beginning of the year, the investment firms, the big investment firms on Wall Street, they come out with their 2026 Market Outlook. And it’s their crystal ball of what they think’s going to happen in 2026. I went ahead and I read BlackRock’s, Zachs, Capital Group, Goldman Sachs, Pimco, and Schwab and I went in and kind of summarized them.
And I’m going to kind of give you a curated version of what I digested. So, this information is just mine alone, where those firms specifically talk about something. I’ll quote them directly, and then I’ll always put the references in the show notes so you can digest them yourselves. There’s always hundreds of these things out there.
I just went with the big ones. We rely on these firms for a lot of market outlooks. And so, they’ve been reliable prognosticators over the years. And so, we tend to lean on them. There’re people that have their own kind of more eclectic outlooks. And I’ll look at them. But these are pretty rich.
A lot of times it’s not the outlook, it’s sometimes the notes inside some of the little things that they say. And so, let’s unpack that. I’ve got I think, I’ve got about 5 or 6 different bullet points here. Let me just double check. Six bullet points. So, let’s go through that. That’s number one, I want to talk about stocks.
You oftentimes hear equities and stocks used synonymously. So we’ll call it stocks here in this section. There’s no doubt that the United States stocks or equities are expensive. They reference this Case-Shiller index which questions on the reliability of it. But by most indicators they’re expensive right now. They referenced the.com era, even the 1929 levels.
So that’s worth noting. The market is still highly concentrated. So, when we do talk about stocks in general, oftentimes we find that we’re discussing these specific companies, these tech firms. And some of you guys may have heard The Magnificent Seven. In fact, this is according to Goldman Sachs, the top ten US tech firms are valued at 17.6 trillion.
That’s actually bigger than the GDPs of Japan, India, UK, France and Italy all combined. So pretty big tech companies running the show of the US stock market. So, it leaves little room for disappointment. So just so you know, if they miss on the earnings or if they a lot of times we have expectation of what they’re going to sell in terms of products and their earnings.
And if they miss on these expectations, that could cause some pressure on the stocks. Nothing yet to, you don’t need to stop this podcast and go do something. Continue to listen. I’m just saying let’s just recognize what they are. They’re expensive compared to historical averages. And the other thing I want to say is some of them are more expensive than others.
These investment outlooks do recognize that the value oriented stocks remain attractively priced. So those haven’t got the same attention as the tech stocks. The dividend payers, we have actually a dividend portfolio. We’re looking at it just the other day because we’re like, okay, should we get a new manager. And it wasn’t the managers, just the dividends in general weren’t performing that well because most people wanted the Magnificent Seven.
And so, it’s recognized in these reports that dividend payers tend to outperform during a market declines like the Starbucks and the PayPal’s. And so, if we get some type of market disruption in 2026, some of those, what we call value oriented stocks or dividend paying stocks might be a better bet, for lack of a better word.
There’re also some competing conversations about small cap stocks. I know BlackRock’s not very favorable for small caps, but other companies like small company stocks. So, we’ll see again, AI, artificial intelligence is the dominant mega force in all of these 2026 outlooks. And the case is still being made that it we’re in the early stages. I don’t know what inning that is, but there’s a lot of development and a lot of deployment taking place.
We call that CapEx, capital spending, innovation, operational efficiencies, have yet to be adopted. But JPMorgan did announce that they saved $2 billion by implementing artificial intelligence. So it is making its way in the business market. So that’s kind of the stock market outlook. Let’s continue in the number two area bonds, we often use this word fixed income, synonymous.
They’re really impacted by fed rate cuts. Schwab thinks they’ll be about two rate cuts next year. And so, when rates go down typically bonds go up. So that’s a good tailwind for bonds. And so, if you want to own some bonds for an extended period of time and lock in rates, the now might be the time, I’m always cynical of bonds.
Personally, I prefer stocks exponentially over bonds. But here a lot of the managers are very favorable on bonds. I think if they’re right for you, then this may be a decent time. If interest rates go down, you might not get that good of a bond. So just something to think about. Blackrock said that the way they frame it is they’re underweight long term US treasuries tactically.
That’s very, that says a lot by the way from an investment nerd, that says a lot. It just means that right now we don’t like these long-term government bonds. But maybe tomorrow we will. So, you don’t hold too much weight into that. But, you know, the love and hate for bonds ebbs and flows, still focusing on just diversifying bonds and letting some good managers do something called curve positioning, meaning that sometimes they’ll own long bonds and sometimes they own short bonds.
And because the weather changes so often, let them decide what umbrella to use. But, you know, last year, bonds didn’t do that bad, according to the Schwab report. Really the place to be was an emerging market debt or bonds, same thing. Generally emerging market bonds, if you own those, not a lot of people did.
You got 10% municipal bonds. The government, like the local governments, did, about 4% last year. This is all in Schwab. It’s all in the notes. You can grab those. There is something to be said about these government, these local government municipal bonds. The reports generally say that there’s strong credit fundamentals, meaning that they’re healthy. These cities and counties record tax revenues that we’re all paying property taxes.
So those record tax revenues, we hate them as homeowners. But for the cities and counties and school districts, if you are a bondholder, then that’s a healthy revenue source to support your bonds. So, municipals are good from an investment perspective. And seem to be very attractive, generally by these reports going into 2026, and other areas of the market, it’s just hard to pick, you know, whether we want junk bonds or emerging market or domestic or municipalities, its hard, having a good manager, the advisor can kind of help navigate that.
But bond market is a tricky one. And in fact, there’s enough evidence out there to support that having active management bonds may actually be a better play than just owning passive exchange traded funds. So, that’s my comment there is counterintuitive to what you might see in the news. Let’s go to the number three area.
The third area is inflation and just policy in general. Zack’s mentioned that inflation has cooled. We also hear the phrase inflation moderation. So, we’ll see. You know it could come back, but it seems to have cooled a little bit. I think we could all, you know, feel a little bit better at the one time I think was peaked at 9%.
Still not at necessarily where we want it, but and frankly, still building off of pretty big number, but generally speaking, when I read these reports tariffs are going to be a dominant theme, the not consensus, but at least from one of them. And I don’t know which one said this necessarily. But judges are not likely to rescind.
They’re not likely to rescind the tariffs. There’s a couple tools in the tool belts of the administration. Section 301, section 232, National security, section 122. So, the administration’s prepared to go before the judges and say, here’s the 3 or 4 different reasons why we could do tariffs. So, it’s unlikely to be rescinded. What’s good about the tariffs is in April of last year, the market freaked out and didn’t really have a good handle on it.
And tariffs have been I think they were initially thought to be averaging about 18%. Now they’re about 11%. And the market feels good that there’s some more policy certainty there and some trade deals that have been done. So tariffs, even though there may be a constant theme going into next year, I think the market feels a little bit better about how that’s working.
The one big beautiful bill. I’ve talked about this before. OB3, really could be a good tailwind for the market in general because, some of that bonus depreciation, is going to spur on capital investment. So, some of these tax cuts and some tariff stability could be, you know, nice tailwinds for the market going into next year.
Number four international markets. You know, if you look in your portfolio, you own international and you just don’t know how much, generally I’ve historically liked about 20%. There is a time I want to say 10 or 15 years ago, probably 15 years ago. Hold on. Let me think about that. 2010 gosh, time flies. It was about 2010, maybe 2008.
Somewhere in that time frame, we were running at about 50% international just because of just that’s what the markets were giving us. It wouldn’t surprise me if portfolios are starting to drift up to 30% now, because the international markets are doing pretty well. Look at your portfolio and see if you have international. A lot of people abandoned it because it wasn’t doing well, and that’s why you just kind of have to stay the course because things ebb and flow.
Don’t I always say, don’t mess with your money too much? It’s like switching money lanes. I was in traffic this morning and switch lanes and end up getting in the slower lane. It’s just. That’s how it works. As soon as you mess with your money, you know you’ve done this before. Every time you’re about to mess with it, and you’re tired and frustrated, right?
When you’re about to do it, it changes on you. And the international stocks are a great example of this. Global diversification is just now becoming increasingly more attractive. That doesn’t mean the United States isn’t the probably the better place to own. It’s still the cleanest shirt and dirty load of laundry, but global diversification makes sense. Now when I say, global, I mean a combination of international and U.S. when I say international, I just mean overseas.
So just to distinguish the two there. There are reasons to believe by going through these, 2026 outlooks that there’s some attractiveness to Japan. There’s last year, Japan did about 24%. So, a really good year for Japan. And there seems to be, generally speaking, some interest in Japan and even Germany. Germany has this $500 billion not dollar.
German mark, I guess, infrastructure stimulus and defense spending. So that is going to stimulate economy so that a lot of people are pro Germany investing going into next year. France. These are just comments I picked up with, France having some challenges due to just a fragmented parliament. India is always interesting because they’re demographics in generally you can package some of the India stuff up in an emerging markets portfolio.
Maybe you add, some India, maybe you add some Russia, maybe add some China, maybe you add some Venezuela. That’s a joke. Or maybe, maybe it’s not a joke. Maybe it is an opportunity to buy low. I don’t know, by the way, all these, 2026 reports came out before Venezuela. So, you know, that’s just like it is, you know, as soon as you get all these analysts put together to put this beautiful report out, the market changes still on currency side, there is still I wouldn’t say consensus, but, you know, I would go through these outlooks.
A weakening dollar seems to be the general outlook, but that’s not a bad thing always. So, some people think a weakening dollar’s bad. It ebbs and flows and it’s still the, in terms of strength. It’s still this, you know, the strongest currency in the world. It’s just weakening relative to other currencies. And sometimes that helps with international trade.
Number five, just the economy and earnings in general, there is plenty of signs of weakness in lower income households. In fact, 20% of households get this. 20% of all households in the United States drive 40% of consumption. So, 20% of all households drive 40% of consumption. It’s crazy. So, we’ll see how this plays out this is not sustainable.
I’ve talked about this before. It’s uncomfortable for me because I don’t like to see people hurting. It’s just the heart in me so that something’s got to be done. There’s a lot of range of outcomes that could occur to it, you know, to get us right size a bit more there. Corporations in general are healthy. There are some bankruptcies in 2025, but what we call mostly idiosyncratic, like not systemic, pretty isolated.
There’s no real evidence that companies are piling like a large amount of unnecessary leverage. Again, sometimes you just can’t see that it’s in the shadows. But according to these reports, there’s not a lot of unnecessary leverage in the corporate banking. I said this before, but it looks like the majority of threats to the market’s growth. If I mean, absent any events, which events happen every single year, they happen.
In fact, the market usually goes down every year, at least 5%. Sometimes 20%. But absence of any, you know, big event, the market has a lot of tailwinds. I think what I’m hearing over and over again is that the stocks could have some pressure if they miss on their earnings. So be, you know, be paying attention to that.
The last category is just kind of alternative assets. This is now this bucket of gold and commodities and even crypto, gold and silver right near all time highs if not all time highs. The driver of that is just kind of the geopolitical environment. The concern about the debt, the sovereign debt that exists and even inflation hedging. So, you know, we have to start thinking about the allocation to commodities and seeing if that is going to increase over time.
And I think you just, you know, I’m not Pimco. Pimco did talk about this. So that’s why I was saying Pimco. But crypto and Bitcoin they did have a rough year. I think, you know, the people that are still have high conviction in that space are always going to have high conviction, you know, own it, but just don’t own too much.
I guess that’s just been kind of the normal mantra. The real assets and infrastructure. So like utilities, and power demand are going to be themes going into next year. In fact, there’s these there’s like $1 trillion of utility investments going in over the next four years. That’s according to Edison Electric Institute. So, a lot of infrastructure, a lot of data centers to support artificial intelligence.
And then, you know, you’ve got to pay for these things. And so how do you pay for these things? You namely, end up financing them through private credit. Or there’s also infrastructure investing. So, there are mechanisms to be able to finance this data center growth in the infrastructure growth. So, both the shovels the people willing like Caterpillar and a lot of those companies are there to be able to get the work done.
And then the financial mechanism which used to just be banks now has broadened and has been able to now support this growth. So, the systems in place to be able to support this artificial intelligence growth, the question is, is to what degree is it going to benefit us as human beings? Real estate still interesting. Had a tough year last year.
But, you know, if you’re going to buy real estate, I think we still look at, you know, you look at things selectively. This is from Pimco selectively, making sure that, you know, you’re paying attention to your liquidity and, the liquidity of if you’re doing it in a pool type of investment and also just credit risk in general.
So, you know, the real estate market has a lot of opportunity. But I lost a lot of threats. I mean, the office is still struggling with the post-Covid work from home environment. So, I said a lot you might have digested a lot. You might have went over your head. I hope that you were able to grab a few little nuggets to help you think about your portfolio next year.
Your advisor is really good about navigating all of this. Believe it or not, there’s a lot to navigate. So, get with your advisor. Make sure that they have an awareness of any outside of accounts that you have to make sure those are being looked at. I’ll leave you with these three points that are mine. I would suggest that next year we’ll have probably what I would consider maybe a greater dispersion of returns.
And we had some of that this year. But now when I say dispersion, I mean, maybe it’s not just AI stocks, but maybe these dividend stocks will participate. Maybe these energy stocks will participate, maybe the international maybe the bonds. And then collectively, if you’ve got a diversified portfolio you can be proud of it. So, I would say that this could be a good year for that.
Especially with the high valuations in those tech names, I think it may not it, it may not be the best one, but it’s probably the most rational practical and maybe even the most safe one with air quotes. Because obviously safe is relative. But just diversification in general next year with thoughtfulness and how you develop that I think is an important theme.
The second thing I would say is, you know, think about risk management. And that could mean those bonds in your portfolio. That way you fall off the porch, not the roof. It could mean, and I’ve talked about this before, structure products where we do some hedging that that could be an important piece or just, you know, a little bit more cash than normal.
So, there’s a handful of ways to do some risk management. So, thinking about that going in next year I always say risk management is not only these tools but also just making sure you do a gut check to say, hey, the market probably will fall 20%. It probably will bounce back, I don’t know. But whatever the headlines are, it’s going to make you nervous.
Just make sure you’re prepared to weather that emotionally. You say you are, but are you? And so that’s something that I would consider a part of risk management. And the third piece is, you know, just probably a little bit more active, activeness. You know, we do use a lot of exchange traded funds. Some people are overly passive, and there are definitely times in life where it makes sense to just put it in the S&P 500 and walk away.
I don’t know if this is going to be the year for that, especially with these high valuations. It’s probably a good year where you have some what we call active management, where maybe some funds that are doing some more stuff, some managers that are doing some more stuff, just paying attention to the risks that are out there and taking advantage of opportunities and disconnects.
So those are the three themes I wanted to summarize, a lot of information in a short amount of time. I hope you’re able to digest it. Like I said, I’ll put all these links in the show notes so you can read about them yourselves. And as always, I want to remind you to think different when you think long term. Have a great day.
Resources:
http://www.blackrock.com/corporate/literature/whitepaper/bii-global-outlook-2026.pdf
http://www.pimco.com/us/en/insights/charting-the-year-ahead-investment-ideas-for-2026
https://www.schwab.com/learn/story/stock-market-outlook
https://am.gs.com/en-us/advisors/insights/article/investment-outlook
http://www.capitalgroup.com/advisor/pdf/shareholder/MFCPBR-099-1046320.pdf
Listen on:
