Forecast 2026: Reflecting on 2025 and What's Ahead

Forecast Recap

Another Forecast event is in the books. Despite the weather, we had an attendance of 231 people for a nice dinner and a presentation on the markets, economy, financial planning and our investment strategies.

For those who could not attend, below is a recap of our discussion.

Markets

Wall Street is famous for issuing forecasts about the markets and economy. December is usually a time when analysts are out in full force attempting to do the impossible: predict the stock markets' return for the coming year. We call December “Tis the season for wild guesses”.

All the major investment firms make forecasts. Below is one recent chart with stock market forecasts from a few of the Wall Street firms. Their wild guesses range from a 3% return for the S&P 500 to as high as 16%. One note: they rarely forecast a negative return.

We often make fun of these forecasts as does Warren Buffett. In his 1992 letter to shareholders, Warren wrote, “The only value of market forecasters is to make fortune tellers look good”.

Having said this, the irony of calling our event, “Forecast”, is not lost to us. So, we joined the bandwagon and made a forecast of our own.

I once heard an economist talk about forecasting and he started with this joke: If you pick a price (for the stock market) do not pick a date. If you pick a date, don’t pick a price. If you’re right? For God’s sake, don’t act surprised!”

Our forecast is modest. As many of you know, we are believers in Dow Theory. One of the rules of Dow Theory is that the market moves in trends. Another rule is, whatever the current trend is, you must expect it to continue until you are proven wrong.

The current trend is up so that was our forecast. It will go up until the trend changes. Then, it will go down. Sorry if you were expecting more, but that is probably the most honest forecast in all of Wall Street.

Did you notice that we did not pick a date or a number? Our process is just that, a process that evolves with changing market conditions. We do not attempt to pick tops or bottoms in the market, and we do not make forecasts as forecasts almost guarantee you will pick the wrong date or number. Therefore, we simply follow the trend.

Economy

Next, we talked about the four pillars that some on Wall Street say would need to be in place for the bull market to continue in 2026.

AI Arms Race. Spending on Artificial Intelligence has been truly astounding. In 2025, $1.5 trillion was spent worldwide building out of Artificial Intelligence. In 2026, it has been forecast that $2 trillion will be spent on AI. Others estimate that Artificial Intelligence spending could boost US GDP by up to 1.9% per year for the next 10 years. That is an astounding number. But remember. If you pick a date, do not pick a number. If you pick a number, don’t pick a date. If you’re right? Don’t act surprised.
Stable Economic Growth. The US economy is expected to grow at 2.9% in 2026. Again, this is a forecast, and forecasting is designed to make fortune tellers look good, per Buffett. If we achieve that growth, it could be a catalyst for further stock market gains. However, if unemployment ticks up above 5%, that could be the end of a bull market in stocks. Or at least cause a significant pullback.
Ongoing Rate Cuts. The Federal Reserve has forecast (there is that word again) one rate cut for 2026. However, it is widely known that President Trump wants rates even lower. Why? In 2025 the United States paid $970 Billion in interest on our debt. Every .01% drop in rates saves American taxpayers $3.5 Billion annually. If rates were to drop 1%, that would result in roughly $350 Billion in savings on interest. It could also help to revive the US housing market. Why not just drop rates then? Lowering rates when the economy is strong can increase inflation. So, there are valid arguments from both Jerome Powell and President Trump. It will be interesting to see how this plays out.
Tariff Clarity. There are ongoing negotiations to resolve the tariffs that we do not hear much about on the news. The stock market likes clarity on all things, including tariffs. If we get deals completed, that could provide some boost to the market.

Planning Ideas

Jandin offered information on new tax laws that could benefit seniors. Because of the One Big Beautiful Bill Act (OBBBA), seniors now have a new tax deduction of $6,000 for a single person and $12,000 for a married couple. This is important as it effectively makes social security non-taxable for most Americans. However, if you make too much money ($75,000 for singles and $150,000 for married) the benefit phases out. Sorry. (1)

This OBBBA deduction can make Roth conversions more appealing, in the right situation. If you are interested in this strategy, give our office a call and we can discuss whether it is right for you.

More good news for retirees. Beginning in 2026 the Michigan has introduced the “Lowering MI Costs Plan” which will eliminate state taxes on certain retirement income, including Social Security, pension, qualified IRA distributions, and Roth conversions. (2)

Together, these tax changes should not only help keep more money in your pocket but also give us greater flexibility to position your accounts for long-term growth, tax efficiency, and estate planning.

Our Strategies

I could write a book on our strategies and, since this is going out to people who may not be clients, I cannot offer much commentary here. I will end by saying that if you have questions about the Callesen Wealth investment strategies or financial planning, we are happy to talk with you at any time.

Thank you to all who attended our 2026 Forecast. It was truly a wonderful night for our team and, hopefully, for you. We are honored and unbelievably grateful for the opportunity to serve you, and we appreciate you taking the time to attend our dinner event.

Sources

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