Investments: Looking Ahead to 2026
The year 2025 proved to be volatile but ultimately very favorable for investors. After declining nearly 20% in early April amid escalating concerns around tariffs, the S&P 500 rallied sharply and finished the year up more than 16%.
Bonds and commodities also delivered strong performance, with gold posting a banner year and ending up more than 65%. Large-cap technology stocks continued to lead the way, while international equities, driven primarily by emerging markets, outperformed U.S. stocks. The U.S. economy also showed resilience, with estimated growth of approximately 2% for the year.
Looking ahead to 2026, the U.S. economy is expected to continue expanding, supported by several potential tailwinds. These include tax cuts from the OBBBA, further deregulation, a continued easing of monetary policy (although likely at a slower pace than markets currently anticipate), and sustained growth in corporate earnings driven by optimism surrounding AI.
That being said, equity valuations remain elevated, reinforcing the importance of not overplaying your hand. Maintaining diversification across asset classes such as stocks (specifically into internationals and small/mid-caps), bonds, real estate, commodities, and private assets remains a prudent approach moving forward.
Planning: 529 to Roth?
With the passage of the SECURE 2.0 Act, overfunded 529 plans can now be rolled over into a Roth IRA without incurring taxes or penalties. However, several conditions must be met to qualify.
The 529 plan must have been open for at least 15 years, and contributions made within the past five years are not eligible for rollover. The beneficiary must have earned income equal to or greater than the rollover amount in the year of the transfer, annual Roth IRA contribution limits still apply, and the Roth IRA must be in the beneficiary’s name.
Additionally, there is a lifetime rollover cap of $35,000 per beneficiary. For parents, this new provision reduces the risk of overfunding a child’s 529 plan and, when used thoughtfully, can be an effective way to help kickstart a child’s retirement savings in a tax-efficient manner.
