Credent’s 2026 Economic Outlook & Market Expectations

Instead of New Year’s resolutions, at Credent, we create New Year’s outlooks, or our experts’ general expectations for the coming year, based on their insights and experiences. As the calendar turns, let’s review 2025 and set our 2026 economic outlook and market expectations.   

Per tradition, our Investment Management team set Credent’s outlook for 2025 earlier this year. What did we anticipate in the economy and markets?  

In light of earnings momentum, strong consumer sentiment, and a still-robust labor market (despite some cooling), our investment experts expected a soft landing or a lack of a recessionary backdrop this year.  

In addition, we believed commodities, such as oil, would stay at fairly neutral price levels. With all of these expectations and knowledge of the incoming administration and the domestic energy independence story, we favored equity market participation in 2025.

Leaning into a diversified equity market participation approach (without chasing momentum) proved successful this year. Going against conventional wisdom, our Investment Management Team predicted that fixed income would carry more risk than stocks in 2025. The markets have proven that they rarely react the way the masses expect them to. As such, our hesitancy around fixed income defined our risk management approach.  

Interest rates were expected to drop meaningfully this year, and while they dropped, they didn’t fall to a level that justified an overweight allocation to fixed-income assets. In other words, our caution proved wise.  

Based on our knowledge of the incoming administration, we expected trade policy uncertainty rhetoric and sentiment to affect markets in 2025. Unsurprisingly, there were numerous volatility cycles as the market reacted to trade policy discussions and activity.  

That kind of volatility is not likely to disappear in the new year. Despite that, we still support investors participating in the equity market.  

No one has a crystal ball. At Credent, however, we believe we have the next best thing — investment experts who spend their careers watching the market and economy, making objective, educated projections about what’s to come.  

What are these experts expecting for 2026?

In a normal business cycle, there can be too much of a good thing. The linear growth cycle we’ve experienced since 2020 cannot be sustained in perpetuity. It’s healthy for a business cycle to ebb and flow, as it tends to do every 7-11 years.  

Normalization does not mean we should run from the equity market or fear the worst. 

We do not foresee a 2026 recession, and we’re not anticipating a notable decline in sentiment or economic activity. Instead, we expect a healthy normalization in growth, retail sales, and demand.  

The labor market’s continued cooling will likely drive this normalization. However, we think this slowdown will be minimal and baked into capital markets. (In other words, not something that will cause major market shifts.)

We believe the stock market may be overvalued in 2026, especially in the United States. This expectation is not a reason for concern or an equity market exit, as valuations are a poor market timing indicator. However, we wouldn’t be surprised to see downside in broad equity markets, like the S&P 500, while the average stock gains value.  

How is that difference possible?  

The S&P 500 is an AI-top-heavy index that does not represent all stocks. If broad indices adjust to the overvaluation next year, the average stock may outperform them across capital markets. From a risk management standpoint, we are positioned to benefit from the broadening cycle in domestic and international equities. 

Tariff rhetoric is still in play in our 2026 economic outlook, and we believe it could cause short bursts of volatility next year. Investors survived similar circumstances this year, proving they can do it again if necessary.  

With Credent’s risk management strategy and proper diversification (no mega-cap performance chasing), we can tap into pockets of opportunity created by volatility throughout the year.  

The housing market has ebbed and flowed, but overall, interest rates have dropped (and will likely continue to drop), demand is steadying, and houses are staying on the market for longer.  

As such, the housing market could gain serious momentum in the new year, bolstering the economic backdrop.  

We anticipate a neutralizing, sustained oil price backdrop next year, which bodes well for U.S. consumer sentiment.  

Once again, we foresee greater risk in bonds than stocks in 2026. If lower rates (which are baked into the bond market) don’t materialize, the labor market doesn’t cool, or the Federal Reserve’s rhetoric changes, bond market sentiment could flip.   

With that instability in mind, we are approaching the bond market with a serious risk management approach.

When you partner with Credent, your next step is simple: Stick to your financial plan and rest easy knowing our team is managing your portfolio throughout the year. Attend your regular meetings, such as your Annual Goal Review, and keep your team updated on your goals and needs.  

Finally, focus on what you can control this year:¹ saving more than spending, participating in the equity market in a way that makes sense for you, and continuing to build your financial future based on your plan.  

We look forward to what the new year will bring!  

If you have questions about our 2026 economic outlook and market expectations, reach out to a team member using the form below.