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It's worth reflecting back on the remarkable period we've just experienced. For the sixth time in seven years, the stock market has delivered double-digit returns, even though it hasn’t always felt smooth. Now, here are seven key themes likely to shape markets in 2026, observes John Gardner, founder and principal of Blackhawk Wealth Advisors’ Market Insights.

1. Diversification is working again: For much of the past decade, US stocks outperformed nearly everything else. That changed in 2025 as international stocks and bonds both contributed meaningfully to portfolio returns. Periods like the February-through-April stock market volatility remind us that a balanced approach can help smooth the journey toward your goals.

2. Stock valuations are elevated: Strong market returns have pushed stock prices higher relative to company earnings. The S&P 500 Index (SPX) has been trading at levels approaching those seen during the Dot-Com era, and we should be prepared for volatility as markets adjust to higher valuations.

SPDR S&P 500 ETF (SPY) Chart
 

3. Artificial Intelligence continues to drive growth: AI has captured enormous attention and investment. Companies are spending trillions of dollars building the infrastructure needed to support this technology. Since most portfolios have significant exposure to AI-related companies through major stock indices, maintaining appropriate balance remains essential.

4. Economic growth remains positive but uneven: The economy continues to grow at a healthy pace, though not everyone is experiencing this equally. Some sectors and income groups are thriving, while others face challenges. This is sometimes referred to as a “two-speed” or “K-shaped” economy.

5. Tariff concerns may continue: Despite significant attention in 2025, tariffs have not caused the economic disruption many feared. Inflation has remained relatively stable, and growth has continued. This doesn't mean tariffs are unimportant, but it suggests that their effects may be more nuanced than headlines suggest.

6. Political developments will create headlines: The upcoming midterm election, ongoing discussions about government debt, and the new One Big Beautiful Bill Act (OBBBA) tax legislation will all generate news throughout the year. While these topics matter for policy and planning, history shows that markets have performed well across different political environments.

7. The Federal Reserve will continue supporting the economy: With new leadership coming to the Fed in mid-2026, monetary policy will likely evolve. But sticking to long-term financial goals, not over-reacting to monetary policy changes, is key.

About the Author

John Gardner is the founder and principal of Blackhawk Wealth Advisors (BWA). In his 37 years as an investment advisor, Mr. Gardner has gained valuable investment insight, experience, and knowledge through working with leading Wall Street wealth management companies before starting BWA.

As both a Certified Financial Planner (CFPand a Certified Portolio Manager (CPM), he seeks to ensure client's investment portfolios are consistent with their overall estate plan.

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