2026 Stock Market Outlook

The obvious choice today to kick off the new year commentary for Zen Investor is to do a 2026 Stock Market Outlook...and what that means for our investment plan and portfolio.

The most complete view on this topic was captured in my webinar from mid December:

Watch 2026 Stock Market Outlook Webinar >

Please take the time now to watch. Then I will give some fresh insights.

In summary there is no strong case to say a bear market is on the way. Yet there are some important areas to stay focused on in case they erode (tariffs and employment).

So we should go forward with the classic stance of “bull market til proven otherwise”.

What I will continue to pound the table on is the obscene valuations for Mega Caps and high flying AI stocks. That party will not last. 

Yes, AI is a revolution.

Yes, AI will change everything.

BUT...this time is no different than any other sweeping technology change over the eons. At some point profitability matters. And valuations matter.

That lesson was learned the HARD WAY back in 2000 as the dot.com bubble imploded leading to 80 to 95% losses for many of the overinflated names.

Please remember that if you lose 80% on an investment then you need a lot more than 80% gain to get back to breakeven. Yes, that is confusing at first so let me spell it out.

Lets say you have $10,000 in a stock that falters by 80%. Now you have only $2,000. An 80% gain would only get you to $3,600. The sad fact is that you need that stock to a whopping 5X to get back what you lost.

Do I have your attention now?

We are not avoiding AI altogether. We are just being much more selective in going for those companies that combine ample growth with STILL attractive valuations and upside potential.

Back to the big picture. Given the valuation problem for many large caps is why our investment plan continues to skew to smaller stocks.

That game plan started to pay off as early as August 2025 when there was a serious rotation to small caps.

Those sands shift on a daily/weekly/monthly basis, but this half year performance chart going back to the middle of July 2025 shows you that smaller stocks are already starting to take the lead.

Another part of the investment plan is to expect more volatility. This will be borne of a market that is already richly valued. That portends that money will be taken from past winners and rotated to new groups.

This form of sector rotation will increase confusion...and increase volatility.

The best recipe for volatility in the midst of a bull market is to have a “Buy the Dip” mentality. Meaning to have a wish list of your favorite stocks you would love to buy at even better prices. And then when the opportunity presents itself..then take action.

We certainly will do that going forward as we have done in the past.

The other part of our investment plan is to expect lower rates from the Fed. It is clear the President wants lower rates. It is clear the President doesn’t care that the Fed is supposed to be an independent group. And it is clear the President doesn’t want to wait to remove Powell when his term ends in May.

Whoever takes over the Fed (and whenever that happens) rates will go lower. It is about as sure as the certainty of “Death & Taxes”. Thus, we want overweight investments whose industry benefits from lower rates.

We have already tripled down on that in the auto industry with 3 outperforming stocks. Plus we previously had some quality industrial companies that also benefit from industrial space. 

Today all 3 new additions to the Zen Investor portfolio will do better in a lower rate environment. The latter two because income producing stocks become all the more attractive as rates head lower. Gladly they all have stellar growth products outside of the income to propel shares higher. 

As always, I will continue to actively monitor all fresh economic and market data to make adjustments to our plan. But so far, so good in terms of how this plan is playing out for our portfolio. 

What To Do Next?

Discover my Zen Investor portfolio that relies upon my 45 years of investing experience. 

During that time I have learned vital lessons from 7 bear markets…8 bull markets and just about everything else the “Mr. Market” can throw at us. 

I use this knowledge to create a detailed investment plan. Then lean into our proven Zen Ratings quant model to select the best stocks given their average annual return of +32.52%. 

In total the Zen Investor portfolio now has 20 top stocks that are hand picked for today’s unique market landscape. 

Plus 3 new stocks I just added in early January with stellar upside potential. 

If you are curious to learn more, and want to see my current top 20 stocks, then please click the link below to get started now. 

Discover the Zen Investor & Top 20 Stocks >

Wishing you a world of investment success!

Steve Reitmeister…but everyone calls me Reity (pronounced “Righty”)

Editor of the Zen Investor

Want to get in touch? Email us at news@wallstreetzen.com.