2026 Market Outlook

Each year, I update the forward-looking assumptions I use when building and stress-testing financial plans. These figures come from JPMorgan’s Long-Term Capital Market Assumptions, which represent their best estimate of expected returns over the next 10 to 15 years.

Many investors and institutions use these figures as a form of market forecasting. I don’t believe in forecasting markets over one-year periods because it’s nearly impossible to do with any consistency, similar to a weatherman trying to project the exact path of a storm days in advance.

Rather than predicting what will happen in any single year, I use these assumptions to help build durable financial plans that can hold up across many different market environments.

Below are the key assumptions I’m using for 2026, how they compare to 2025, and how they stack up against historical rates of return.

• 2026 assumption: 6.7%
• 2025 assumption: 6.7%
• Historical inflation rate: ~9.0-10.0%*

• 2026 assumption: 7.0%
• 2025 assumption: 7.0%
• Historical inflation rate: ~10.0-11.0%*

• 2026 assumption: 6.9%
• 2025 assumption: 6.9%
• Historical inflation rate: ~11.0-12.0%*

Across U.S. equities, forward-looking assumptions remain well below historical averages. This is intentional. Valuations today are elevated relative to history, and planning based solely on past returns can lead to overly optimistic outcomes. Using lower return assumptions helps stress-test savings rates, spending targets, and retirement planning scenarios.

• 2026 assumption: 7.5%
• 2025 assumption: 8.1%
• Historical inflation rate: ~8.0-9.0%*

• 2026 assumption: 7.8%
• 2025 assumption: 7.2%
• Historical inflation rate: ~9.0-10.0%*

International developed and emerging market equities currently trade at lower valuations relative to their own historical ranges compared to US equities, which remain elevated versus long-term historical levels.

That valuation gap does not guarantee higher short-term returns, but it helps explain why expected returns for international and emerging markets remain competitive in long-term planning assumptions. These asset classes play an important role in diversification rather than short-term return chasing.

• 2026 assumption: 3.1%
• 2025 assumption: 3.1%
• Historical inflation rate: ~3.0-3.5%*

Cash yields remain higher than what investors experienced for much of the past decade. Historically, cash has tended to earn roughly in line with inflation over long periods. That reinforces its role in a portfolio as a liquidity and stability tool, not a long-term growth asset.

• 2026 assumption: 4.8%
• 2025 assumption: 4.6%
• Historical inflation rate: ~4.5-5.5%*

Bond assumptions have improved meaningfully compared to the ultra-low-rate environment of the 2010s. From a planning perspective, higher expected bond returns improve portfolio resilience, income planning, and sequence-of-returns management, particularly for clients approaching a work-optional lifestyle or retirement.

• 2026 assumption: 2.5%
• 2025 assumption: 2.4%
• Historical inflation rate: ~3.0%*

Inflation assumptions remain modestly below long-term historical inflation. From a planning standpoint, this reflects an expectation of normalization rather than a return to the unusually high inflation experienced recently. Assuming inflation in this range helps avoid understating future spending needs while remaining grounded in long-term data.

1. Forward-looking assumptions create more conservative plans than relying on historical return

Using lower, forward-looking return assumptions reduces the risk of building a plan that only works if markets deliver above-average outcomes. This leads to more conservative savings targets, spending decisions, and expectations around work-optional timelines. In other words, plan for the worst and hope for the best.

2. Diversification matters more than precision

Whether it’s a traditional 60/40 portfolio or another mix, globally diversified portfolios are still expected to deliver reasonable long-term returns, even after a strong run in U.S. equities and a higher-rate environment. The focus should remain on staying invested, maintaining diversification, and relying on disciplined rebalancing, not on assuming traditional portfolio construction no longer works.

3. Bonds and cash improve flexibility, not excitement

Higher expected returns for bonds and cash improve liquidity, rebalancing opportunities, and downside protection. These assets are less about maximizing returns and more about improving the overall durability of a financial plan.

4. Long-term discipline still matters most

These assumptions are designed to support planning over decades. Short-term market outcomes will vary, sometimes significantly, but a well-built plan should not depend on getting any single year right.

Final Thought

No one knows exactly how markets will behave in 2026 or beyond. What we can control is how reasonable our assumptions are, how aligned our portfolios are with our goals, and how adaptable our plans remain as conditions change.

If you would like to review how these updated assumptions affect your financial plan, retirement timeline, or investment strategy, I am happy to walk through it with you. Let’s talk.