As we approach 2026, what can investors expect from the equities market, fixed income, and the overall US economy in the new year?

The Federal Reserve lowered its policy interest rate by 25 basis points, as widely expected. However, Fed Chairman Powell hinted at a pause ahead, and there were several dissents.

We believe the macro environment will continue to be unstable given policy crosscurrents and a wobbly labor market, but stocks can likely churn higher given a firmer earnings backdrop.

International stocks could be poised for another strong year in 2026 due to accelerating global growth, attractive valuations and the potential for dollar weakness.

Liz Ann Sonders and Kathy Jones review the Federal Reserve’s latest dilemma and the complexity of policy setting in this environment.

We believe municipal bonds will continue to offer attractive tax-adjusted yields in 2026, while credit quality should remain stable.

We continue to suggest an up-in-quality fixed income bias for the short run, but investors can still consider some of the riskier parts of the fixed income market in moderation.

Overall, we expect 2026 to be another good year of returns for bond investors, but the range of potential outcomes is wide.

After a gangbuster stock market rally since the early-April lows, many of the prior highfliers have taken a breather amid AI bubble and valuation concerns.