>> Matt Finley: Foreign.

>> Matt Nelson: Well, welcome back to the channel. We are going to chat about the market outlook for 2026 and Matt and I have some good discussion prepared. Um, Matt, I know that you've joined us multiple times in the past as we go over investment commentary and what we're thinking for upcoming coming days. A lot of times we just share this with clients but um, um, we're going to try to make this available to the public as well so they can get an insight on what we're thinking about portfolios and, and how we like to handle things. Um, Matt, what we're going to talk about today is, is uh, the article that, that you're putting out on, on our website as a blog that you, you uh, prepared titled at Market Outlook 2026. Um, making calculated Risks. And so I think today we're just going to go through it and get some of your thoughts and um, I'll see if I can add any commentary that's uh, helpful. But mostly we're going to pick your brain on this. So first of all though, before we get into that, how, how have you been there? I, we want to, we want to check in on the family and ah, the golfing uh, legacy that you're starting there.

>> Matt Finley: Yeah, thanks. Well, thanks for having me on again today. Um, at this moment, daughter's uh, back home for winter break. So nice to have her back uh, here for a few weeks before she heads back to college. Division 1 golf and the onslaught of spring. But um, just a lot of fun time to get back out on the course with her. Haven't been able to do that obviously since August. Boys are doing good, crazy as always, working hard. Oldest will be graduating college here. Hopefully this year we'll see. Moving along in life and uh, youngest just continuing to do high uh, school and his little baseball empire. He's creating baseball hard empire that is.

>> Matt Nelson: Well first part of the 2026 predictions out of the way then uh, the finish.

>> Matt Finley: Yeah, yeah, more, more chaos. More of the same.

>> Matt Nelson: Yeah, yeah, exactly. Well, so what we, we wanted to kind of revisit was what kind of roller coaster it's been. Um, you know, 2025 and we started out the year um, really with a decline in March pretty early in the year that got down deep as 19%.

>> Matt Finley: Right.

>> Matt Nelson: Which is, you know, it's quite a shock when uh, that starts off the year like that and um, you know, maybe talk about that like what, what happened, what was the push on that and what maybe pulled us out.

>> Matt Finley: Yeah, ah, absolutely. Um, you know, this time last year uh the article will have a link to the article from last year um with similar information. Just obviously the end of 2024. But we, we anticipated a market pullback uh to start the year just data economics A ah, few other trends were pointed that way. Um the depth of it 19 as you mentioned was probably a little deeper than we anticipated and most probably anticipated. And that was driven primarily by the inflation um, issues that were still persistent. And then of course the big hit of tariffs um, and the extent of tariffs and maybe the chaos of terrorists tariffs is, is maybe the bigger thing. Um like here's all the terrorists everybody. But we don't really know what they all mean. Um and so the markets price uh that in or repriced that in very very fast. Um and we certainly have some articles from last spring on tariffs. What they mean, what we anticipate moving forward. Um but yeah that was that that's what drew us down to a 19% negative ah, late March, early April.

>> Matt Nelson: Yeah that you know and, and as volatile as, as it was then. Um, you wrote here that we've got there is a shocking statistic. 37 new all time highs. So not quite the record which by the way record of 70.

>> Matt Finley: 70. Yep. Yeah. There's been a number of years where we've been around 70 all time highs and what an all time high is just for clarity is if the market closes that day at a new all time high that's marked as a new all time high. Um, and so so far this year, um, up to this point when we're recording this, there's been 37 new all time highs set in the s and P500. That's still a lot.

>> Matt Nelson: It is a lot. And you know what they say, I mean the new all time highs beget more all time highs. Uh, it's not necessarily that an all time high means that now the market has to go down, doesn't mean that there's not risk and we're going to talk about that. But uh, that's actually a good thing when we see that kind of, that kind of ah, behavior happen.

>> Matt Finley: Exactly.

>> Matt Nelson: Well you know just looking back at some of the, some of the predictions so to speak and what was put into that 2025 forecast. Maybe just touch on that uh, briefly before we jump onto. We're thinking 2026.

>> Matt Finley: Yeah. So our firm, we, we try to stick to the long term economic data to give us you know, some guidance on where things are going. It helps to eliminate the noise such as tariffs or a political election or you name it um, and it, it really then falls back on company earnings and growth, um, Fed reserve rate policy and so forth. So last year we uh, were still expecting company earnings growth to be pretty strong. Ended up being very strong on the year. And we like to look forward at the next year and the year after and come up with, think of it as a high and low um, target range and then our assumption within that. So last year uh, that led us to like a negative, Almost a negative 5 as the low scenario and a plus 16% as the high scenario. And our estimation uh, was somewhere in the high single digits. And as of today we're at the high end of that, that mark. So we're at 15 give or take on the year right now. Um, which is great. I, I love being wrong on, on the lower end of. Right.

>> Matt Nelson: Well with, if we're, if we've hit kind of that upper end of uh, what was, what might have made sense for a range, uh, how is that playing into maybe what we're thinking in 2026?

>> Matt Finley: Yeah, so again we're seeing earnings for 2026 and 2027 as strong, um, but not necessarily continuing to accelerate. And they can't continue to accelerate year after year after year. Like there has to be down years or flat years. And that's what we're seeing in the current analyst estimates moving forward. Um, and part of that is what brings our target for next year a little lower than it was. Uh, so instead of a roughly a negative 5 to plus 16, um, the target this year is more like a negative 7 to plus 13 range. But when we add all of the economic data out there, um, we should continue to have rate cuts in 2026. Um, a couple other items that are out there. Uh, still a, you know, an upper single digit type of return should be expected on the year.

>> Matt Nelson: Okay. Okay. Yeah. And you know I think that's a, that's a great segue into just you're talking about these highs and lows and the expectations. Um, and um, we're going to share um, this graphic that we, you put in the article. Annual returns and intra year Declines. It's a chart by JP Morgan. We love their um, their chart book. We get a lot of material, um, fundamental guidance out of this chart book and some just look back at history. And this, this uh, graphic illustrates the volatility you're talking about. And so just to explain it real quick for the um, those watching, what is this is showing is that every given year has intra year volatility. So over on the far Left, looking at 1980, the market was up 26% and down negative 17. All within the same year. Um, and so even though you can have a positive year, which most of the time you're having positive years, um, most of the time you have an. A low that's significantly below zero before you finish the year. Now this chart I think goes through the end of the third quarter. We didn't have fourth quarter. So year to date we're up about 16%. Market's gonna end, you know, probably end nicely positive. But at one point we had a down 19. And so just, just to keep that in mind, that we could kick off the next year here with a rough first quarter. And that doesn't necessarily have anything to do with where we're going to end.

>> Matt Finley: Yeah, and, and actually looking at this next year, um, it really mirrors what we were thinking coming into this year. Uh, there's probably going to be some form of weakness early on. Um, and then again, uh, a nice positive year. I don't personally think we're going to have a 16% positive year again next year, but there are some cases that that could happen. Like if all the things align properly and economically and I mean certainly could happen. M. We are expecting to have, um, national GDP growth in the first half of well over 3%. Uh, we are getting something that is hard to price in and that's, um, a better, um, tax receipts for individuals. Uh, there will be larger refunds for the individual filer this year. So think of it this way, that the consumer is going to have extra money in their pocket to start the year once taxes are filed. And we know what that means. Yeah, consumer spend. And then that gets multiplied in the economy. So we could have a little unexpected boost, um, first half of the year. Um, but I don't think that's enough money to keep the entire year just gangbusters going forward.

>> Matt Nelson: Sure. Well, you highlighted, uh, another graphic here from JP Morgan. The title is Sources of Earnings Growth and Profit Margin. Why don't you take us through the graph and why you thought that was significant. I think it's speaking to your point.

>> Matt Finley: Yeah. So you can see the, the two right, uh, columns there show 14% and 14%. That would be for 2026 and 2027. Estimates of earnings per share, growth of the s and P500 companies. And without getting into too much of the details, you can take that data and multiply it by what's called the PE multiple and give you a good range of what you think the market should be at based on analyst estimates. Now these get adjusted throughout the year. Uh, again coming into um, this year, uh, they have been adjusted up because we had some fantastic earnings seasons. This last earning season uh, was about an 82% beat, um, from company reportings. Right, that's really strong. Um, again not record but really strong. And so analyst estimates can go up on that. That's part of the reason why we are, are sitting at a 16 return on the year. Um, and that's likely to continue to a certain degree. So this, what this is showing us is earnings growth. Earnings growth is a good thing. That's how the stock market grows over time. As an investor you can clearly see years where it was down. Um, you know 20, 20 is, it was down, 21 was up, 22 was down. And so you can't uh, necessarily predict a recession or expansion just on that data. But it's another large piece of the data that we can utilize to get a general direction of where we think things are going to go.

>> Matt Nelson: Yeah, that's great. You know, we get a lot of questions about whether there's maybe a, an AI bubble or some sort of bubble, but just the word bubble I think, I think people just like to throw that around. Anytime market's high, it must be a bubble. Uh, so you know, maybe, maybe talk to that and, and um, see does it tie into um, at all the second part of this graph about the SP profit margins and just you know, where we are, profitability. Um, you know I'm thinking in my mind our company's just literally spending money and there's no profits. Um, you know, is something being covered up?

>> Matt Finley: Right, right. Yeah. And your um, your anchor point, and therefore most of our clients anchor point is what we went through in the dot com bubble, right. Where there were so many companies at some crazy valuations with no revenue. And uh, so it's a little different this time. Uh, while there probably certainly are some companies that uh, are out over their skis, they're spending way more than they are netting back and maybe will never net a profit off of it. Um, there's also plenty of companies that are profiting. Right? So uh, Nvidia would be the easiest one to talk about. Um, they are making money because they're selling chips and they're getting the money for that chip. But companies that are buying those Nvidia chips for their AI infrastructure to, for whatever their AI project is, maybe it's um, you know, Google investing in AI and everything that Google does, are they going to see a Net return on that. That's the million dollar question right now.

>> Matt Nelson: Yeah.

>> Matt Finley: Right. And so is there a bubble? Um, there's probably a little bit of out over the skis type of thing but I don't think there's a bubble in the sense of the Internet, um, you know, 99, 2000 Internet uh, collapse and what that meant. Um, but certainly all it's going to take is for consumers to be a little, or investors I should say to be a little afraid that there is a bubble, start selling, it'll cascade on itself and in my opinion that'll be the time for us to swoop in and buy things at a lower, lower price.

>> Matt Nelson: Yep. Long term investors, not short term speculators.

>> Matt Finley: Exactly.

>> Matt Nelson: Well as we just wrap up, maybe just quickly um, cover the positive catalysts and maybe a couple negative pieces uh, that we're keeping in mind.

>> Matt Finley: Yeah. So US growth is expected to continue to accelerate into 2026. Inflation um, will continue to decline or at least that's the direction we're headed. We just had a great inflation report this week that um, showed a pretty good decline. We believe that trend does continue. Employment's been the big sticking uh, point. Um, it's my belief that employment has or will be bottoming very soon and improve from there and um, that'll help to extend our bull view longer if that makes sense.

>> Matt Nelson: Yeah.

>> Matt Finley: Um, and then again AI and crypto adoption, um, so what we were just talking about, um. M. Maybe like the revenue side of that will pick up a little faster. But what we do know is companies are still spending a lot in that area and so that's going to continue to expand um, growth in the AI space while they continue to spend as long as they continue to spend. And as of right now it's supposed to be more spending next year than this year. Um, and then the negative side of things, if employment doesn't improve, if there are more policy mistakes, um, such as the tariffs or um, uh, maybe cutting checks to people instead of paying down the debt would be another policy type of mistake. Maybe rates don't come down um, any further and they stay flat. That could be a potential policy mistake. Or if we like we were just talking about if AI spending collapses or goes flat, then those things could be a negative catalyst to the market ahead.

>> Matt Nelson: Yeah. And all things that we're paying attention to and making adjustments to client portfolios. Um, of course we can't and don't attempt to exactly time tops and bottoms. It's just so, it's just a fool's Ah, errand to try that. But as uh, prudence, you know, and, and um, just kind of years of wisdom of doing this shows us we need to make small adjustments or prepare, we'll do that. And as, as we see things on sale, that's when you buy them up. So, um, yeah, I think, I think we're still in a global expansion and I think there's still some, Some good returns to be had.

>> Matt Finley: Exactly. Yeah. Keeping our foot on the gas a little bit. Um, equity side, um, should make sense. Bonds should do well in 2026 with rates cutting, um, as they did in 2025. That helps all of our clients who have balanced portfolios out. Um, and in similar 26, maybe a little less growth, uh, out there, but it should still be a decent year and if it changes, will certainly, you know, be making those changes, uh, to, to account for that.

>> Matt Nelson: Yes. Yep. Well, thanks for joining me as we just, uh, give little thoughts on the, on the market outlook and uh, you know, if you have any questions about this material, happy to take, uh, take some time and chat with you about your situation. If you're a client of ours, um, we'll happy to review your portfolio in the upcoming quarter. But as always, thanks for watching or listening however you're consuming this and we'll catch you again on the other side.

>> Matt Finley: Excellent. Thanks for having me on.

>> Matt Nelson: Investment advisory services offered through Savvy Advisors Inc. Other entities and or marketing names.

>> Matt Finley: Products or services mentioned here are independent of Savvy Advisors Inc.