Portfolio Positioning for 2026: Lessons, Risks, and Opportunities

0:01 With a new year comes new challenges, new opportunities. What to think about as we start 2026 for your portfolio. That's what we're talking about today on something more with Chris Boyd. Stay with us. Welcome to something more with Chris Boyd. Chris Boyd is a certified financial planner practitioner and senior vice president, financial advisor at wealth enhancement group. One of the nation's largest registered investment advisors. We call it something more because we'd like to talk not only about those important dollar and cents issues, but also the quality of life issues that make the money matters better. Here he is your fulfillment facilitator, your partner in prosperity, advising clients on Cape Cod and across the country.

0:44 Here's your host, Jay Christopher Boyd. Welcome everybody to something more with Chris Boyd. Thanks for being with us for another segment. As we start off a new year, we often think about these kinds of issues. So we're going to talk about markets and portfolio planning. Joining me today, of course, is Jeff Perry. And we also have Brian Regan. Our, uh, all of us are with the AMR team at, uh, wealth enhancement. So glad to have you joining us. Well, this is going to be good. I was just looking at Brian here and looking at his name with his. Yeah. What's, uh, what's going on with this title here, Brian? Uh, I was going to put baloney sauce, but I don't know. I, I just, you know, I'm in a mood this week, Chris, you know, the conversations we've had about, um, not mincing words as I say, but I'm just saying I'm not no sugarcoating.

1:34 Um, I'm all fired up. So it should be a fun show. And I, I think those are the best shows to listen to when people actually say what they mean, um, rather than dancing around the topic for one reason or another. So if you're not, we're, we're talking about the video. Uh, we obviously, if you're listening to us on a podcast, you know, we have the podcast. We also, uh, have a video that we put out on YouTube and on our webpage. You can find that easily by going to something more with chrisboyd.com. Brian has put not only his name on the show here, but his, uh, under title, he's put no sugar coating. So that's what we're, that's what we're referring to. So that's what we're in store for a no sugar coating.

2:16 You know, let's start off Brian, as we think about how to be thinking about, uh, posture and positioning in a portfolio, uh, maybe we can start with just a quick look back to think about what lessons from 2026 do you think are worth paying attention to? And maybe, um, that, that carry forward into our thinking about what should we be, you know, being attentive to in 2026, I think the big lessons of 2025 is just the narratives change constantly and it's best just to keep focused on the longer term. Um, that's the longer term for the prospects of a business. If you own individual stocks, the longer term and the focus of your.

2:57 Um, financial plan. If you're thinking about yourself personally and how you should be allocated, um, when it comes to your savings and your spending, I think focusing on the longer term is much better than reacting to whatever news headlines, if you just think of just 25, 25, right. Um, you know, at the end of 24, we had a bit of a rally in the markets because there was optimism, optimism about tax cuts. And then, uh, you know, basically soon after the inauguration with market started going down because they were afraid of tariffs. And then in April we had a big drop because of tariffs. So, you know, we had, uh, the market go up because of, um, the government policy.

3:39 We had the market go down because of government policy. We had the market panic because of government policy. Then we had the market rally all the way back because of reversal of a lot of that policy. So, um, just in the first, you know, six months of the year, we had a bit of a rollercoaster when it came to government policy. Um, and I, I think the average person is probably worse off if they reacted too aggressively in one way or another to, to any, any particular headline. Um, when you think about individual stocks or themes, um, Nvidia, which is currently the stock market darling and has been the stock market darling. Uh, really saw a lot of pedals fall off during the middle of the year. Right. It actually had a 40% drawdown, uh, trades around $185 today.

4:23 At one point, um, you could have bought it at $85 a share this year in 2025. Um, so if you were a big bull and then became a big bear, uh, it didn't get bullish again, you know, that, that was painful, right? Um, open AI, uh, was hailed, uh, and has, has an amazing product. So I think chat GPT, um, definitely the first mover advantage when it came to the large language models, it was hailed as, you know, the, the. Sacred cow of, um, AI technology going forward. And, uh, in Google was pronounced, you know, dead and that narrative is completely flipped. Now people are saying open AI is flipped and Google's the, the, you know, um, MVP of the league.

5:07 You know, I think that battle is going to continue. I think, you know, there's a lot of players in the large language model space. I think, you know, saying Google's out or open AI as I was probably premature. Um, I do have my opinions on what it's going to be for the longer term. Um, and you know, we can talk about that. It's interesting, but it had huge effects on other companies too, right? So Oracle, uh, took a big order from open AI, um, to do a lot of, uh, uh, a lot of their data center work, uh, $300 billion between now and 2030. Um, and Oracle shot up and then was quickly met with a lot of skepticism when the market started piecing together the numbers and said, hold on a second.

5:52 Open open AI has about $1.4 trillion in commitments between now and 2030. That's an awful big number. How are they going to get there? Uh, and so Oracle started to fall and Microsoft, which, um, you know, owns a significant stake in open AI, uh, you know, started staggering as well. So, you know, there was a lot of ups and downs and different changes in narratives. Um, and I think, uh, you know, if you, if you clung to any one of those, uh, you know, you, you probably really, really hurt, um, one way or another this year. So I think the biggest lesson is to have a long-term thesis that's well researched, thought out and sticking with that and monitoring it for real purposeful, uh, changes in that thesis.

6:42 Yeah, that was good comments, Brian. I want to just drill down on one piece of it because it's the thing that seems to be on the forefront of our clients' minds when they come in for reviews and meetings is the politics of it all. You know, during the elections, when we have an upcoming election, we talk a lot to our clients and on the podcast about, you know, don't put your politics in with your investing, right? Don't, if your team's, if your political team's not winning, don't jump out of the market. And if your team is winning, that doesn't mean you should be all in on the market. So we talk about that a lot because people are thinking about in elections, but, you know, with this administration we have for the next three years, we've had one for the next three years, politics and the market are going to be on the mind of the investors.

7:29 It's kind of one thing, especially if they have a significant leaning to the left or right, but Brian's right. If they don't go together, they don't go together. You can't react negatively or positively because you like or dislike something that your political party is promoting because it's probably not going to happen. It might be overruled by a court. Somebody might change your mind and it might actually be okay. So the two separate and distinct things. So don't mix your politics with your financial plan. I think that's the big lesson for me, Chris, for 2025. Yeah, portfolio and politics, huh? Not always the same outcome. But, you know, Brian, you talked about how it did move markets to some extent.

8:11 Right. So how do you, you know, use that term, how do you square that circle or whatever? How do you make sense of that when you know it's not always the right thing to be letting your politics invade your portfolio planning, but that policy is impacted? And but does it is it is it the kind of thing that you should be thinking about as you structure your portfolio design? As a general rule, I agree with Jeff 100 percent. I do think this administration has been a little bit different and it's not just the administration, but it's the congressional makeup and the makeup of the Supreme Court.

8:53 We're supposed to have three co-equal branches of government. Doesn't necessarily seem to have been the case over the last year. Tariffs have been unilaterally enacted and it's a guess as to whether or not the Supreme Court will push back on those and to what degree and what's going to happen. And that does have a huge effect on the economy. I mean, a very, very big effect. We've had significant threats to the Federal Reserve independence where I would say manipulation of the yield curve should be your base case going forward for the next for the next few years. And Congress has no desire to push back on anything the president does.

9:36 So there's doesn't seem to be any checks whatsoever. So, you know, there are significant reason to believe that this administration and this congressional makeup and the Supreme Court make the situation different than has been in the past. When we were thinking and analyzing prior to the election, I think the general assumption is that we would have at least one part of Congress, the House or the or the Senate to be blue. And that's not the case. They're both they're both red. The Supreme Court's red and the president, the president is a Republican as well.

10:16 So there's an overwhelming amount of power right now that resides in the executive branch. And that has caused a lot of turmoil in the last year, despite the fact that the economy has continued to deliver very, very strong results and very and filled with a lot of optimism with the future of technology and and productivity growth. So, you know, that that's a that's a great thing. And if you were. And maybe you could add to that, which relates to policy issues, but you could include tax policy as being favorable to industry.

10:59 Yeah. So another tailwind there. Right. So Jeff is right where to say that, you know, if you let's say if you were a Democrat and you sold out of everything because you were concerned about the Republican administration and a lot of Republican power, you missed out on a good year because there's a lot of a lot of other good things going on in the economy. I mean, you know, one one man does not decide the earnings for for all every company in the country, at least at least not yet. I mean, there there has been a lot of proposals for price controls and socialistic type policies, but no legislative fervor for that, at least yet.

11:42 Let's focus on a couple of other things. And by the way, before I turn attention to something as it relates to this, I wanted to mention for our compliance team here at Wealth Enhancement, we've talked about a number of stocks and some earlier comments. Mention of stocks is not a recommendation or an offer. Individual investors should do their own due diligence to determine the appropriateness of their own for their own circumstances. If you need help, consult an advisor. We certainly are available. One of the things I will be mentioning throughout the show is it's the time of year when people are more focused on their portfolio and are available to help with a portfolio review, complementary consultation.

12:28 We usually do that in the context of a framework of a financial plan as well. But happy to help you. And one of the things we've been finding a lot of attention around these days is tax strategies to help people navigate embedded capital gains or some of the challenges that people face, that there are techniques that can be helpful to help you manage risk and manage taxes as well. So in any case, if you need a complementary consultation, don't hesitate to reach out to us. You can do that by phone, 508-771 -8900, or you can always send us an email AMR-info at wealthenhancement.com.

13:16 In any event, you know, one of the things that policy, I think, you know, you guys talked about this a couple of weeks ago when making predictions, I think is really kind of relevant is the outlook when it comes to the Fed and interest rate expectations. And Brian, I think that's part of among the things that you are giving thought to as it relates to positioning and portfolio design and what that means for markets, you know, productivity and the availability of low cost, you know, use of money, you know, if interest rates are lower and likely to be going lower on the short end, that has certain consequences.

14:11 The overall structure of the yield curve has some implications. Talk a little bit about this issue when it comes to your framing of portfolio design. Interest rates are an important part of that consideration, are they not? They're a huge input, they might be the biggest input. And, you know, one of the themes that I'm going to talk about in this quarter's webinar is about holistic asset allocation. And what does that mean? I think a big problem that a lot of investment shops do is siloing their thought process, right? They might think this is the right thing to do for equities right now.

14:51 This might be the right thing to do for fixed income right now. But in my mind, they're kind of married to each other, just like my wife and I are married to each other, right? If she gets upset, I'm going to be upset. If she's very happy, I'm probably having a good day, too, and vice versa. Right. So they're very much involved and there are good ways to utilize the shape of the yield curve. So, for example, small banks, when they take in your deposits and they pay you a very low rate of return based on the short end of the yield curve, or they can borrow from other banks at a rate that's reflective of the Fed funds rate.

15:35 You know, that's actually what the Fed funds rate is, right? It's the overnight interbank rate. So if that is lower than the rate that they're lending at, they get something called a net interest margin. And the bigger that spread, the more money they're going to make. It's not that it's not that simple, but generally speaking, that's a good rule of thumb, right? They don't want the duration to be too far off, which is why it's not. It's not a hard and fast rule, but that's a good example of how the shape of the yield curve can affect an equity investment. In this case, the regional bank is probably going to make more money. That means their equity is probably going to do well.

16:16 You know, another way, if you think about from 2009 to 2019, what type of assets really outperformed? In that case, we had extreme intervention by the Federal Reserve with the yield curve. And I actually think it was the appropriate thing to do at that time because we had very, very low inflation. But we had a zero Fed funds rate and a 10 year treasury that was below 2 percent. And what did you see? You saw growth stocks really chug along north because people were willing to wait for their longer term returns rather than getting their returns today because of the difference in interest rates.

17:01 So it's very important. And we I think it's the first thing I look at when I think about asset allocation. And it's one of the biggest inputs, along with earnings, when I think about valuation. So, yeah, I think it's super important. And we're in a situation right now where the Federal Reserve independence is very much under question and likely going to be close to non-existent in May. So what do I expect? I expect an extreme shape to the yield curve. I expect the Fed funds to go much lower, the one, two and three year part to be much lower than it is today.

17:42 Today is around three and a half percent. And I expect the 10 year to stay where it is or float a little higher. So without any yield curve intervention, which is always in the cards, buying mortgage bonds of 200 billion dollars from Fannie and Freddie has already been at least suggested from the president. So yield curve intervention is definitely and rate intervention is definitely not off the table when it comes to what we're seeing from policy. So what does that mean? I would expect it to benefit the types of equities that will do well in a in a steep yield curve environment.

18:23 And so do you want to elaborate on that, who those are? Yeah, I think it's very similar to the 2009-2019 playbook. The difference here is that inflation is not below 2 percent. So this is something that we're going to have to monitor very closely. If inflation expectations start to grow because we have negative real rates on the front end of the curve, then your growth stocks might not do as well. So diversification and asset allocation are very important. I do think this is going to be negative for the dollar. So I think this is likely continually positive for emerging markets. I think it's continually positive for gold with negative real real rates or my expectation of negative real rates.

19:08 So, you know, our portfolios are going to be tilted towards, you know, I mentioned regional banks, I mentioned growth stocks, I mentioned gold. Those things are all going to be pieces of the portfolio. So, Brian, in your comments about 2025, you talked about AI and the different companies involved. So we're in 2026, the Nasdaq and some of those Mag 7 stocks are not off to a roaring start this year. They're kind of hanging out. Do you think the AI projections or thoughts of unlimited spending, you know, basically unlimited spending and these stocks just going to the moon is in the market of these companies like overpriced because the spending might not happen?

19:55 Or do we have a long way to go? Are we really early in the cycle? And these companies who are some way connected to the AI boom, the AI future, are still worth looking at. I, you know, I don't look at the Mag 7 as a basket. It's just, you know, I know that people do on CNBC. I was just using that as a reference where they've kind of stalled. I mean, the sector in general, are we overblowing the sector? And, you know, is it time to pause? It jumped out at me because I don't know what every company has done up to date in the Mag 7. I know Google's done very well, and that's probably because I own a lot of Google. So I'm pretty, I'm pretty tuned in there.

20:35 And a lot of our clients do in discretionary accounts as well. But to answer your question, I think a lot of the same, just because the calendar turned, I don't think the theme has changed. And I got some good reasons for that. So NVIDIA, the biggest hardware provider when it comes to the AI story, is projecting a half a trillion dollars in sales in 2026. They gave a full year guidance the last quarter, which is, you know, unheard of, really. I mean, sometimes you get a quarter, sometimes you get nothing. A full year, you know, in an earnings, a quarterly earnings call is pretty significant. And that means that they're pretty confident.

21:17 And what does that mean? I think that, you know, they're expecting the hyperscalers to continue to spend as they've been spending. And they've been doing nothing but upping their CapEx forecast. You know, there's been, because of the giant numbers that are being thrown out, there's been some speculation about, you know, an AI bubble. And I think that's very appropriate to watch. It's very important to see how these companies are financing these buys. Lately, they've been financing it through cash flow. Some companies like Oracle and Facebook, to some degree, have been financing it through other means, Facebook through private credit, Oracle through public debt, and Oracle starting to look pretty indebted, which has weighed on their stock price significantly.

22:07 So, you know, another thing is data centers, you know, just because you spend 50 billion dollars doesn't mean you get a data center right away. They take two to three years to build and sometimes longer for some of these bigger ones. And that even seems optimistic to me. Right. I don't know if anybody here has ever built a house, but I have some close friends that do. And just building a personal residence has taken over 12 months in both their cases. So two to three years sounds even optimistic to me. So most of the data centers that are under construction now broke ground in 2024 and 2025, which means that compute won't come online until late 26, early 27 at best.

22:49 So we won't know if we have a compute overhang for well more than 12 months. You know, there's going to be speculation, of course, and I think that's appropriate, but I don't think we'll know for sure until the boxes are lit up. And from every CEO that I listen to and from the CapEx projections, it doesn't seem like anybody thinks they have enough compute. But the idea of having too much seems. Almost crazy to them, like. Related to those comments, are you still optimistic about some of the big construction companies who are building these and utilities who will provide the electricity and, you know, a lot of people have talked about utilities, for example, as a big bottleneck, right?

23:41 Because we need a lot of power to power these things, you know, an overwhelming amount, really, and from all types from from. But natural gas is probably going to drive it. There's been, you know, Aqua, for example, is a stock that's gone just vertical and they have no revenue. Why is it gone vertical? They. Believe they can build basically private nuclear reactors for a lot of these data centers, right, and they have a prototype. Constellation Energy in Canada is actually building something similar. So, you know, there's reason to believe that it's possible. I'd also we should note that you're getting a lot more compute for the power with each iteration of new chip.

24:22 So. NVIDIA just came out with a new chip called Rubin, and apparently it's four times more efficient than Blackwell, the previous iteration, and they're coming out with a new iteration every year. So if they keep improving for for X, we're going to need a lot less power than what people are predicting now. And I think that is something that's going to be part of the. Part of the algorithm of making this work, just more efficiency when it comes to chips and power, and they've been doing that through software and doing that to, you know, more efficient chip technology. There's there's it's it's pretty amazing how quickly they're they're building and fixing this problem, in my opinion.

25:05 So, Brian, you know, your comments broadly sound pretty positive and optimistic for the markets as we look ahead. It strikes me as, you know, interesting to think we had a down year in 2022, but that was several years ago now we're looking at 23 double digit returns, 24 double digit returns, 25 equities, double digit returns in all of these years. And now, you know, a generally a positive perspective as we look at 2026 and, you know, we've heard people talk about the 1990s as a comparison.

25:46 You hear that because of the impact of technology, new technology, AI seems to be today's new technology. So we did have a 20 percent nearly downturn last year, but we still had big numbers for the year. And I guess where I'm going with this is we don't know when, but we do know inevitably that volatility occurs. And as investors set their expectations for a new year, I hear you to be saying, hey, we think generally there's some good things happening and there's still opportunity that abounds for profitability from companies.

26:31 Talk a little bit about risk mitigation, risk management. How do you how are you thinking about this? You mentioned, well, we have to be mindful, be watchful for issues like a bubble or something like that. But what do you what do you how do you guide our listeners who may be thinking about, well, what if the other shoe drops? How do I position for that? The first line of defense is you guys, right, the financial plan, having personal conversations with people and making sure that they're not taking risks that they can't handle. And that personal conversation and that analysis of how much money they have, how much money they need builds a strategic allocation.

27:15 And we don't differ too far from that. Right. If you are a conservative investor for us, that means you're going to have around 50 percent in stock. If you're a very conservative investor, you can have around 30 percent in stock. You know, if you're aggressive investor, it's going to be eighty five to one hundred. It's going to be, you know, but that all comes from having these personal conversations and doing a financial plan and finding out how much volatility you can withstand. So the allocation decision is primary. You can add to that, you know, having liquidity reserves, you know, being part of that readiness. What else for things you might think about as you're structuring your portfolio?

27:57 The the fixed income exposure is an important decision in that you talked a little bit about that already. And I don't know if there's anything else you want to talk about. Alternatives other than the traditional stock and bond. You did mention gold in the portfolio as one of those gold can be volatile, but is an alternative, doesn't move necessarily in a correlated manner to equities generally. So that's a good point. Jeff, what else, Brian? So as a general rule, and I just want to put an exclamation point on the previous point that I made, whether strategic allocation and controlling that volatility is important.

28:41 If you are in a 50-50 active allocation portfolio with us, you know, the downturn that you experienced during the tariff tantrum in April was around 8 percent, a little less than 8 percent. And if you were in our 100 percent discretionary individual stock portfolio, you know, it was down 17 percent. So that's a big gap, right? If you have a million dollars, that's the difference between that's the difference of one hundred thousand dollars. And, you know, that might scare you out of the portfolio. If that scares you out of the portfolio, then you didn't realize the recovery. So finding that right balance is important and controlling for that volatility is also very important.

29:23 Now. When the key to building a portfolio that has positive returns and minimal volatility is by grouping a bunch of non-correlated assets. So if I have two assets, they both have positive positive returns, but they move on a day to day basis in different directions in each other, then I've fundamentally lowered the volatility that you're going to experience. And I've also delivered a positive return over the over the term. So that's what the that's the science between owning both stocks and bonds. Right. Bonds are historically longer duration bonds historically have a negative correlation with equity.

30:09 That doesn't mean it's always that experience. Right. And particularly in high inflationary environments, that's not the experience, especially in any single period which we experienced in twenty twenty two in twenty twenty two bonds fell almost 17 percent and equities were down north of 20 percent. So, you know, it's not always the case, but it's a good starting point. And since that's a good starting point, that should be the foundation. Right. How much equity should you have and how much in fixed income should you have? There are there are alternatives that might be correlated with one of these assets or the other. But maybe the correlation isn't as isn't as high as a one for one.

30:53 Maybe the the the strength of the moves, you know, there might be correlated one for one, but the strength of the move isn't as strong. So you might be able to get some upside without experiencing as much as the downside. You know, at the same time, your upside is probably capped in that scenario. You might get something that, you know, kind of has an unpredictable move and unpredictable correlation with equities, which is kind of what gold has. Right. It has a it has a historically unpredictable correlation. Sometimes it's highly correlated, sometimes it's negatively correlated. And that unpredictability could be a good thing as long as the return going forward is positive. So, you know, part of what we call the active allocation is evaluating the situation we're in at the time and rejiggering the assets within that equity and fixed income decision to limit the volatility as much as possible by being in positive, relatively uncorrelated assets for the best we can in that in that particular scenario.

31:56 One of the big things that we did that you guys know and during the tariff tantrum is we bought the VIX, which is something I had never done before. But this is the this was the ultimate expression of doing something that. It moves the opposite of the market, right, that the VIX is a fear gauge. It goes up when people get scared, when people get scared, they typically sell off their equities. They really sell off most of their assets, but the VIX goes up. So the VIX was positive. We made money on it while the market was falling down. And part of the part of the way that we got comfortable with that was. We thought, well, we could buy a small amount of the VIX, limit some of the downside. If the VIX does bad, that's actually good for us because that means everything else is going well.

32:40 If the VIX does well, we limit some of the downside. So that's how we got comfortable with that. And that's that's one of the ways in every I'll say every every tantrum is different. I mean, we've bought municipal bonds in the past during tantrums. We've done really long term charities during tantrums. We've bought in the tantrums. We've done we've we've we've done the gamut of different things. But, you know, I think that's just the most recent example of a position that we did where we tried to really offset that correlation. Excellent. Well, it's obvious for our listeners to recognize that in every year there's different circumstances and new things to consider.

33:24 But it's important, whether it's on the security level, on the macro level, there's a whole host of considerations to be thinking about, how should I be positioning my portfolio? And some of that relates to this this broad perspective on outlook. Some of it gets more into which industries will benefit, which will not. The fixed income, the interest rate environment, all of these are variables that we want to be responsive to how to be positioning the portfolio. And even more so, it's how does this fit into my context? What do I need for cash flow?

34:05 How much am I demanding from this portfolio? How much can I tolerate downside risk? And that fits into a financial plan. So as you think about these issues, as you look ahead into this year, know for anyone who's our client, know we're paying attention and making adjustments. And Brian will be talking about that in an upcoming webinar for our clients. We'll make some of those comments, most of that available to our listeners on this YouTube channel as well and on our website. And we'll probably talk more about this with Brian on a future podcast. But and in the meantime, if you're listening and don't have the benefit of some of our insights, but would like to maybe get a chance to have a conversation, now's a perfect time.

34:57 It's the time of year when people have a fresh set of eyes on things. We're happy to be a resource to you in that process. Complimentary consultation, really a two meeting process. Don't hesitate to take advantage of it. If we can be a resource to you, we're happy to do that. And with that in mind, guys, thanks so much for your time and for everyone. Until next time, keep striving for something more. Thank you for listening to something more with Chris Boyd. Call us for help, whether it's for financial planning or portfolio management, insurance concerns or those quality of life issues that make the money matters matter.

35:37 Whatever's on your mind, visit us at something more with Chris Boyd dot com or call us toll free at eight six six seven seven one eight nine zero one. Or send us your questions to AMR dash info at Wealth Enhancement dot com. You're listening to something more with Chris Boyd Financial Talk Show Wealth Enhancement Advisory Services and Jay Christopher Boyd provide investment advice on an individual basis to clients only. Proper advice depends on a complete analysis of all facts and circumstances. The information given on this program is general financial comments and cannot be relied upon as pertaining to your specific situation. Wealth Enhancement Group cannot guarantee that using the information from this show will generate profits or ensure freedom from loss. Listeners should consult their own financial advisors or conduct their own due diligence before making any financial decisions.