Episode Overview

Podcast: Money For the Rest of Us
Episode: What Will Drive Financial Markets in 2026—and How to Make It Your Best Year
Host: J. David Stein
Date: January 14, 2026
Episode Number: 548

This episode is a blend of personal reflection and macro financial outlook as host J. David Stein shares his year-end routines, intentions for 2026, and a thoughtful analysis of the forces likely to drive financial markets in the coming year. The discussion emphasizes personal finance habits, cognitive biases, investment opportunities (and pitfalls), and the complex relationship between technological innovation and the economy.

Key Themes & Discussion Points

1. Year-End Routines and Setting Intentions (00:00–20:00)

• Personal Rhythms and Reflection

  • Stein describes taking yearly breaks from work to reset and reflect, continuing a tradition from his institutional investing days.
  • He emphasizes the value of having rhythms but remaining flexible, quoting Gustave Thibon:
    "Measure repeats, rhythm renews. Natural cycles always allow for the unforeseeable." (01:50)
  • Activities over the break include physical tasks, hiking, tennis, socializing, and time for contemplation.

• Intention-Setting vs. Resolutions

  • Stein distinguishes between setting "intentions" rather than traditional New Year’s resolutions, which he finds are prone to failure due to overconfidence and present bias (drawing on the work of Roland Fryer, Harvard economics professor, and a 2006 gym membership study).
  • Memorable framing:

    "Our current present self makes a contract with our future self that just considers it a suggestion because we have what's known as present bias." (08:00)

  • Intentions are process-oriented, approach-based, and designed to have a very low bar for success.
    • Examples: "Seek depth, not volume" in his work, and simply "move" more, not track steps or physical metrics obsessively.

      "The intention is to move. I'm not going to track it. And I don't have that pressure in the background that I'm being quantified and monitored." (15:30)

2. Overcoming Cognitive Biases in Life and Investing (20:00–35:00)

• Biases Explored

  • Stein references a Swiss Federal Intelligence Service handbook identifying 18 cognitive biases, particularly:
    • Overconfidence: Overestimating one’s abilities.
    • Hindsight Bias: Believing events were predictable after they occur.
    • Conjunction Fallacy: Thinking detailed scenarios are more likely than general ones.
  • Practical solutions include tracking investment performance, writing down predictions, and being intellectually humble.

• Sports Betting Example

  • The conjunction fallacy illustrated via parlay bets:

    "The more legs in the parlay, the less likely it's going to happen. The statistical probability of it happening is much, much less." (28:00)

3. Year-End Portfolio Review & Investment Reflections (35:00–50:00)

• Portfolio Review Practice

  • Stein uses an "asset garden" approach with diversification.
  • Notes frustration that many times there are few compelling opportunities in the markets, but stresses the importance of ongoing research and patience.

• Case Study: Private Real Estate Funds

  • Revisits his skepticism from episode 414 about private REITs due to liquidity risks, referencing a recent Bloomberg story about Canadian real estate funds gating redemptions.
  • Shares deep research into the Blue Rock Total Income and Real Estate Fund (BP RE), which traded at a sharp discount but failed to meet his investment criteria due to sector concentration, insufficient cash flow, and problematic reliance on return of capital for dividends:

    "The overall return was down 3% for the year ending 2025, but the 10 year return on a total return basis was only 4% annualized… There was just not enough cash flow being generated… this was not an opportunity and I didn't invest." (46:00)

4. Challenging Consensus & Macro Themes (50:00–1:05:00)

• Affordability & Wages:

  • Discusses a contrarian take from The Economist: America’s affordability crisis may be overstated because real wages have risen since 2015, even if prices are higher.
  • Notes that housing affordability concerns are more acute due to higher interest rates, a key political flashpoint.

• 2025-2026 Market Recap and Outlook:

  • Recap: 2025 saw strong returns in global markets, non-US stocks outperformed, and markets benefited from surging earnings, falling rates, and AI-driven capital projects.
  • Outlook: Fiscal stimulus and AI remain major tailwinds. However, geopolitical risks (Ukraine, Middle East, US-Latin America tensions) remain high.

• AI & Innovation in the Economy:

  • Raises the major open question: will AI adoption in 2026 drive a noticeable productivity boom, or is it overhyped?
  • Draws on a Washington Post report on changing job categories, highlighting the transformative power of innovation across decades.
  • Explores two perspectives on AI’s economic potential:
    • Walter Frick: AI as a powerful organizer and curator of existing information—remixing, not true thinking.

      "Walter Frick says that's not thinking, it's remixing. And that is what AI does." (1:02:00)

    • Carl Benedict Fry: Generative AI cannot push beyond historical data; innovation demands human creativity.

5. Humility and Continuous Learning (1:05:00–1:13:00)

• Reflection on Past Predictions
  • Responds thoughtfully to a critical YouTube comment on an eight-year-old video, acknowledging changes in his understanding about inflation, QE, and money supply:

    "We have to recognize, be humble, not be overconfident. We're going to get some things right, we're going to get some things wrong. But we have to make our best judgment based on the weight of evidence." (1:12:00)

  • Stresses adaptability, humility, and learning from past mistakes as keys to long-term investing and personal growth.

Notable Quotes & Memorable Moments

• On Present Bias and Intentions:
  "Our current present self makes a contract with our future self that just considers it a suggestion because we have what's known as present bias." (08:00)

• On Moving Away from Tracking:
  "The intention is to move. I'm not going to track it. And I don't have that pressure in the background that I'm being quantified and monitored." (15:30)

• On Investment Patience:
  "Most of the time there just isn't anything interesting to purchase. But occasionally something comes up and then I'll research." (37:20)

• On Humility in Investing:
  "We have to recognize, be humble, not be overconfident. We're going to get some things right, we're going to get some things wrong. But we have to make our best judgment based on the weight of evidence." (1:12:00)

Important Segment Timestamps

• 00:00 — Introduction, year-end personal routines, and "measure repeats, rhythm renews"
• 08:00 — Research on resolutions, gym memberships, and behavioral economics
• 15:30 — Moving away from self-quantification and setting intentions to "just move"
• 20:00 — Review of cognitive biases and their impact on personal finance and investing
• 28:00 — Explanation of the conjunction fallacy through sports betting
• 35:00 — Portfolio review practices and asset garden approach
• 46:00 — Real estate fund review and lessons in investment discipline
• 50:00 — Examination of consensus views, affordability crisis, and real wage data
• 1:02:00 — Debating the real impact of AI on the economy
• 1:12:00 — Closing thoughts on learning from past mistakes and fostering humility

Tone & Approach

The episode is candid, reflective, and practical, maintaining Stein’s signature clarity and humble, evidence-driven perspective. Listeners are encouraged to set simple, flexible intentions for the year, remain aware of their biases, avoid overconfidence in investing, and see 2026 as a year where staying curious and adaptable is more important than predicting specifics.

Summary Takeaways

• Set intentions, not rigid New Year’s resolutions—focus on flexible, approachable habits.
• Stay alert to cognitive biases, track your decisions, and learn from both wins and losses.
• The most compelling investments are rare—be patient, do your due diligence, and don’t force action.
• 2026’s financial market trajectory will hinge on macro tailwinds (AI/fiscal policy), persistent risks, and whether AI delivers real productivity.
• Always invest with humility, adaptability, and a long-term learning mindset.