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Money For the Rest of Us
What Will Drive Financial Markets in 2026—and How to Make It Your Best Year
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Welcome to Money for the Rest of Us. This is a personal finance show on money. How it works, how to invest it, and how to live without worrying about it. I'm your host, David Stein. Today is episode 548. It's titled what I Did over the Break and what to expect in 2026. For the past 25 years or so, I've basically not worked during the last few weeks of the year. I did it as a new institutional investment advisor as I was able to accrue more vacation. I certainly have done it with Money for the Rest of Us as we've not published episodes typically over the holidays. Last year our family and I was were in Costa Rica over the year end break. This year we were in Tucson. What I wanted to do in this episode is to kind of share what I did during the break. What did I learn? What are my routines at year end in terms of preparing for the upcoming year? I generally don't have a schedule when it comes to what I do at year end. There's certain things that I have done over the years that help me plan, help me reflect on what happened in the prior year. There's a saying from French philosopher Gustave Thibault, measure repeats rhythm renews. Natural cycles always allow for the unforeseeable. I like that idea of rhythm. I have year end rhythms that I follow, but I'm flexible. I allow room for the unforeseeable. And there's certainly things that came up and that flexibility allows us to address those things. A big part of what I do at year end tends to be a lot more physical activity, the sort of those year end things that just need to get done. When we've lived in Tucson, we live on about an acre and it's desert fauna, so you have a lot of trees that, that need trimming. The palo verde, the mesquite, the catia trees. And so usually over the break I'll order a dumpster and then I'll go out and trim trees and fill the dumpster. Took lots of hikes over the break, played some tennis. I spent time with friends. We had a friend, one of my former associates at FEG stayed with us for a few days. We went out to dinner with some friends at a Oaxacan restaurant and I had chapulines for the first time, which is a roasted seasoned grasshopper that Oaxacans put on various meals and tasty. But one of the big things that I do is decide my intentions for the next year. And these are not goals, they're not resolutions. Over the break, I saw an article by Roland Fryer. He's an economics professor at Harvard, and the piece was in the Wall Street Journal. And he wrote we are awful forecasters of our own future behavior. He referenced a study that was done back in 2006 where some scholars had data of 7,000 individuals and it related to their gym memberships, whether it was a pay as you go monthly or an annual membership. And what they found is that those that paid monthly ended up paying more than they would if they just did pay as you go because they, they paid a higher rate because it was monthly, but they didn't go as much. So they could have saved on average 10 to $17 per visit had they just paid every time they went. They also found that people that signed up monthly, where you have the option to quit at any time, tended to stay longer than people that just signed up annual plan and, and which is interesting when it comes to gym membership because we find with members of money for the rest of us plus that those that sign up for monthly tend to to stay shorter amounts of time than those that sign up for an annual plan. But for this study that was not the case. And what what they considered was explanations was overconfidence about future self control. The idea that when we make a resolution such as to go to the gym and I'm going to get up every morning and I'm gonna go work out at the gym or five days a week, we're forecasting our future willpower. Fryer says we, we picture an idealized version of ourselves, disciplined, virtuous, rising at dawn. He, he describes it as our current present self making a contract with our future self that just considers it a suggestion because we have what's known as present bias. The alarm rings at 5:30 or 6am and our person at that time, the cost of getting up the drowsiness, it overwhelms that resolution made weeks earlier. So what's the solution to resolutions? Well, my solution is I don't make them. I have intentions. An example of an intention is one that we talked about a few weeks ago. The idea that in 2026, I'm seeking depth, not volume, not the volume output. I'm trying to produce better content. And much of that depth is coming through writing my current book where I can dig deep into topics, I can curate the language and it just takes way more time. Not writing 50 books in 2026, just one. The studies when it comes to resolutions found that goals or resolutions that are more approach oriented. I'm going to do this versus I'm going to avoid that, tend to keep those more and then the other idea is to make the bar super, super low. So things that just seem ridiculously easy to do. But if it's an approach oriented, I'm just going to try to exercise. 20 minutes a day, for example, would be an approach oriented, hopefully fairly simple, depends on the person. And then the other idea is just make it as easy as possible in terms of what Richard Thaler and Cass Sunstein call choice architecture. So if your idea is to eat healthier, have a bunch of healthy snacks in the refrigerator to make that easier. Now one of my other intentions for 2026 is just to move. I don't have physical goals. I typically work out at the gym to lift weights a couple of times a week, but that's not a goal. I no longer have Step Counts back in June 2024, in our episode, I talked about how I was going to stop counting steps. Typically it was 10 to 12,000 steps per day, but I found that the app was still counting even though it wasn't looking as much. But there was still that underlying pressure. And over the Thanksgiving break, my family and I took a hike in Aravaipa Canyon in Arizona and I forgot my phone. I left it at home so I couldn't take photos, I couldn't count steps. And there was some relief to it. There was this pressure that wasn't there anymore. And as I thought about that, I I said, well, I'm just going to turn off the step counter altogether on my ph, turn off the screen time on my phone so it is not tracking it at all. Because one of the things I found is that, well, is tennis. How many steps am I taking when I play tennis? What if I want to ride? Go cycling? And there were times where I would convert cycling time into steps so I could add the data to my counter. It's like, well, no, 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. Before we continue, let me pause and share some words from one of this week's sponsors. Delete me. Delete me. Makes it easy, quick and safe to remove your personal data online. At a time when surveillance and data breaches are common enough to make everyone vulnerable, it's easier than ever to find personal information about people online. Having your address, phone number and family members names hanging out on the Internet can have actual consequences in the real world and make everyone vulnerable. That's why I use Delete Me so my data is protected. And it's how you can protect your personal privacy or the privacy of your business from doxing attacks before sensitive information can be exploited. As someone with an active online presence, privacy is really important to me. And so I continue to use Delete Me to help protect my personal privacy. Take control of your data and keep your private life private by signing up for Delete Me now at a special discount for our listeners. Get 20% off your DeleteMe plan when you go to JoinDeleteMe.com david20 and use promo code david20 at checkout. The only way to get 20% off is to go to JoinDeleteMe.com David20 and enter code David20 at checkout. That's JoinDeleteMe.com David20 code David20 one of the other things that I have found helpful in setting these intentions and deciding what I want to do for the year is, is don't wait to January 1st actually start earlier. That's why often I'll, I'll set these things in December, think about them. Because the idea is no, it's not a fresh start to a year, just, just already start, doesn't matter when. And I learned this number of years ago When I was iShares had asked me to do some videos. And so we this I think one of the first time that I had been videoed and one of the first times really probably since college and, and their approach was they would ask a question or they would get you starting and then they would start recording it. So they would, you have the momentum of speaking, you would forget that the camera's there. And then it was a more natural video, but there was already the momentum of talking and providing that content without the pressure of now we're starting. And so having this intention starting earlier I've mentioned two of them here. To move is one of my intentions. Seek depth, not volume. One of the other ones is to wait for emergence, to not keep pressing, but just wait to see how things evolve, be it with our business with financial markets. I had a similar intention back in 2022 and in that case instead of a phrase, it was a question. Am I letting things take the time they take, letting my life unfold in deep time? Rather than pressing and leaning toward the future, this year it's more just wait for emergence, wait to see how things evolve. And when there's time to take action, then I will. In 2025, I had a number of projects that I just didn't. I didn't do as well on that. I had hoped I wanted to get further along on my book, the second book that I've been working on for three or four years and they're just, I just haven't made the time to do it. 20, 26 I will we have a We're not producing as many podcast and we're I'm blocking off times to do that Thursdays. I'm not taking meetings and trying to focus completely on writing. We also have weeks that we're not producing a podcast that will allow more time for writing. One of the things that makes resolutions hard to keep is we are overconfident about our future self control or our abilities in the future. And that's why the idea is to just make the intention, whatever, fairly simple so we can gain some momentum, get the habit or form the habit. But one of the pieces that I that I read and I read a lot from many different sources and then I'll save them in a note taker, then go back and look at it. And one of the pieces was a column by Gillian Tett in the Financial Times and she was referring to how the Swiss Federal Intelligence Service released a handbook of cognitive biases and they had 18 of them. And many of them we've talked about in the show over the years. I'll link to it because it's probably one of the best summaries of various cognitive biases. There's 18 of them. Overconfidence, for example, is one of those. And they'll they list what it is. So the descriptions overconfidence. We overestimate our knowledge and our ability to make predictions. And we could say we're overconfident in our ability to adhere to goals or resolutions, solutions. And then they have a column what to do about it. For overconfidence, show intellectual modesty, self reflection, be open to feedback. When it comes to investing, one of the things that I've advocated is, is to track your investment returns, your performance, to see how well you predict it. Certainly some of them will work out, but sometimes we remember the winners and forget the losers and we don't track the overall returns. One of the other fallacies or biases we have is the hindsight bias. We overestimate the predictability of a past event. And we do this with investing. We can look back and say, well, I knew that was going to happen. Solution to that is to write down your predictions and imagine alternative paths that could have happened. Another bias that I've ties into some of the things we've been talking about the last month or so on the podcast is the conjunction fallacy. We tend to think of two things combined are more likely to happen than one thing. And the example that they that the they give. In this booklet is A group of experts are asked to assess the likelihood of two scenarios for the coming year. The first scenario is the President will no longer be in office and the second is the president will be replaced by a representative of his inner circle in a couple. They point out that second scenario, if a group of individuals are asked, is likely to be rated as more probable than the first one because it's so much more detailed, seems more plausible where in fact the president will no longer be in office would be the more likely event in sports betting, Many bettors fall into this conjunction fallacy because one of the most popular bets are parlay bets. These are multi legs that have to happen in order to pay out. An example is someone sent me a bet on the FanDuel sportsbook that you wagered $30 and won 31,500. But it was a three leg parlay and it was three different NBA players, three different games who would score the first basket of the game. That might seem fairly straightforward high probability, but no, the more legs in the parlay, the less likely it's going to happen. The statistical probability of it happening is much, much less. And we can, we can fall into that conjunction fallacy. So over the break I spent some time thinking about those intentions. I won't share them all there, but that that's just a rhythm that I have done every year. I also look at my portfolio at year end. I look at what the performance has been. I look at my holdings should I make any changes. I use an asset garden approach so I have a variety of asset types and holdings with different return drivers. I don't have a strategic mix where I have to rebalance at your end, but I'm I'm looking for opportunities and I was sharing an email this on an email the other day with one of our plus members and I pointed out one of the frustrations with doing like teaching investing, sharing investment insights in audio format in our newsletter and our strategy report is There just aren't that many opportunities that come. Most of the time there just isn't anything interesting to purchase. But occasionally something comes up and then I'll research. So I thought I would share an investment that I almost made that I did all the research and I would have shared with our plus members explained why. But I ended up not making it. And this ties into an episode that we did three years ago, episode 414 on Private REITs. This was on private real estate investing. And I at the time I said I'm not against private real estate investing. I've done it for years. But the point of the episode was to let investors, listeners be aware of the liquidity issues of private REITs that because the sponsor is investing in illiquid properties, they can gate the fund and prevent redemptions or limit the amount of redemptions. Typically redemptions are quarterly, but there's a limit to how much they'll let out and they they can gate it completely. And there was an article yesterday in Bloomberg mentioning this as it relates to Canada, that Canadian investors have put billions of dollars into private real estate funds and the Canadian market has had some challenges. The real estate market and investors haven't been able to get their funds. They thought they were way more liquid than they were because of the gates. And and this has become more commonplace, particularly as interest rates rose. The value of the real estate hasn't kept up. It's fallen in some cases. Before we continue, let me pause and share some words from this week's sponsors. For many business owners, tax time's a little scary. You gather all the paperwork, you send it to your accountant and you hope the numbers work out. I know in our business, taxes can be really frustrating. And that's where Gilt can help. Gilt is a tax planning and strategy solution for you and your business. 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See important disclosures@masterworks.com CD and so there was this investment opportunity that I saw in December. One of these private real estate funds, the Blue Rock Total Income and Real Estate Fund, decided to take this private entity and list it as a closed end fund on the New York Stock Exchange. It's Ticker B P R E. It's the Blue Rock Private Real estate fund. It did a public listing and immediately the price fell to a 40% discount to the net asset value. Now that was potentially attractive because what I thought was interesting about this fund is the fund sponsor was investing in institutional real estate funds. So this was essentially a fund of funds investing in a diversified pool of real estate funds. And this, the Fund started in 2012. So it's been 13 years. So these should be fairly seasoned funds and I thought generating cash flow and if you can buy them at a 40% discount now there's a potential opportunity. So I started digging into it to see and I, I looked at the portfolio, I went and I found the annual report for the year ending September 20with every intention of buying this closed end fund. But then as I started to dig, I saw that it was an unusual portfolio. There was 41% in industrial funds and about 16 to 18% in life science accounts. So biotech and that raised a red flag. Last time we were in East Bay area in California, there was a beautiful property, the Berkeley Emeryville Life Sciences center. And it's vacancy rate is around 50%. I saw one quote in looking at biotech. Alexis Borisi, the founder of a biotech venture firm says there's so much money that the sector got overbuilt. If there was a good idea, there'd be 10 companies all built at the same time to go do it. And so over capacity and you have these life science buildings that are specialized. And so I saw that that raised a red flag. And then when I went in and I looked at the financials, what you want with a real estate fund is enough cash flow being generated to pay the dividend. And that's not the case for this fund, even though they're institutional real estate funds either. The sector allocation, there was something about it that it just wasn't generating enough cash. The overall return was down 3% for the year ending 2025, but the 10 year return on a total return basis was only been 4% annualized. And since 2012 just 5% which was fine, but at a 12 year old fund ought to at that point be generating enough income because these funds ought to be mature. But if we look at the financials, total investment income, both dividends and interest was 126, $127 million. But expenses was $149 million. And that was even before they paid their dividend. And so much of their dividend was return of capital which is not self sustaining. There are closed end funds that do this in that if they're selling at a premium, they'll issue new shares at that premium price and then that the higher than the net asset value and that actually starts funding a much higher dividend that could be with sustained otherwise, but in this case it's at a 40% discount. Now it's 35% discount, but there's not enough cash flow being generated. Perhaps I'm overlooking something, but this was not an opportunity and I didn't invest. One of the other things I do when I take these long breaks is I look for non consensus opinions or things that strike me as like huh, maybe the consensus is wrong about that. And there was an article in the Economist, it was titled America's affordability crisis is mostly a mirage. And it had some data. And I'll link to a chart, I'll link to the article, but also a chart. And they pointed out if real wages are rising, so real wages backing out, inflation are rising. That means things are becoming more affordable across the economy. And if we look at the median weekly real earnings for workers over age 16 that has increased since 2015 now it definitely spiked in 2020 with the pandemic payments and then it fell, but it's actually been increasing. There was a period from early 2000s to 2015 where real wages had stagnated. But since 2015 they've actually increased. And the economist did some analysis that said essentially the, the, the poorest workers have seen the biggest increase in real wages. And they asked the question, so what's going on? And they said part of the issue is that people are focused on the level of prices which are now about 25% higher than before the pandemic. So no doubt prices are higher. That stings. But real wages have kept up with that. They've exceeded the rate of inflation. But as humans, we tend to ascribe or believe that raises that we get are deserved. And so we would have, should have gotten them anyway, irrespective of what inflation was. And so we remember those price increases. We don't forget the prices aren't in most cases going back down. Outlier prices, yes, but as inflation overall we're not going to have deflation as long as the money supply keeps growing faster than the rate of goods being produced. But there clearly are affordability issues when it comes to housing and especially the bigger cities in the US and the economist points out that much of the housing higher cost and affordability is related to higher interest rates, which is why the current policy rate for the Federal Reserve is so controversial and such a flashpoint for the Trump administration, et cetera, because higher mortgage rates are making houses less affordable than they were three or four years ago when mortgage rates were closer to 3%. Affordability is something we'll continue to monitor. It was something that I looked at some over the break the beginning of the year. I spent a week last week writing our investment strategy report for AssetCamp and Plus Membership. As we looked at what happened, where do things stand now as it relates to the economy and financial markets and where are they heading and pointed out that global financial markets very strong return in 2025 non US stocks significantly outperformed US stocks. But overall the financial markets were supported by accelerating earnings growth. Earnings growth per share is strong and in many areas interest rates have been falling. And then we have this AI capital boom capital project. So there's this tailwind in place for the economy which is why we've had double digit returns for three years for the global stock market. 22% in 2025. It matched the return for global stocks in 2023. We got some fiscal stimulus from the one big beautiful bill act hitting in 2026. We have continued investment in AI. So there's a solid foundation for continued economic growth. But there are a lot of geopolitical risk. US much more active in Latin America. They're threatening additional action. The war in Ukraine's not been resolved. There's tensions in the Middle east with Iran. But the base case for the economy and financial markets is continuation of what we've seen. But that could be upended by some type of tail risk events. When it comes to politics, 2026 will be a critical year to see whether all this investment in AI leads to higher productivity boosting economic growth. And much of the evidence so far is anecdotal. But technology innovation leads to job losses, but also job gains. There was a report this week in the Washington Post and it looked at all the jobs, the fastest growing jobs over decades and the slowest growing or fastest shrinking jobs. And if we look at the economy over the past 40 to 50 years, the areas that have shrunk the most is farming from 1969 to 2008. And then the other one is secretaries and administrative assistants. There's just fewer of them because workers have been asked to do that themselves and they've had the tools to be able to automate much of that. But if we look at other fast growing areas, customer service reps, app and software developers, that's to be expected. Customer service reps surprise me. But as the economy has become more service oriented, that makes sense. Construction workers, though, a lot more construction workers. And then over the past three years, personal care aides. As the boomers age, there's, there's more need for that. Cashiers is another job that there's less of again due to automation innovation. As you go into fast food restaurant, oftentimes you're ordering at a kiosk or you've already ordered on the app and there's not a cashier there. Sometimes they're nowhere to be found if you actually need help. So one of the big questions for 2026 is AI, will we see the implementation that actually leads to productivity? Employment growth is slowing in the US and other areas. Question is why? And finally, one of the big things when it comes to AI is, and there are two pieces that I'll link to. One pretty negative toward it, the other more positive in terms of describing it. But there was a piece written by a number of academics brought up by Walter Frick, where these AI, these large language models, what they really do is they're transferring culture, they are better organizing information for us to use. And in the study they referred to, they talk about one of the advantages of the printing press is all that information was taken and different topics were put together and it helped people sort of merge unrelated things to get new ideas. Economies need new ideas to grow. Those come from humans, but the technology and tools can help with that. And that's what the printing press did. And there's a thought that AI, these large language models are the same way. And they give the example of a human coach. If you hire a coach to help you write a cover letter for a job, that coach has specialized knowledge from their experience. But a large language model essentially has absorbed every example available of a cover letter and different formats and then does statistical prediction of what's the best word to use. So it's a way to communicate or organize information because it has sucked up all that information. Walter Frick says that's not thinking, it's remixing. And that is what AI does. But then a contrary opinion is by Carl Benedict Fry in the New York Times article titled Don't Fear an AI bubble bursting. He is an economist at University of Oxford. He would agree that's what AI does. But writes generative AI needs its own course correction. Large language models, for all their wonders, can only predict the next thing a human would say. Train one on text from the late 1800s and it won't invent airplanes or rockets. It will channel ideas from that period when leading scientists thought human flight was impossible. So the idea is that it can't push us to the next area because it's been trained on the existing data. 2026 will be the year to see is there breakout innovations in AI? Are companies able to take these tools to get more productive, come up with new ideas, new innovations that leads to the continuation of corporate earnings growth and faster economic growth? We'll see the US stocks remains expensive. We have to be aware of valuations. But 2025 was a good year. If we look at model portfolios that we run on money for the rest was plus 2025. The most conservative returned 10%. The most aggressive over 20% return. So that's how I spent the first week and this week I'm doing a routine that I have followed the last 8 or 9 years is coming up with new 10 year expected return assumptions that we use the money for the rest of us. Plus what will different asset classes perform and what is that range of returns? We look at that yearly and that feeds into spreadsheets to help members that want to figure out what the expected return on their portfolios are and to help them with rebalancing. That's what we're doing this week and talking about in our plus episode at the end of the week. You also have a live stream that doing Wednesday for assetcamp subscribers. And that's how I spent my break. One other thing I did yesterday is I commented on a YouTube video that I released eight years ago. And one of the things that bugs me, but I recognize it with social media and all these forms is people comment and they have, they have no context to who you are. I'm just a stranger on YouTube. And this comment was on this video that's 8 years old that was titled Will the US Dollar Collapse? Why do Peter Schiff is wrong about the dollar crisis? And the comment was do your homework, no one listening. You got it all wrong. And I didn't get it all wrong, but some of it I did. And I thanked him for the comment, pointed out the video was seven years old, that that's an eternity when it comes to financial markets. And I continue to do my homework. I've done hundreds of hours of podcasts and videos since that video came out. And what I said in that video is consistent and it was right for inflation. The economy needs an increase in the money supply and capacity constraints. And that's what we got during the pandemic. Which is why in episode 336 I warned about inflation coming and we should own real things. But I was also wrong in that video. I said QE on its own doesn't lead to an increase in the money supply and inflation. And that is true. But if the government is running a budget deficit, a massive budget deficit at the time, and I spent a lot of time in that video talking about how the money supply hadn't really increased. We didn't have capacity constraints and that's why we didn't have inflation. That's why the dollar wasn't collapsing. But we did with the pandemic. 40% increase in the money supply. We had capacity constraints and that was why we had inflation. And that's why we have mortgage rates the way they are now as central banks continue to try to bring inflation down. Now, US Dollar hasn't collapsed, but it certainly has relative to gold. And so it's an ongoing process. 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. And that's what we try to do at money for the rest of us, that's what I'll continue to do in 2026, invest on the leading edge of the present. Be flexible, be adaptable, be humble, and that will allow us to meet whatever our intentions are for 2026. That's episode 548. Thanks for listening. Everything I've shared with you in this episode has been for general education. I'm not considered your specific risk profile. I've not provided investment advice. This is simply general education on money and the economy. Have a great week.