2025 Year-End Market Review & 2026 Outlook with Steven Major and Jim Caron

Fixed Income Outlook for 2026

• 💡 Steven Major maintains a structural dampening of yields into the coming years, noting healthy returns from fixed income and significant cash in money markets seeking better yields.
• 💰 He suggests that bonds should have a central place in portfolios, offering 5-6% returns, and that greed is the primary obstacle to investor satisfaction.
• 📈 The US Treasury market shows a bullish steepening driven by falling short-dated yields due to Fed cuts, rather than rising long-term yields.
• 🎯 Major identifies the 5-to-30 year yield curve as the most informative measure, capturing sensitivity to rates without being overly distorted by the Fed like the 2-year yield.

Economic Recovery and Equity Markets

• 🚀 Jim Caron anticipates a U-shaped economic recovery in 2026, with the potential for a "Trump boom" economy characterized by higher growth and potentially stable inflation.
• 📊 Caron suggests that the bond market is signaling smooth sailing for equities in 2026, with tight credit spreads and low default risks, provided inflation remains stable.
• 💼 Caron's positioning favors cyclical sectors and broader markets outside the MAG 7, expecting an upturn to take hold in the second quarter of 2026 after a soft patch in Q1.
• 🧩 The traditional 60/40 portfolio may no longer be optimal due to sideways interest rate movements, suggesting a shift towards more equities and fewer bonds.

Private Credit and Investment Trends

• 🏦 Private credit is experiencing strong deal flow, mirroring 2019 levels, driven by falling interest rates and a balanced macro environment.
• 📈 Churchill Asset Management sees a record pipeline for Q1 2026, reflecting investor confidence and opportunities in smaller companies, particularly in service sectors.
• 💼 Investors seek to put money to work quickly but safely, with a focus on asset selection and managing risk in private markets.
• 💰 Private credit offers attractive risk-reward with close to double-digit income streams, even with no leverage, and a conservative approach focused on principal and interest.

Consumer Trends and Affordability

• 🚗 The average monthly payment for a new car in the US is estimated at $760, leading to extended loan terms of 72 months or more.
• 🍷 Restaurants are increasingly featuring dessert wines on menus, offering a more affordable luxury compared to aged red wines and extending bottle shelf life.
• 🍺 A new, highly boozy version of Boston Beer's Utopias brand is available, with 30% alcohol by volume, comparable to cognac and illegal in 15 states.
• 💰 Discussions around financial success reveal significant generational differences in salary expectations, with Gen Z reporting the highest minimum needed for financial success.