Our 2026 Capital Markets Outlook is Ready…are you?
Implications for Portfolio Construction, Retirement Income Planning, and Sequence of Returns Risk
by Chris Brown, Ph.D., MBA, CFP® and Ron A. Rhoades, JD, CFP®
At the end of 2025, the U.S. financial markets present a historically unusual combination of elevated equity valuations, improving bond yields, uncertain but potentially transformative artificial intelligence (AI) productivity effects, and heightened geopolitical complexity. While near-term economic data remains resilient and corporate earnings have exceeded expectations, long-term expected returns are increasingly dominated by starting valuations, sequence-of-returns risk, and significant return dispersion across asset classes and equity factors.
Our comprehensive report – “A Valuation-Aware, Scenario-Based Capital Markets Outlook” for 2026 – provides investment advisers with an evidence-based, scenario-driven framework for understanding expected returns over the next decade. The analysis integrates insights from multiple authoritative sources, including but not limited to:
- Vanguard’s Capital Markets Model (VCMM) and 2026 Economic and Market Outlook;
- Research Affiliates’ Asset Allocation Interactive valuation-based return estimates;
- Goldman Sachs Global Economics research and Jan Hatzius’s macroeconomic forecasts;
- Morningstar’s 2026 Global Investment Outlook;
- Academic and practitioner research on retirement glidepaths, sequence risk, and factor investing; and
- Aswath Damodaran’s equity risk premium analysis and valuation research.
Within the report, you will find a discussion of current market conditions and valuations; five probability-based economic scenarios we may face; valuation-adjusted return expectations for the next decade by asset class; a deep examination of Sequence-of-Returns Risk; insights into retirement frameworks including Dynamic Withdrawal Strategies, The Bucket Strategy, and Factor-Based Equity Investing as Risk Management; and how these insights can inform practical guidance on portfolio construction and retirement income planning.
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About the Authors
Ron A. Rhoades, JD, CFP®
Ron Rhoades is an Associate Professor of Finance at the Gordon Ford College of Business, Western Kentucky University. He also serves as a financial advisor at Scholar Financial, a practice within XY Investment Solutions LLC. With a background as both an attorney and a CERTIFIED FINANCIAL PLANNER™ professional, Ron is a nationally recognized authority on the fiduciary duties of financial advisors.
Chris Brown, Ph.D., CFP®
Chris Brown is a faculty member in the Department of Finance at the Gordon Ford College of Business, Western Kentucky University, and a financial advisor at Scholar Financial, a practice within XY Investment Solutions, LLC. He holds the CERTIFIED FINANCIAL PLANNER™ designation and a Ph.D. in Personal Financial Planning. His research and teaching focus is on behavioral finance, retirement planning, and evidence-based investment strategies.
This report contains a variety of performance and research data. Past performance is not a guarantee of future results. Probability assessments represent the opinions of the authors, which are based upon multiple analyst forecasts, research reports, and other reliable sources, as set forth below, but probability assessments cannot be guaranteed. The scenarios presented in this report do not represent the full range of outcomes. Actual results may vary significantly. The strategies and scenarios described herein often involve trade-offs that may not be suitable for all investors. Individual circumstances – including risk tolerance, time horizon, tax situation, other income sources, and spending flexibility, among other factors – should be carefully considered before implementing any of the strategies or scenarios presented herein. Investors should consult with qualified financial, tax, and legal professionals before making retirement income decisions.
Advisory services offered through XYPN Sapphire, an SEC-registered investment adviser.
