2025 was another good year for stock investors. The DJIA was up almost 14% and the S & P 500 Stock Index rose over 16%. Despite wars starting and stopping, tariffs, persistent inflation, unfounded recession fears, and continued political gridlock, the market responded to the tried-and-true catalysts: Interest rates and corporate profits. Both were well-behaved. The Federal reserve began lowering interest rates, and corporate profits increased more than expected. As we go into 2026, this bodes well for stocks.
The problem? Stock values already reflect much of the above good news. The standard measurement yardstick – price to earnings ratio- for the major indices is about 10-20% higher than that of the last ten years. If interest rates and corporate profits fail to provide the expected stimulus, stock prices could suffer a long overdue sell-off.
A year ago, we opined that in 2025 stocks might see a 5-10% gain at best. Like most other “forecasters”, we were dead wrong. The S & P 500 Stock index more than doubled that forecast. Most of our picks did well however: Alphabet, First Solar, Canadian Solar, Truist, Citigroup, and Johnson & Johnson had big gains. Pfizer and Verizon struggled a bit.
For 2026, forecasters predict gains on average of 11%. This seems unlikely to us, but we hope we are wrong. Despite the high stock price levels, we still see some opportunities: Financials: Truist (TFC, $49, 4.21% yield), Columbia Bank (COLB, $27.95, 5.29% yield), Eagle Bank (EGBN, $21, .19% yield). Drug Stocks: Pfizer (PFE , $25.10, 6.85% yield) Utilities: Verizon (VZ, $40.60, 6.80% yield). Technology: Alphabet (GOOGL, $314, .26% yield) Chemicals: LyondellBasil (LYB, $44, 12.4% yield) REITs: EPR Properties (EPR, $50, 7.04% yield).
At current prices, DJIA 48,127 and S & P 500 6,832, we would keep at least a 10% cash position, in order to have some firepower to buy when we see lower prices. Please contact one of our friendly advisors for ideas and/or a portfolio check-up. Our portfolio management service continues to expand. Call Bob Mann for more information.
Happy New Year to all!
Prices and yields as of January 2, 2026. The above information is believed to be reliable but is not guaranteed to be accurate. Investors should check every investment for suitability for his or her needs. Stock investing is risky, and you could lose money. The author and/or his clients maintain positions in all of the above-mentioned securities. First Georgetown Securities, Inc. will provide available information supporting the above recommendations on request.