The past year was marked by sharp swings in market confidence. After a brief period of heightened volatility and tariff-related anxiety, optimism returned quickly, driven by enthusiasm around artificial intelligence, expectations for policy support, and easing financial conditions. Equity markets ultimately reached new highs, reinforcing the role confidence and liquidity now play in shaping market outcomes.

These developments have occurred against a backdrop of extraordinary aggregate wealth. Over the past decade, U.S. household net worth has nearly doubled, supporting consumption, investment, and risk-taking. In many respects, last year’s optimism was justified by subsequent economic and market performance.

At the same time, signs of elevated risk appetite have become increasingly evident. Valuations are near historical extremes, credit spreads are compressed, dividend yields are low, and market gains have become highly concentrated in higher-risk stocks. These conditions are uncommon and suggest a narrower path forward, where outcomes depend more heavily on confidence holding together.

In environments like this, risk unfolds across multiple time horizons. This Viewpoint 2026 addresses short-term market conditions, intermediate-term trends, and long-term fundamentals in a cohesive framework designed to navigate both opportunity and uncertainty.