Mary Ann Bartels: Tech and International Stocks to Rise in 2026

This podcast is brought to you by Wells Fargo Advisors. Looking for a firm your clients can't outgrow? Wells Fargo Advisors offers financial advisors full balance sheet solutions with wealth planning, investment products, banking, and lending that meet the needs of affluent to ultra-high net worth clients. Build your practice your way and on your schedule with independent and employee model options designed to meet your needs today and tomorrow. Learn more at joinwfadvisors.com.

Welcome to Barron's The Way Forward. I'm Greg Bartellis, and my special guest is Marianne Bartels, Chief Investment Strategist at Sanctuary Wealth. We're here to discuss her market outlook for 2026, and this is the third straight year that we've conducted this year ahead forecast. So it's become a mini tradition at this point and one that I really, really look forward to each year because Marianne has an incredible understanding of the market and her, you know, predictions have been quite accurate. You could go back to the podcast we had a year ago and from 2 years ago, and you'll see that the vast majority of her meaningful predictions and all predictions actually came true. So welcome to the podcast again.

Thank you so much. I'm so excited to be here again.

So let's talk about your high-level views of where things are going.

So 2026, I think, is kind of— it'll be what I'm calling a reset year. It's not going to be a bad year in terms of returns. My target for the S&P 500 is 7,500, which is still still an up year, but we're going into the midterm election years— year, which is historically really rocky, particularly from April to September. On average, markets are up 6%. There's also something called the decennial pattern, not something you really hear much about. But if you look at every decade and take out each year and average it up over time, there's a pattern that evolves. And we're moving into 6, and 6 tends be up 6%. So there's this magical 6% going into 2026.

Can you explain that a little more? Just sorry, I wasn't totally following that.

Sure. So what you do for the decennial pattern is you take a decade and you have year 1, year 2, year 3, etc., including year 0.

Yep, I got it.

Going back in time and you average the return for the market and you get a cycle. Believe it or not, year 5 is the best.

Interesting. Got it.

The middle of the decade has the best return. Year 6 tends to be up 6%.

Got it.

The midterm election year tends to be up 6%, and we're magically going to be in 2026. The other reason why I think we're going to have some volatility is markets have done extraordinarily well since the lows of the bear market in 2022. The market by S&P is up 100%. The Magnificent Seven up a lot more than that. I think we've reached a point where maybe some of these technology and tech-related names need to consolidate, need to kind of take a break to reset, to relaunch. My very high conviction call that I have 100% confidence in, at least today, is that the S&P is tracking towards 10,000 and 13,000 towards the end of the decade. So we called our year ahead report Be Fearless. So if we do get volatility next year, I don't want investors to give up on the markets. I don't want investors to give up on technology because they remain the leaders, at least in my view they do. And the industry group that's the leader within technology has been semiconductors. I've been liking semiconductors for years. The whole AI movement cannot happen without semiconductors, and the demand is insatiable. But a lot of the stocks reflect some of this optimism. So I, again, I think it's just the year of the reset in 2026.

Okay. So they'll continue to do well, but maybe not as well as in recent years. And given that the valuations are quite high, they might grow into the valuation a little more. Because the fundamentals are still very strong.

Correct. And here's the other thing. Earnings have been spectacular and much better than expected. So the comps might be more challenging for some companies. And markets trade on rate of change, right, on expectations. So maybe the companies do well and they have positive earnings, which I do expect them to have. But what happens if they can't keep up that same rate of growth? The market needs to reset and price that in.

Yeah. Now for the S&P, I think you said in your report that for next year you see it reaching 7,500, and given where we are, it's a ballpark 9% gain from recording now.

Yeah, correct. I'm still looking for 7,000 for this year. We may or may not get there. One could declare victory because we got close to 7,000, but I still think the markets are trading pretty well, and 7,500 is still a very good gain. And by the way, I'll be fine if I'm wrong and markets are higher. Yeah, I'm not going to complain if markets are higher next year than my target. But right now, where I see things headed is towards more 7,500.

Yeah. And, you know, just for a second, I just want to go back to last year when we did our year ahead recording. You at the time expected the S&P 500 to rise about 20%. This year we're up now, I think, about 16%. So that's largely tracking. You also were very bullish on tech stocks, which you said should remain strong given healthy earnings growth, rising profit margins, and high returns on equity. NASDAQ's up about 20% this year. So those two big calls have worked out. Your Bitcoin call has not been entirely— it's kind of done a round trip, but it did hit— you said we were about $100,000 a year ago, and you said it could— it would likely hit $113,000 and maybe $150,000. We did hit $126,000, but we pulled back. So that's kind of done a relative round trip, but we could talk about Bitcoin later as well. But I thought the most impressive call from last year had to do with precious metals. In your report last year, you summarize your predictions for this year. You said that gold is on a bull run to $4,000, and at the time it was $2,750. So that's up 53%. And then in terms of silver, which at the time was about $32, you said it would break out to test record highs, and in fact has done that. It's up 85% since your report. So well called on that. And we could as well talk about precious metals, but I thought that was, you know, the stock recommendations were right on and precious metals especially were impressive.

Thank you.

You're welcome.

Thank you.

So let's lead, you know, you take the ball a little more in terms of where you have conviction and what you see happening?

Sure. Well, you talked about precious metals. We still think that bull run runs. For gold, I'm looking for $5,000. And for silver, I think we can get to maybe $80 to even $100. So what I really like in terms of gold, though, are the gold mining stocks. They've lagged for years and they're finally catching up and realizing that gold prices have more than doubled. Right. And so if you're really looking for a strong return, return on gold, I think the gold mining stocks are going to outpace gold in terms of return. So I have very, very high conviction there. I still have high conviction that tech is the leader and that semis are the leader within tech. But as we talked about, I think that's kind of a reset, but I don't want people to give up on those stocks. You know, healthcare really was in the doghouse by the summer on a relative basis. Compared to the S&P, we hit a new relative low and it was grossly oversold. And what we've seen in healthcare— so we've had a really good comeback. We've had a really strong rally. I don't think it's leadership, though. But what is emerging as leadership within healthcare is biotechnology, and that's high beta. So that gives me confidence that the markets can do well next year because you're seeing a beta sector breakout within, within a large—

more of a defense. Yeah.

Yes. Within a defensive sector. Yeah. You have beta in terms of the biotechs breaking out. Industrials are really interesting because they're leveraged into AI, right? They make a lot— a lot of the companies in there make the nuts and bolts. Like even if you look at a Caterpillar, which is tilting its business towards AI, there's pockets of industrials that are going to do well. Financials look good. And that's important in order to continue to grow your economy. Your banks have to work. And we see banks still working. Again, these are not leadership, but you need a diversified portfolio. Utilities, we still think can do well because we do see interest rates next year coming down. So utilities actually fill two buckets now. They've generally been defensive income providers, but now they're part of the AI bucket. So I now call them growth. I never thought I would call a utility utility company.

I don't think any investor really ever thought that.

Yeah, no. Yeah. So I still like the pockets, um, of utilities. So there's a lot within the market, but what I still don't see leadership in is small cap. Um, I don't see anything there really happening, and that's because their earnings can't compete with the big cap technology companies. So I still think small cap, uh, will continue to lag. So it's really growth over value, although next year you may see value continue to do well if markets choppy, but still believe that growth is the long-term bull. So I'm not giving up on the growth cycle.

Okay. Look, I just want to go back for a moment to small caps. Over the past 6 months, like, so the indexes, I mean, are lagging the big cap indexes. But in the last 6 months, the, for example, the Russell 2000 is up 20%. And my understanding is that a lot of it is due to Fed rate cuts and hopes for more cuts. But just address that. So you see that recent outperformance is more a blip and not necessarily a sign of what's to come.

I don't think it's sustainable. Yeah. But again, it doesn't mean that small cap, if the markets do go up, doesn't mean small cap can't go up. I just still see the leadership. Yeah. But if big cap corrects on a relative basis, you may continue to see some outperformance from small cap, meaning they don't go down as much. That's possible. But I try to stay with what I see as the long-term leadership trends. Yeah. I don't see a major leadership shift within small-cap. But what's— what has been working within small-cap are the industrial names. Small-cap industrial stocks continue to look very good. So it's not that you can't find pockets of small-cap that are doing well. I just don't think they're taking over the leadership of the market.

Okay. All right. And I just want to go back even earlier to— you talked about gold and gold miners. Yes. So as you mentioned, for many years the miners dramatically underperformed gold price itself. And then this year the miners, I mean, have done incredibly well. I mean, GDX, just to use that, I think is up something like 140, 150% year to date. GDXJ, using that as a proxy for the junior gold miners, is up actually about the same amount, which is interesting because you would, you might think risk reward that it would do better in a bull cycle and worse, but the performance has been remarkably similar. But, but despite the big gains by the miners, you still think that given the choice between the metal itself and the miners, that the miners on balance offer more opportunity to investors. Is that right?

That's correct. And, you know, some might be at record all-time highs and some are not at record all-time highs. So I still see significant upside. So although I have a $5,000 target for next year, I think gold is still tracking towards $8,000, maybe even $10,000. So I still think gold has a very long runway, and I don't think the miner stocks have picked up on that up until last year. And so I still see significant upside for these stocks, right?

Because it's very much leverage where like the cost of mining, and then when you go, it can just really deliver torrents of cash above a certain point.

Correct. And you have to look at the reason why gold is up. And gold went up and it's the best performing asset this year.

Easily, yeah.

The reason why it went up was for every possible reason gold could go up. Gold is sensitive to interest rates. Lower interest rates are positive. And we had lower interest rates. We have inflation. There is inflation. The Fed has not been able to get back to 2% for 4 years. There is inflation. Gold responds to inflation. So you have that. Central banks, particularly emerging market central banks, are diversifying their balance sheet and they're adding more gold. And then lastly, just geopolitical risk. You know, when investors become nervous and concerned, they tend to go to gold. So everything that possibly could go right for gold this year did go right for gold. But I'm concerned over the longer term that inflation is here. I don't think that's going to be reflective in interest rates next year. I do think there, there is a trend for rates to come down in the short term. But I do think gold is partly reflective that inflation is not leaving.

Right. And two things. One is I first, I want to correct what I said. I said gold is the best performing asset this year. I think silver has done better.

Oh, is it now?

Oh yeah, silver, I think it's up like more like 90-something percent year to date, but they've both gangbusters, just to be clear. Yeah, they've both been incredibly well. Now the national debt is around $38 trillion and counting. Tell me what that means in the context of gold and just your investments in markets, 'cause that's going up, you know, every few months at this rate, we're going up a trillion roughly.

Right. There's— I can honestly say since I've been in college, when I went to college, I can remember my economics professors debating whether or not a deficit was good for our economy. We have been concerned about a deficit for over 40 years now. Granted, it has grown substantially. It's the largest in my career. The way I've always looked at a deficit, which I learned from my economic professors or the, or the leaning that I tend towards. As long as you can pay your debts as a country and countries have confidence that you can pay your debt, you don't have a problem funding it. You can keep a deficit indefinitely. Now, not healthy, but you can. You can grow out of your deficit through inflating. Maybe that's a possibility down the road. Not there quite yet. The dollar. Now, this is really interesting because I have a controversial call on the dollar. Many investors are concerned that the dollar is not in favor anymore and doesn't want to be owned anymore and will continue to go down. I disagree with that. I think the dollar has found its footing and has a new asset buyer called stablecoins. And I don't think investors fully understand stablecoins yet. And it's not their fault. It's because we're moving to a digital world of payment and currency that is not fully comprehended and understood at this time. Now, we did get legislation around stablecoins called the Genius Act, and stablecoins are here to stay. And what a lot of investors don't know is that Stablecoin transactions today that have to be backed by US Treasuries have more transactions happening than Visa and MasterCard. Hmm. And a lot— that's because you can move money quickly, fastly, and more cheaply. I think this is an area that's going to continue to grow. And having that stabilization on the dollar is critical. To part of the stability. The other reason why I see the dollar going up is I see short-term risk of interest rates going up, but within the context of a downtrend. So as you go into the end of the year, companies need capital to close their books, and seasonally interest rates tend to rise during that period and tend to rise into the first quarter. So we may get a slight uptick in interest rates, that's bullish for the dollar. So I think the dollar— the other thing about the dollar that people don't talk about is the dollar made a major low during the Great Financial Crisis. And we have been in an uptrend since 2008 and 2009 that no one talks about. They only talk about the last year. So the dollar has actually been a very strong currency. Just this year had a 10% correction within an uptrend. And I think that correction has been completed and that we can see the dollar actually go up. The best thing for companies and economy is to have a stable currency. But what investors are not pricing in going into 2026 is if the dollar does go up and let's say it goes up 10%, multinational company earnings will be negatively impacted.

Right.

Right. And I don't think that's being factored in yet.

Yeah, that resonates. And I'll add to that, that so much of the markets, I think, is really narratives. And once narratives are a powerful thing, they take hold. And sometimes the world changes and the facts are what they are, but you don't realize it. So for example, with the dollar, de-dollarization is very much, you know, it's a thing. We know that in terms of a percentage of transactions, etc., the dollar is is accounting for less, but it's still, of course, the reserve currency. It's still the big kahuna. Its dominance is still not imperiled anytime soon whatsoever. But what's also interesting is like we talked about with gold specifically is that it usually will do better when rates are falling, all things considered. But gold has had a ripping rally for the last few years, even, even during, I think, 2022 when stocks and bonds you know, got hurt when rates spiked. Gold has still done very well despite higher rates. And I think a lot of that reflects central bank buying because to some extent they were just gonna buy through thick and thin. It wasn't so much, oh, which way are rates going? They're like, and a lot of that might've been China and other countries, but they're like, we're buying it. But my point is that when everyone's saying the same thing, oftentimes it's totally baked into the market. That's correct. And so like right now the narrative very much is like the dollar is screwed and de-dollarization and all that. And even if there's truth to some, to it in overall or aspects of it, that often is the time when investors might want to go in the other direction sometimes.

That's correct. And that's what we call a contrarian event. It's that everybody, if everybody's in the same trade or in the same knowledge base, the opposite is likely to happen. And I think the biggest risk in 2026 for a contrarian position is for the dollar to go up.

Yeah. Yeah, that's very interesting. So you talked about you, you like growth over value. You like big caps over small caps. Let's widen the lens and look at the global stage in terms of equities and what you see.

So this is the most exciting part of my report. I've been doing this, you know, my career on Wall Street. I've been doing this for 40 years. And for 40 years, I have never experienced or have seen global equity markets all in a secular bull market at the same time. And that's where we are today, in my opinion. Now, the United States is much more advanced in its secular bull market because we went into a secular bull market in 2013. And I think now we're moving into the tail end of a secular bull market, but that's where a good portion of the returns are made. So I think this is still very positive. But when I walk around the world and I look at Japan, that's broken out to all-time record highs. It was in a bear market for 35 years. I now believe Japan is in a secular bull market. We have Europe breaking out into a secular bull market. And emerging markets ex-China breaking out into a secular bear market. I think China still has the disinflationary forces or deflationary forces from its real estate bubble. What is working in China— and China is up a lot, I think it's up around 30%— but I don't think it's yet emerged into a secular bull market. But their tech sector is doing extraordinary. I do like their tech sector very, very much. But to have global equities in a secular bull market to me is just, you know, the party's here. You can finally diversify your portfolio. Most U.S. investors have not diversified outside of the United States because they haven't needed to do that. We've had spectacular returns here. But I think between now and the end of the decade is the time to start thinking about adding international assets. Now, right now, our equity markets have done phenomenally well, but returns outside of the United States have been even better. So the question is, can they sustain them? I think over time they can. And that's why I, you know, you can't time all, you know, every year. But I think between now and the end of the decade, if you can dollar-cost average in now, adding exposure to non-U.S. equities, I think that's going to play out extremely well in the next decade. Right. So I still think the US is in a secular bull market with tech leading to the end of this decade. And then we go into a secular bear market, meaning we go into a trading range. And yes, we will have a very bad down year and then go into a holding pattern for 15 or 20 years. As we go into that holding pattern for 15 to 20 years, international equities are going to shine.

Well, that's definitely fascinating and eye-opening and a really, you know, taking a strong position there because Yes, this year international has easily beat US stocks. I think EM especially followed by developed markets, but both handily have outperformed US stocks, which in and of themselves have done very well, to be clear. And it's really interesting because I think the big question that a lot of investors are wrestling with this year is, is this overseas performance a blip, an aberration, a one-off, if you will, or is this the early innings of a trend? And you're clearly suggesting it's the latter. And what's really interesting interesting is that they have relative momentum now. They also have lower valuations. They're also not even thought about much, you know, like your average US investor is just looking at their portfolio, which is largely US stocks, and they're largely happy with what they see, but they're not entirely— most are not aware that foreign stocks are doing far better. And I think that even for those who are aware, there's an element of, I'm not sure if I can trust this. So there's going to be likely, I think, to the extent they buy in, it's kind of like a show-me aspect. And maybe if this year Warren again outperforms, then I can see the money following, which would create a virtuous cycle possibly.

So that's skepticism.

Mm-hmm.

And bull markets start on skepticism.

Correct.

And so that makes me confident that we're still in the very early innings because there is a lot of skepticism.

That's, that's right. I mean, there is home country bias, which is most people tend to own stocks in the country that they live in. And that's certainly the case here in the US. You know, most people have some foreign exposure, but yeah, certainly not a lot. And the narrative of, you know, the foreign bull market, it is anything but a mania to your point. It's just like not out there. So on a sentiment level, it seems a little bit off the radar, which is often a bullish thing when people are not talking about it incessantly.

Correct.

Yeah. And within overseas, I mean, do you have, do you parse it in terms of, oh, I preferred EM developed markets? I mean, what are your thoughts on that level?

I think then you have to look at the client and what your risk profile is. Obviously EM has more risk to it. And I have a hard time picking my favorite when I see all of them in a bull market. So maybe you buy like an MSCI EAFE, which is a very broad-based exposure, and then add a little bit of EM. But it's really looking at the risk profile. But I have a hard time choosing because I also love Japan. I I, to see Japan come out of a 35-year bear market is extraordinary. Now, I do think there's risk in the return where the yen can continue to depreciate. So you lose part of your return in the currency translation. But there are ways in through ETFs that you can hedge out that currency exposure. But I think what's happening in Asia is they're turning into a a much larger trading region among themselves. And I think Japan is going to be a major beneficiary. You know, they're innovators. They're great at technology. They're great exporters. And I think that's where Japan is going to get the power to get companies to perform well. The big change in Japan is corporate governance and really running a company for profit. And it's a big cultural shift for them that I don't think is truly appreciated yet by, by U.S. investors. Hi, I'm Kelly Cavanearo, Managing Director, Head of North America Institutional Distribution at Janus Henderson Investors. We believe working together is the way to work better, like combining your portfolio plans and our in-depth strategy, your valued assets and our valuable insights, your mission and our vision working in harmony to seek the right investment opportunities. Janus Henderson Investors, investing in a brighter future together.

Investors, right, right. I'm aware of that, but I don't think that message has sunk in.

Not yet.

No, no. What about the apparent end of the yen carry trade with Japan, whereby a lot of investors would borrow cheap yen, redeploy the assets elsewhere for higher returns. But now with the new prime minister and the rate changes right now, it's, it's not really. So is that a risk more for the rest of the world? It's not so much about Japan, or how do you interpret all that?

So you— that's really important because the yen carry trade has been around for a long time because Japan had zero interest rates. So you could borrow basically for nothing and then put your money elsewhere to get a return. And that was called the yen carry trade. Right. The way I look at it is this is called in economics interest rate differentials. So money's not going to be free anymore in Japan. And what the new prime minister is trying to do is implement economic growth strategies, which is really positive. They need economic growth strategies. And with that will come higher interest rates. But when you look at interest rates differentials, will the interest rate in Japan remain lower than developed markets? Probably so. So is there still a trade there? Yeah, there's still a trade, but it's not the same trade.

The gap is shrinking, so there's less of a relative opportunity.

Exactly. So that big spread profitability is getting narrower. Yes. But you'll probably still have some traders and investors that still put on that trade.

Let's see, what else have we not covered?

So what I'd like to talk about, if you don't mind, because I still like tech. Yeah, I still believe in, in in AI and everybody's calling it a bubble now. Well, I can honestly tell you it's not a bubble if everybody's calling it a bubble or questioning if it's in a bubble. But in our year ahead report, what we did is we took the NASDAQ 100 and we compared it to the market of the 1990s where we had the dot-com and to the 1920s. And the, the parallel is, is astonishing. We are— we're tracking that pattern.

And if that is true, if I may— the pattern in what exactly? The share, the performance of the—

the performance of the indexes are paralleling one another. And we have not entered the bubblicious phase. Now, I am calling for a bubble. I do think we will have a bubble by the end of the decade. But we're in the early stages. When you reach any peak in any kind of market, whether it's a bubble or just a peak, you reach it on euphoria. You get giddy, you get happy. No one questions it. We're going to make this money for a long, long time. And you're not seeing that. It was Sir John Templeton that really did a great job in defining what a secular bull market pattern is. I don't know if you realized it was a secular bull market, but I define it as a secular bull market. Your bull market starts on skepticism and it rises on, like, optimism, and you don't peak until you get to euphoria. And until we have— I don't know, you probably remember dot-com.

Of course. Yeah, I was in this industry covering stocks. It's very vivid still to me, so I remember, yep.

And nothing can go wrong. That's when companies had, you know, 100, 200 PE multiples. They didn't have to have money. You had IPO after IPO.

Eyeballs reach were like a metric, yeah.

Exactly. Huge M&A deals. We don't have any of that. Not, not, not even close. So I think we're kind of in what I call the sweet spot, kind of right in the middle of not quite optimism, not quite pessimism. You're kind of flip-flopping between the two. And so I still think we have a long runway. And I can tell you, because, you know, I did technical analysis for part of my career. And even when I look at the charts, I see significant upside, although I see some, you know, consolidation, I still see much higher prices. Obviously I can get the S&P up to 10,000 to 13,000. So, you know, having a reset year, I think would be very healthy for markets. And even if I'm wrong, let's say I'm wrong and markets go even higher. Let's say they go up to 7,600 to 7,800. My theme is, you know, don't lose the faith, be fearless and say, stay invested because there really is no other— too many options. I mean, the bond market has done well. On average, maybe bonds are up around 7% and the market's double that. So if you really want to grow your capital, I think you're still going to grow your capital faster and better within the equity market versus fixed income. Now, I do believe in diversification. I don't believe you should put all your eggs in one basket. But my job is to figure out where the best returns are going to be. And I still think investors will get better returns out of the equity market over time than out of the fixed income market.

Okay. And let me ask you on that count, with some of the critics of indexing complain that all this money is flowing in, that it's kind of valuations don't matter, that just torrents of cash coming in. And there's X amount of truth to that in the sense of like, retirement plans. A lot of people on 401(k)s, they say, look, I'm allocating whatever to stocks, and many people default to the S&P 500. To what extent, if any, do you think there is sensitivity on valuations there? I mean, to kind of set it and forget it, I mean, how do you unpack that?

So in our report, we do talk about valuations. We look at P/Es and we do a 5-year z-score, and We're at the upper ends. And that's another reason why I think we can have a reset, that we pull in some of the valuations the companies grow into part, part of their earnings. But when I look over secular periods, P/E multiples expand. And so I think over time, P/E multiples will continue to trend higher, although I think next year we get a reset. The other reason why we're not in a bubble is the companies that are doing the best have earnings. And when we look at earnings in the second quarter and third quarter, tech and communication services have been standouts. Other sectors can't compete with the earning— earnings power of these companies. So you have a fundamental justification for why tech or Magnificent Seven, this, this concentration are outperforming. Now to get to your, the, the index question, the whole structure of the market is messed up in my opinion because every sector you look at has a concentration risk. Example, one we don't talk a lot about, consumer discretionary. There's two companies that dominate consumer discretionary. Tesla and Amazon, and they're tech and tech-related. So consumer discretionary by default is a tech-related sector, but you have home builders, you have retailers, you have autos, you have cruise lines, you have hotels, but yet these two companies dominate the performance. So I think the structure of the market, how we've set sectors, is also problematic. But because we now have more ETFs than any other product, we're going to stay a product-based industry. And as long as investors want to buy indexes— and I remember a number of years ago, Warren Buffett, one of the greatest investors of our lifetime, said you would be better off buying an S&P 500 index fund than you would trying to beat the market. And he's been spot on.

Yes. And he also, for his wife, I think he said, you know, when he passes that, at least for her, that 90% of the wealth should go into the S&P 500, 10% in treasuries. Now granted, that's not advice for everyone. It's specifically in his case. But he's also, he's long espoused the S&P 500. And I remember 10, 20 years ago, there was a high-profile wager he had with some hedge fund guy. Where the challenge— the money went to charity or some such good endeavor. But it was like Buffett was like, I'm betting on the S&P 500. And this hedge fund guy was confident he would beat Buffett. And of course, the S&P 500 blew away the hedge fund guy. But yeah, it's, it's, it's just historically pretty amazing how few can outperform it over the long haul.

As long as indexing is working, investors will stay with it. History generally shows that investors have to see losses for 2 to 3 years before they'll change. They're willing to take a 1 year of loss, possibly even 2 years of losses. After 3, they're out and done. So the S&P would have to underperform for 3 years, I think, before investors change their pattern of investing.

I mean, that, that feels right. I mean, 2022, stocks and bonds both got hit hard, which was was definitely tricky, especially for people who only thought, saw fixed income as a buffer. But people have been conditioned to buy the dip and they've been rewarded over and over and over. But, you know, we've had over 20-plus years, there's almost a generation of people who haven't really experienced a long, prolonged bear market. So at least until that time, it seems that it might be propped up to some extent by people who keep buying on weakness.

Correct. And I think the, well, so what, The consumer, we haven't talked about the consumer, and that's where the wealth effect comes in. The wealth effect has been extraordinary. When investors see their portfolio rising, they feel that they have income to spend. And of course, housing has done very well for them. So when we look at disposable income, which is income after taxes, that's growing at about a 5% clip. You have savings around 4.5%. We're in the holiday season and consumers are spending. We just had Black Friday. The consumer is spending. And that's important because they make up 70% of our economy, which is why the Fed is focused on employment, because if the employment rate goes— continues to go up and we get more layoffs, that consumer will retrench.

So let me ask you about that, because you've heard a lot of talk about the K effect whereby there's been kind of a bifurcation, if you will, of just to be really simple about it, that the haves are doing a lot more spending than the have-nots and that there's this parting of the ways. So, so much of the consumer spending is concentrated amongst people who have money. Tell me about the concern vis-à-vis the markets on that and maybe how it relates to the Fed, et cetera. I'm just curious whatever thoughts you might have there.

Everybody wants to talk about the K effect. That's, and, but we've been talking about the K effect. It's just a new term since the recession. For the past 3 years, we've been talking about the K effect. We just have a new term for it. I'd like to point your listeners to Bank— the Bank of America Institute. And you go up to their website because Bank of America has some of the best data on what the consumer is doing. And the Bank of America Institute provides free research on this. And what you do see in their data is that the high net worth individual is spending probably at twice the rate as the low end. And they do high end, middle, lower end. The important part is all three are spending, but they're all spending at a different rate. And the low end is not able to keep up with the high end, but they're still spending. You have a problem in your economy when everybody retrenches, and that has not happened. But if you want to follow that data, I do think the Bank of America Institute is putting out some of the best free research that's available. On this.

That's great to know. And I'd assume given what they do, they'd have their pulse on the economy and spending.

That is correct.

Yeah. So let's talk before we wrap up. We haven't talked about Bitcoin.

Well, crypto. Can I tell you?

Crypto. Yeah. Sorry.

Crypto in general. Bitcoin being the largest crypto. Can I kind of tell you an analogy of how I look at the whole crypto space?

You certainly can.

So when I first saw Bitcoin, my instinct was, is that we're going to be moving towards a digital platform of payment. And how I've watched technology unfold follows Star Trek, uncannily follows Star Trek. So you remember flip phones? They seem like ancient architecture now, a flip phone. But Kirk had a flip phone. Then you get Star Trek: The Next Generation. Look at their consoles. They're iPads. Their communication officer has an earpiece and is talking in it and can do translations of other languages. We now do both of those. One of the officers was a humanoid. It was a robot, Data. And we're moving towards robots. The hologram deck is virtual reality. War now is being fought with drones. You can find Star Trek: The Next Generation, you can find drones in war, or at least shooting, right? What was the currency on Star Trek?

I'm not a Trekkie, so sorry, I don't have a good answer.

That's okay. Even some Trekkies don't know, and I had to look this up myself. Okay. There were two currencies on Star Trek. There was latinum that was a metal that was not stable that was put into gold. So gold was still a form of payment. Federation credits. Now let's look at Bitcoin and let's look at the blockchain because Bitcoin trades on the blockchain. So let's start with the blockchain. What is the blockchain? The blockchain is a ledger of debits and credits. It's recorded It's confirmed. It can be tracked. Some people don't think it can be tracked. It can be tracked. Bitcoin is a credit on the blockchain. It is a form of payment. Before, many people thought it would be Bitcoin that would be the form of payment. But now we have a new form. We have stablecoins. I don't think that's gonna remove Bitcoin. But what it tells us between Bitcoin and stablecoins is we're moving towards digital payments. Now, people will say, well, Marianne, we have that, you know, MasterCard, Visa, PayPal. Those are forms of payments. These are actual monies that are being transferred, right? So Bitcoin is very unique and stablecoins. So we're gonna keep crypto, that's one part of crypto. Now you have Ethereum, Solana, Cardano, Chainlink, and there's thousands of others, but those are some, some of the more well-known ones. They are technology. These are companies providing technology on the blockchain. So they are Web 3.0. We started with Web 1.0. So when we originally had the internet, it was read-only. Then you went to Web 2.0. That was read— what did I just say? I went ahead in my head and then I lost my— sometimes I multi-process. Read-write is Web 2.0. Web 3.0, which we are in now, is read, write, own. You can now own on the blockchain, and that's also called tokenization. And we have crypto that are tokens, but we will tokenize Wall Street over time. Stocks will trade on the blockchain, bonds will trade on the blockchain, real estate's gonna trade on the blockchain. But we're in the early phases of development. And so when we look at these cryptocurrencies, like let's say Ethereum, that is a technology that's on the blockchain that allows, let's say, stablecoins to trade. It's a, you know, that little thing that you type on your computer that's called HTTP slash something. It's like a protocol. Yeah. Yeah. Ethereum is like a protocol on, on, on the blockchain. And Solana competes with them. What we're creating is a way of transacting that's faster and cheaper. So if I go up to my phone right now and I wanna send you some Bitcoin, I can go up to Coinbase. As long as I know your address, I can instantaneously send you money. Money. However, if I want to send money to a friend overseas, I can do the same thing instantaneously on my phone. But if I go to a bank and ask them to transfer money for me, it could take 24 to 48 hours, and it's more costly for me to do that. The joke is I can take a suitcase of cash and deliver it faster by plane than I can than trying to do a wire transfer through a bank. We are moving to a technology platform that will allow us to do transactions a lot faster and cheaper. But it's the very, very early stage. And why people have not adapted it is because we didn't have the forms that were easy for people to do it. Example, a couple of years ago, you would need what was called a cold wallet, looked like a USB port, and you would put your crypto on that USB port. And if you lost that, you lost your crypto, but not necessarily if you remembered your password, 'cause only, the only thing on there is your password. Your crypto is actually on the blockchain. So you have to know your password, and there's no one that can help you with your password. And we've all gotten used to companies helping us with our passwords. Password. But now we're creating platforms and technologies where you can buy an ETF now and you don't have to worry about your platform or your password. So it's, it's, um, investors feel more comfortable with that. I don't, I was originally gonna say safer and I'm not sure that's the right word, but they're more comfortable not being responsible for holding and, and, and being responsible for that password.

Yeah. I mean, the introduction of crypto ETFs was arguably a game changer in terms of addressing these concerns. You literally go to your brokerage and boom, you buy an ETF, you own it with no security concerns. And now very recently, you surely know that Vanguard finally threw in the towel after not permitting crypto to be traded on its platform, said, okay, we'll do it. And then I think even, I think Bank of America recently even said advisors can up to 4% for clients, give up up to 4%. So I think there's been a real shift institutionally and a big, big sea change there as well.

It's a huge sea change for adoption. But what I do want to remind your listeners is that this is the most volatile asset class we have. We haven't seen an asset class like this before. If you study the history of Bitcoin, it goes up and down 80%.. And we're moving into what's called the halving next year, where the Bitcoin miners get paid less. And during the years of the halving, Bitcoin traditionally goes down 80%. Now, there's a lot of reasons why Bitcoin recently went down. There was a lot of leverage in the system. Part of the leverage is coming out. There were technical breaks. But I think people are also looking at 2026 as the halving. And historically we see Bitcoin go down 80% and they're trying to get out before that big decline. I think now Bitcoin is extremely oversold. I do think it can rally, but if it has that type of return that it historically has, we're gonna see a lot more volatility in 2026. But the trend in Bitcoin remains up. The trend in Ethereum is a little bit different. It's been in a trading range for years. And I think if we can eventually break out and hold new highs, it'll have the ability to double. But crypto is not for the faint of heart.

Yeah, absolutely. I mean, what's interesting is that Bitcoin as we speak now is, I think, roughly $94,000, give or take $1,000. I haven't checked recently, but it did hit $126,000 earlier this year. And what has happened over and over is that every time it swoons, a lot of people will people in the media write about its demise and say, I told you so. And then historically, at least, it's kept powering back. But that's talking about the extreme volatility, to your point, that it behaves quite differently, at least in its relatively short history. That's part and parcel of the package. And if you don't fully understand that, a lot of people might get— anyway, to your point, every— what is it? Every third or fourth year it tends to have a—

it's every four years.

Every four. Yeah. That's what, you know, in its history, a very short history.

But that's what performance is not indicative of future results. Exactly. But yeah, so 2026 is the fourth year for—

Yeah, so that's interesting. So you think some of that decline was people anticipating that and getting in front of it. So if you will, like almost front-loading or anticipating— Yes. Borrowing from next year. Yes. Gotcha. So if you have a target, I mean, is there a target or you just want to stick to something more general and directional about next year? I mean, it's hard to obviously—

Will we eventually see new highs in Bitcoin? We'll eventually get to new highs. Can we get to $125,000 and $150,000? 50%, yes. Are we going to see it next year? I'd be surprised if we see it next year.

Okay. But as for the end of next year, do you— how confident are you that it'll be higher from where we are today? What do you think about that?

You know, that's the challenge because I don't know if it's going to go down that 80% because that's a big drop from here. And then you're not going to get to new highs next year. Okay. So I don't have real high confidence if we follow the halving pattern as we have that every 4 years where we go down 80%. You're not gonna be at new highs next year, but in the next 2 to 3 years you will be.

Gotcha. So that you anticipated my next question though. So for people then who you would recommend keep it more of a longer-term horizon.

Dollar-cost averaging.

Yeah. Dollar-cost average, a longer horizon. Yes. Got it. Okay. Is there anything left that you wanna add? Any final comments or important things from your report that we did not touch on?

I think we touched on the highlights, but I'd like to summarize with the title of my report is To Be an Investor You Need to Be Fearless. There's still money to be made, and not just domestically. We can now find returns outside of the United States.

Excellent. Well, this was an absolute delight, as it was the previous 2 years, and I hope we can do this again next December.

I plan on being here.

Excellent. Well, thank you so much. Thank you. Thank you. My guest was Marianne Bartels. For more podcasts and the latest wealth management news, visit barons.com/advisors. You can also listen to this podcast on iTunes, Spotify, and Amazon. For The Way Forward, I'm Greg Bartalus.

This podcast was brought to you by Wells Fargo Advisors. Looking for a firm your clients can't outgrow? Wells Fargo Advisors offers financial advisors full balance sheet solutions with wealth planning, investment products, banking, and lending that meet the needs of affluent to ultra-high net worth clients. Build your practice your way and on your schedule with independent and employee model options designed to meet your needs today and tomorrow. Learn more at joinwfadvisors.com.