As we step into 2026, the newsfeeds are awash with investment experts making clinical predictions for what investors can expect to see over the next 12 months. We didn’t want to feel left out, so we too are kicking things off in 2026 with a genuinely helpful (while simultaneously useless) prediction of the market returns you can expect to see over the next 12 months, varying by the portfolio that you use:
So there you have it – clarity, precision, and confidence! Or maybe not.
Okay. So before you start wondering if we’ve gone mad by offering such wide ranges for our predictions, let’s understand why an amusingly wide range of expected outcomes highlights an important truth: trying to make accurate short-term market forecasts is a lot like a weather prediction for 2030 – a combination of guesswork, optimism, and wild stabs in the dark.
Why Trying to Make Accurate Forecasts is Silly (and Yet So Tempting)
Every January, the financial media teems with predictions from analysts, economists, and self-proclaimed gurus about what’s in store for markets over the next 12 months. These forecasts are bold, specific, and… almost always wrong. Yet, people continue to pay attention and click on the articles. Why? Well our brains crave predictability. The idea that someone out there has cracked the code for future stock returns gives us a comforting illusion of control in a world full of randomness. Psychologically, we’d rather latch onto a dubious forecast than admit the future is inherently unpredictable. That’s why pundits with flashy charts and confident narratives always find an audience, even when their track records are laughable. But if we’re all being honest: markets are complex systems influenced by countless variables. Even if someone accurately predicted a major geopolitical event, a natural disaster, or a technological breakthrough, they’d still need to forecast how irrational human emotions – fear, greed, and herd behaviour – would impact the market as a result. As Warren Buffett put it best, “Forecasts usually tell us more about the forecaster than the future.”
The Problem with One-Year Predictions
Predicting market returns over any single year is like focusing on a single frame of a long movie. Historical data teaches us that annual returns can swing wildly from strongly positive to deeply negative. One-year returns are heavily influenced by short-term noise – headline news, investor sentiment, and unexpected events. Trying to predict them is a futile exercise.
For example, in 2024, Goldman Sachs predicted the S&P500, the world largest stock market, would effectively do nothing, by both starting and ending the year at 4,700. Let’s not forget that Goldman Sachs have untold access to compute power and one of the largest teams of finance professors in the world, so their published prediction ‘should’ be a useful prediction.
What actually happened? Well the S&P500 grew by 25% to end 2024 at 5,881 – wildly higher than predicted and another timely reminder that making short-term predictions is folly. And this isn’t a dig at Goldman Sachs, all the large institutions make big predictions each year, and they’re almost always all wrong. Even the odd occasion that one of them is close, the reasons behind the number they picked often turned out to out to be very different to how reality panned out. As the Austrian writer Marie von Ebner-Eschenbach famously said: “even a broken clock is right twice each day”.
The Long-Term View: Why It Matters
Here’s where things get interesting. While one-year returns are notoriously unpredictable, history shows that as an investors holding period gets longer, the range of outcomes they experience begins to narrow. Yes – simply staying put and holding the same volatile assets for longer removes your total volatility across your personal holding period.
As always, let’s evidence this with real data:
- Over a 1-year holding period, as we have seen above, returns will vary dramatically – from double-digit losses to outlandish gains.
- Over a 3-year or 5-year holding period, the range of annualised returns shrinks noticeably:
So what happens if we extend this further to look at all of the possible 10-year periods of investment since 1990? Well, the variability decreases even further, and positive outcomes become extremely likely. You’ll see that we’ve actually had to move the portfolio identifier circles on the graph for 10-year holding periods, because even the worst outcomes have been positive.
Key Messages:
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The longer you hold the same volatile asset, your total personal experience of the volatility over your personal holding period gets less and less. This is simply time doing its magic on your behalf to reduce the ‘risk’ (price volatility) you experience.
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Do not forget that these figures are all net of fund charges and inflation. Money held in cash cannot dream of outpacing the rising cost of your lifestyle in 10 years time.
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The long-term tightening of outcomes we’ve seen above is a powerful reminder that investing is a marathon, not a sprint. While short-term returns can feel chaotic and uncertain, the trajectory over decades, achieved only by staying put, has historically rewarded those who stay the course very handsomely.
What This Means for You
As financial planners, our role is to help you focus on what truly matters: your long-term goals. Looking at short-term predictions can lead to unnecessary stress and ill-timed decisions. Instead, we advocate for evidence-based strategies that embrace the uncertainty of markets while staying anchored to your personal financial plan. Markets will always fluctuate, and pundits will always speculate. But with boosst at your side and a financial planning strategy in place, your financial success doesn’t hinge on anyone’s ability to guess the next 12 months. It’s built on the principles of diversification, patience, and a long-term perspective. So, as we move through 2025, let’s continue to resist the temptation to get swept up in the noise of market forecasts. Instead, we focus on what we can control – your goals, your financial plan, the assumptions we make in your plan and the buffers we include for unknowns. After all, it’s not the year-to-year volatility that defines your journey, but the steady progress toward the future you envision. Here’s to a year of staying focused on the big picture!
>> A note on the data we’ve used
The historical portfolio data used in this exercise reflects the asset allocation of the real boosst portfolios since 1990. That’s a 35 year period which included a number of recessions, global conflict, and a ‘lost decade from 2000 to 2010 where US markets did not grow at all. Having said that, it has generally been a very good time for investors. Of course, it is possible that the next 35 years include years even better or worse than we’ve seen since 1990.
Want to look further back? 1990 is as far as we can go with a solid representation of the boosst portfolios, but the graphic below takes us back to 1950, and tracks the annual return of the S&P500, the American index of the most significant 500 US companies. This highlights that while extreme highs and lows are possible in any given 12 months, if you pick any few consecutive years and take an average, you’ll be pretty happy with where you end up.
