The Biggest Risk in 2026

Here are some survey results from Deutsche Bank on the biggest risks investors think we’ll face in 2026:

No surprises here.

Investors are worried about the AI trade and a Fed policy mistake. Not very original but what else do you expect them to say?

I could come up with a host of other potential risks that could come out of left field, but my thinking is that forecasting the risks in advance matters far less than how you prepare for a wide array of hypothetical landmines.

Being right provides an ego boost but you don’t get extra points for being right about what happens next if you don’t position your portfolio accordingly.

The biggest risk to me is that investor expectations have become out of whack because returns have simply been too high in recent years.

Just look at the performance for the S&P 500 by year since 2019:

• 2019 +31.2%
• 2020 +18.0%
• 2021 +28.5%
• 2022 -18.0%
• 2023 +26.1%
• 2024 +24.9%
• 2025 +19.4%

Sure, 2022 was a bad year for the markets but look at how wonderful the returns have been in 6 out of the past 7 years.

Even with the Covid Crash in 2020 and the bear market in 2022, the S&P 500 is up more than 200% in total since the start of 2019, good enough annual returns of nearly 18% per year.

Bull markets can last longer than you think but we can’t have above-average returns forever.

Therein lies the biggest risk in 2026…or 2027 or 2028 or some undetermined year in the future.

Eventually, above-average returns lead to below-average returns. Sometimes the biggest reason for bad returns is because good returns lasted for so long.

It’s just hard to know when that will take place or that the trigger will be.

Michael and I talked about the biggest risks in 2026 and a whole lot more on this week’s Animal Spirits video:



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Further Reading:
Do We Need a Long Bear Market?

Now here’s what I’ve been reading lately:

Books: