RICHMOND, Va. β The end of the year is always a good time to look back on the economic trends that affected your investments, and keep an eye on the future trends.
Despite all the turmoil from tariffs, inflation, and federal job cuts, the U.S. economy had a robust third quarter in 2025, and the stock markets are near all-time highs. So what do we know about what's driving the markets? And what does 2026 look like as far as your retirement portfolio might be concerned?
Our old friend Sandy Wiggins with Wealthspire Advisors in Midlothian offers some insight.
"Both stocks and bonds are having a great time," Wiggins said. "International securities are also doing very well. And this is an opportunity for the economy to continue to strengthen. There's an expectation that rates will be lower next year. Companies are making money, even though we have some pockets of the economy that are softer. But ultimately, it's about expectations."
Many observers had noted the uncertainty tariffs created, with whether and how businesses would absorb the extra cost. Wiggins said while they were applied, then removed, then applied again, tariffs have settled since a rocky start.
"April was obviously a challenging month with the introduction of the tariffs, but we got some clarity over the summer around that," said Wiggins. "Companies continue to make money and profits drive earnings, and rising earnings obviously increases the market."
With US stock markets all hitting new highs recently, what should investors be looking for?
"Part of it is the US has continued to do so well that stocks are at all time highs, and that's a great feeling," Wiggins said. "So as an investor, you're looking for other places for value. International continues to look very attractive from a stock price point of view. And international has trailed demand domestic stock markets for a decade or more. So there's an ebb and flow, and international is having its day in the sun."
But going forward, how much of a threat does inflation pose?
"I think that's probably the biggest risk into next year, Wiggins said. "On one hand, we can argue that the global economy is potentially re-accelerating with lower interest rates from the Fed and other central banks, and more money flow just creates more demand for products and services. So that is potentially an issue for heightened inflation to continue. When the Fed lowers interest rates, that creates some excitement, so to speak. And that's not a dis-inflationary environment."
Wiggins also mentioned the massive inflows into AI companies and funds also poses a risk.
"We're moving towards a bubble," said Wiggins. "Bubbles are elusive. You don't know how much air the balloon can take, and ultimately, what's going to happen? Is the bubble going to pop, or are we going to be able to let some of the air out in a reasonable manner? AI is driving so much of that. And so I think we still have some upside, with the AI trade. But you don't want to put all your eggs in one basket. It's so easy to get excited about that. But diversification is very, very important in the grand scheme of things."
Wiggins pointed out the heavy load AI data centers are putting on the US electrical grid. He says China has built out its own grid, especially with dozens of new nuclear power plants. He says China's capacity dwarfs the US's and right now the US data centers are paying three times what the Chinese say their operators pay.
"Chinese data centers can now secure power for as little as three cents a kilowatt-hour using longer-term purchase agreements," said Wiggins. "In the U.S., operators in markets such as northern Virginia typically pay seven to nine cents a kilowatt-hour."
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