Posted by Financial Strategies Group in Newsletters20Jan2026
The year 2025 was a good example of the prevailing regime. That is, we are witnessing markets that are driven less by fundamentals and traditional business-cycle dynamics and more by fiscal and monetary policy influence. As fundamentals have taken the back seat, policy decisions have emerged as one of the most impactful forces driving market direction.
What does that mean for 2026? In an environment where policy shifts and market momentum increasingly outweigh fundamentals and valuations, we believe investors should remain patient and avoid overreacting to short-term sentiment swings — as policy and momentum-driven markets cause severe fluctuations in price, which can then challenge behavioral biases. We saw this in 2025, when stock prices swung wildly from policy-induced lows to momentum-driven highs, and we expect this pattern of higher volatility to persist.
