Bob Graham – Riggs Asset Management Company

Hi there, this is Bob Graham with Riggs Asset Management Company.

It’s the first week of 2026, and I thought it would be helpful to provide an overview of what we see ahead for the year. As we move forward, we’ll provide more detailed updates, but today I want to give you a sense of our overall outlook for both the equity markets and the fixed-income markets.

Let me start with the punchline.

We believe 2026 should be a decent year for investors.

Our expectation is that equity markets will have another positive year, which would make it the fourth strong year in a row for stocks. At the same time, we believe the fixed-income markets should also perform well.

While bonds likely won’t perform as strongly as equities, we still expect them to deliver solid returns.

So whether you’re primarily an equity investor or a fixed-income investor, the outlook for 2026 appears constructive.

That said, it may be a bumpy year, and we’ll discuss why.

The Economic Backdrop

Several long-term investment themes remain firmly in place.

One of the most important is the continued buildout of artificial intelligence infrastructure. Along with AI itself, we are also seeing major investment in the supporting systems that make AI possible — including power generation, electrical grids, and computing infrastructure.

These developments are likely to continue expanding throughout the year.

On the fixed-income side, we’re currently in what appears to be a slow easing cycle from the Federal Reserve. Gradually declining interest rates can help support both the bond market and the broader economy.

However, 2026 is also a midterm election year, and historically those years tend to be more volatile, particularly as we get closer to the election.

The Bond Market Outlook

When we look at the bond market, there are two primary forces influencing the outlook.

The first is the employment trend.

Hiring demand in the United States peaked in 2021 and has gradually slowed since then. There are several reasons for this.

Many companies hired more workers than necessary coming out of the COVID recovery period, partly because they were unsure how quickly the economy would grow.

Over time, those excess staffing levels have been working their way through the system.

Another factor may be the early impact of artificial intelligence. We’ve already seen some AI-driven efficiency improvements in the technology sector, and we may see those effects expand into other parts of the economy.

The second major force is commodity prices, particularly metals.

As the economy becomes more technology-driven and industrial activity expands, demand for materials such as:

• Copper

• Tin

• Aluminum

• Rare earth metals

has been rising.

Building the infrastructure required for modern technology requires large amounts of specialized materials, which is pushing certain commodity prices higher.

These two forces partially offset each other, but overall we expect the economy to remain relatively strong.

When we examine one of our key indicators — the two-year U.S. Treasury yield — it suggests we may see one to two interest rate cuts from the Federal Reserve this year.

If that occurs, it would likely support both the bond market and economic activity.

Currently, the 10-year U.S. Treasury yield is around 4.1% to 4.15%.

For fixed-income investors, that suggests you may earn your coupon income plus potential price appreciation if interest rates decline slightly.

The key for bond portfolios is being properly positioned along the yield curve, and your portfolios are currently structured to benefit from a gradual decline in short-term interest rates combined with a stable economy.

The Stock Market Outlook

On the equity side, we expect the market to remain somewhat volatile this year.

The biggest difference compared with the past two years is that we are now entering a midterm election cycle.

Election years often bring strong opinions, increased political headlines, and higher market volatility.

Historically, midterm election years often follow a pattern:

• The first part of the year tends to be relatively strong

• Markets may peak around early summer

• As the election approaches, markets can come under pressure

It would not surprise us to see a 10% to 15% market pullback at some point this year, or possibly slightly more.

However, long-term data shows that second-term presidential midterm years average about an 8.8% return for the stock market.

Interestingly, many large investment banks and Wall Street strategists are forecasting similar results for 2026.

Current forecasts generally range from about:

• 3% on the low end

• Up to 14% on the high end

Our expectation is that the market likely lands somewhere in the high single digits to low double digits, which aligns with historical averages.

The Next Phase of Artificial Intelligence

Another important shift we’re seeing in the markets is the transition in how artificial intelligence is affecting the economy.

Over the last two years, much of the market excitement focused on building AI infrastructure — including chips, data centers, and cloud computing.

We believe that investment will continue.

However, we’re now entering the next phase of the AI cycle.

Companies across many industries are beginning to implement AI directly into their operations.

In fact, AI adoption is occurring faster than any technological advancement we’ve seen in history.

The reason is simple: the infrastructure already exists.

Artificial intelligence runs on the internet, and the global internet infrastructure has been built over the past 30 years.

Because of that, companies can adopt AI much more quickly than previous technologies.

As adoption spreads, we expect to see AI improving productivity, efficiency, and profit margins across many industries.

Examples could include:

• Financial services

• Transportation and trucking companies

• Mining and energy companies

• Manufacturing and industrial firms

As companies integrate AI into their operations, those efficiency gains could begin to show up directly in corporate earnings and margins.

Looking Ahead

So when we step back and look at the big picture for 2026:

• The economy appears stable

• Artificial intelligence adoption is expanding

• The bond market could benefit from modest rate cuts

• Stocks may deliver solid returns despite increased volatility

In short, we expect a good year for both equity and fixed-income investors, although the path forward will likely include periods of volatility.

The key will be identifying the industries that benefit most from AI adoption, not just the companies building the technology.

That’s exactly what your portfolio management team at Riggs Asset Management is focused on.

You can already see some of that positioning reflected in your portfolios, and we’ll continue adjusting allocations as opportunities develop.

Overall, we’re looking forward to what we expect will be a bumpy but ultimately positive year in 2026.

Thank you very much.