Expect lower returns in 2026 due to midterms, says Wealth Enhancement's Ayako Yoshioka

John Fortt (Anchor) 00:00.000

Joining me now is Wealth Enhancement Group portfolio consulting director Aya Yoshikawa Yoshioka, sorry, with $128.8 billion in assets under management. Aya, welcome. So tell me, the economic growth you expect is going to remain strong into 2026, but why does that mean that

John Fortt (Anchor) 00:23.120

equities remain strong given that valuations are at such historic highs?

Ayako Yoshioka (Portfolio Consulting Director) 00:28.720

Hi John, happy holidays. to you. So, you know, the last few years, we've seen, you know, really strong market returns, right? Double digit returns. And, you know, going back to 2023, a good portion of that came from multiple expansion. Well, as we look at 2025, you know, 80% of

Ayako Yoshioka (Portfolio Consulting Director) 00:47.040

the returns that we've seen out of the 17.5% returns in the S&P 500 this year, that's largely come from earnings growth. And so, we expect that to continue in 2026. And we don't expect much in terms of the multiple multiple expansion in 2026. It's already at elevated levels.

Ayako Yoshioka (Portfolio Consulting Director) 01:05.560

It's really difficult to argue for, you know, more in terms of the multiple there.

John Fortt (Anchor) 01:10.960

So, we have a little fan service on CNBC last hour. I don't know if you've caught it. Mike Santoli's mystery broker was finally revealed. I want to read you a little bit of what he said. Within two years, this is all going to end. He said, "People that want to see a broadening

John Fortt (Anchor) 01:29.600

in the market could be careful what you wish for because in the past, it's always been painful for the entire market. Your thoughts?

Ayako Yoshioka (Portfolio Consulting Director) 01:38.200

Sure. So, you know, we've seen such concentration in markets and a lot of this concentration has been given to the, you know, leaders that have had strong balance sheets, high quality names with really strong growth. And so, you know, we want to see the broadening out because we

Ayako Yoshioka (Portfolio Consulting Director) 01:54.840

don't want to see the market being driven by just seven names. But we do want to see see the overall market being a reflection of the overall economy and that broadening out being reflected in markets. So, I hope it doesn't end poorly for the MAG 7. I hope it continues with the

Ayako Yoshioka (Portfolio Consulting Director) 02:13.440

S&P 500 hitting new highs in 2026.

John Fortt (Anchor) 02:16.240

My impression, Aya, is that this market is leaning hard on big stocks, leaning hard on equities and leaning hard on this retail investor mindset that has been willing to buy the dips with April of this year being a prime example. How much is that culture or stance going to be

John Fortt (Anchor) 02:37.000

tested you expect in 2026? How much volatility does it leave room for given the levels of margin and options activity that retail investors have taken on?

Ayako Yoshioka (Portfolio Consulting Director) 02:49.440

Absolutely. And you know, Mike Santoli touched on this a little bit. It is a midterm election year in 2026 and the averages aren't too kind. I think we're in that sort of mid-single-digit returns when you look at the averages. And it might seem a little disappointing in 2026 to

Ayako Yoshioka (Portfolio Consulting Director) 03:06.800

have a 6, 7, 8% return after being spoiled for 3 years in a row of 15 plus percent returns. So we'll have to see. We do think structurally that retail investor is still invested and wants to, you know, find those winners and it's going to be sort of imperative that there is a

Ayako Yoshioka (Portfolio Consulting Director) 03:25.560

little bit of that active management going on structurally in markets. Well, that's a to all the passive inflows that continue to happen in markets.

John Fortt (Anchor) 03:33.440

How much are we sort of leveraged to the attitude about AI infrastructure spending? It's not just about the big tech names, anymore. We're talking about utilities, we're talking about construction equipment companies, all getting some sort of a lift off of the hopes of this not

John Fortt (Anchor) 03:51.240

just existing plans, but continued expansion in AI data center spending.

Ayako Yoshioka (Portfolio Consulting Director) 03:57.560

Absolutely. In terms of the AI I, you know, thematic. We did get that broadening out of all the picks and shovels related to AI, but we need to see sort of that continue. And I think investors are really afraid of two things. One, deceleration in that growth rate. So, it would

Ayako Yoshioka (Portfolio Consulting Director) 04:16.000

impact all of those areas of AI. And this being the increase of debt used to fund that growth. So, I think those are the two things that we're all really monitoring as we go into 2026.