This 12 months’s outcomes verify the traits I warned about — and so they set the stage for the most important alternatives in 2026.
Hey, Reader.
Because the enterprise writer Peter Drucker noticed, “The one factor we all know in regards to the future is that it will likely be completely different.”
Trying again on the previous 12 months proves this to be true. Completely different, surprising, unprecedented… you’ll be able to take your decide of adjectives.
With all that’s occurred this 12 months – the continuing commerce warfare, the longest authorities shutdown in U.S. historical past, and the AI increase’s continued exceptional (and costly) developments – it could possibly be straightforward to imagine many market predictions made firstly of this 12 months can be fully nugatory by now.
Nevertheless, one forecast I made this 12 months has continued to be confirmed proper.
As I wrote to my Fry’s Investment Report members, I anticipated “the richly valued Magazine 7 shares to lose a few of their luster.”
My reasoning was fairly easy: Valuations have been getting stretched, and the price of staying forward in AI was, and nonetheless is, getting costly.
And my prediction was echoed this week.
Wall Road veteran Ed Yardeni introduced on Monday that he’s formally going underweight on the Magnificent Seven: Amazon.com Inc. (AMZN), Apple Inc. (AAPL), Alphabet Inc. (GOOGL), Meta Platforms Inc. (META), Microsoft Corp. (MSFT), Nvidia Corp. (NVDA), and Tesla Inc. (TSLA).
In keeping with Yardeni, the Magazine 7 corporations face distinctive, aggressive competitors, and he expects the 493 different corporations within the S&P to develop into extra precious.
What’s extra, the HSBC’s 2026 predictions of a Magazine 7 slowdown and improved earnings development for the remainder of the S&P corporations again up what I’ve been repeating…
Valuations among the many hottest investments at the moment are bordering on the unsustainable.
Following my forecast’s success, I’d like to try how a few of my different predictions held up, particularly as sure traits appear like they’ll proceed in 2026.
Then, I’ll share how one can get a soar on enjoying my predictions.
Let’s soar in…
Unpacking My 2025 Predictions
1. Company Revenue Margins Will Soar
I anticipated corporations to squeeze extra revenue out of their operations this 12 months, which is precisely what occurred.
The S&P 500 reported a 12.9% earnings development within the first quarter of 2025 and 12% within the second quarter. Then within the third quarter, 81% of corporations within the index went on to beat earnings expectations – a giant soar from the 73% common in 2013.
As for 2026, Yardeni additionally talked about that he believes “that S&P 500 corporations’ collective earnings per share will enhance from $268 this 12 months to $310 subsequent 12 months.”
That is one prediction that might proceed to pan out.
2. The Pharma Sector Will Outperform the S&P 500
Whereas this one didn’t begin to go as deliberate, the pharma sector has rebounded within the latter half of 2025, proving my prediction proper
The pharma business, as measured by the iShares U.S. Prescription drugs ETF (IHE), spent many of the 12 months down and even by way of late September. However now it’s up 28% year-to-date, in comparison with a 17.6% rise within the S&P.
We are able to thank latest developments within the sector for late-year shift towards larger beneficial properties.
Take into account Fry’s Investment Report holding Bristol-Myers Squibb Co. (BMY)’s announcement that it could proceed its Part 3 examine of Cobenfy’s use as a remedy for Alzheimer’s illness. The trial was initially paused attributable to irregularities at sure examine websites, and it was restarted after session and settlement with the U.S. Meals and Drug Administration.
Information like this has us enthusiastic about our healthcare holdings in Fry’s Investment Report.
3. Choose International Markets Will Outperform the S&P 500
This one is popping out to be true. For the third time previously 10 years, it appears just like the S&P 500 will finish the 12 months broadly underperforming the international markets.
At present, the S&P 500 ranks 41 out of the highest 60 inventory indexes on the planet. And the iShares MSCI ex-U.S. ETF (ACWX) – a fund that invests in shares from international locations outdoors the USA – is up 30% for the reason that begin of the 12 months.
So, I’m holding onto my strongest international shares, together with one which’s at present up 80% in eight months…
Investing Amid Chaos
I’m speaking about one in every of my worldwide inventory suggestions within the Fry’s Funding Report portfolio. It’s a world efficiency luxurious and way of life model.
It manufactures its merchandise outdoors of the U.S., however possesses a aggressive benefit within the U.S. towards all the same manufacturers paying large tariffs on the merchandise they manufacture in China or Southeast Asia and export to the U.S.
You can learn how to access more details about this stock by clicking here.
The greenback has stabilized this 12 months, however the low valuations and the broad development we’re seeing abroad ought to preserve pushing international shares larger, which I anticipate to proceed as we transfer into 2026.
At Fry’s Funding Report, we’re ready for the completely different, the identical, and all the pieces in between that the longer term will carry.
In reality, I’m releasing my last Fry’s Funding Report month-to-month problem of the 12 months in only a few days. You can click here to join us before it’s released – and ensure that you are well prepared for the year ahead.
Regards,
Eric Fry
