Investing Based on Past Performance in 2026 Almost Guarantees a Bad Outcome. Do This Instead.

Past performance does not guarantee future results, especially when it comes to investing. Relying on the exceptional equity returns of the post-2008 era as a model for the next decade is a recipe for disaster. The S&P 500's impressive 15% annualized returns during the past decade were fueled by historically unique tailwinds like zero-interest-rate policy (ZIRP), quantitative easing, cheap energy, and corporate debt issuance for share buybacks.

However, these factors are unlikely to repeat themselves, and extrapolating past performance is not a reliable strategy for future success.

The current market conditions suggest a higher risk of major losses. Major U.S. stock market indexes' ROAR Scores have dropped significantly, indicating increased risk. While past returns may suggest low to flat annualized returns for stocks in the next decade, bonds and commodities could offer better prospects. Interest rates have risen dramatically since the 2008 financial crisis, leading to poor bond returns and potential vulnerabilities in high-cost refinancing for speculative growth companies.

Commodities, represented by the Invesco Optimum Yield Diversified Commodity Strategy ETF (PDBC), may hold promise for outperforming stocks in the next 5-10 years. Factors such as oil and gas, gold, silver, and agricultural commodities should be carefully considered when evaluating potential investments. Ultimately, ignoring the past and focusing on active risk management, higher cash yields, and tactical asset management will be crucial for navigating the coming investment environment.