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Economic Trends · Feb 3rd, 2026
What this video’s about
In this episode of The Market Share, Paul Gifford, Chief Investment Officer at 1st Source Bank, is joined by Jason Cooper, Senior Portfolio Manager, to reflect on the market’s performance in 2025 and look ahead to what 2026 may bring.
After another strong year for equities, the discussion centers on diversification, balanced portfolios, and what history tells us about markets during election years.
A strong year for equities, with broader participation
The S&P 500 closed 2025 with its third consecutive year of returns above 15 percent. While much of the conversation around performance has focused on technology, artificial intelligence, and the so-called “Magnificent 7,” Jason points out that the rally was not limited to a handful of stocks.
“What was encouraging,” he explains, “was the broader representation we saw from the rest of the S&P.” Nearly 10 percent of the index’s return came from the other 493 companies, highlighting healthier market participation and reinforcing the value of diversification.
Why diversification still matters
To illustrate the importance of balance, Jason references a familiar visual many investors have seen: the quilt chart. It shows how different asset classes rotate in and out of leadership each year. Rarely does one asset stay on top for long.
The takeaway is simple. A well-diversified portfolio may not lead every year, but it tends to avoid being a consistent laggard. As Jason notes, diversification is not only about managing risk. It can also support long-term returns by keeping investors invested across market cycles.
What history says about markets and election years
With the 2026 midterm elections approaching, Paul and Jason address a common concern: how elections affect the stock market. Jason shares data going back to 1933 that compares market returns during non-election years, presidential election years, and midterm years.
The pattern is clear. Markets have posted positive returns across all three categories. While the magnitude of returns may vary, the long-term trend remains intact. Election years, by themselves, have not derailed market progress.
Why markets often prefer split government
The conversation then turns to the structure of government. Jason explains that when power is split between parties, markets often respond favorably. A divided government can slow sweeping policy changes and encourage compromise, which tends to create a more predictable environment.
That certainty matters. Investors value stability, and checks and balances can reduce policy surprises. Historically, markets have responded well to that balance.
Conclusion
Strong equity returns in 2025, broader market participation, and lessons from history all point to the same conclusion: diversification and perspective matter. Election headlines may come and go, but long-term market fundamentals continue to drive results.
Stay informed as 2026 unfolds. Subscribe to The Market Share for insights on how emerging market trends and policy developments might affect your financial decisions.
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