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Coming into 2025, there have been good causes to be nervous about what would possibly occur within the inventory market.
Now we have actually seen some bumps alongside the way in which this 12 months, together with a inventory market correction in April following surprising shifts in US tariff coverage.
However to date, 2025 has seen the inventory market carry out strongly.
The FTSE 100 has repeatedly hit new all-times highs. It’s up 17% to date this 12 months.
Stateside, the S&P 500 is up by the identical quantity – and final week broke its all-time document degree.
Can that momentum keep on into 2026?
An unsure reckoning
I believe it will probably do. Whether or not it would, nonetheless, stays to be seen.
That may sound like I’m sitting on the fence. However I believe there’s a justifiable argument on either side of that fence.
The thought of additional features could make sense given what we now have seen this 12 months – sturdy inventory market efficiency even throughout the context of a reasonably modest financial efficiency total.
If 2026 sees key economies just like the US return to sturdy progress, that might give the inventory market additional impetus, for my part.
From a glass half empty perspective although, maybe that sturdy inventory market efficiency this 12 months unaccompanied by a equally sturdy financial efficiency might imply that the market’s valuation is getting more durable to justify.
Added to that’s the danger that the massive AI-related increase we now have seen in some main shares this 12 months is just unsustainable.
In search of particular person bargains
Time will inform.
To some extent, what occurs to the broader market shouldn’t be essential for me anyway, as I’m not investing available in the market as an entire.
Quite than, say, placing cash into an index tracker fund, I want on method primarily based on proudly owning a suitably diversified portfolio of particular person shares.
Why do I like this method of shopping for particular person shares?
Shopping for particular person shares lets me attempt to filter out what I see as dangerous shares which may exert a downward drag on the efficiency of the market total.
As a substitute, I can deal with conditions the place I see a mismatch between what I believe is a superb enterprise and the way the inventory market at present values it.
Down 47%, however I prefer it!
For instance, one share I’ve been shopping for repeatedly this 12 months is Lululemon Athletica (NASDAQ: LULU).
Its shares jumped on the finish of final week on information that the chief government will step down.
When a share jumps as a result of the boss goes to depart, that’s typically an indication of shareholder frustration (and aid)! Even after that bounce although, the Lululemon share value continues to be 47% decrease than it was initially of the 12 months.
That displays weakening gross sales within the firm’s key North American market. Rising competitors from rivals like Alo and the specter of falling disposable incomes imply the dear yoga outfit maker must kind out its North American efficiency as quickly as attainable.
However its international enterprise is rising quick — and has tons extra progress alternatives. The Lululemon model stays sturdy and provides the corporate a whole lot of pricing energy.
From a long-term perspective, I see its present inventory market valuation as a possible discount.
