As 2026 begins to take shape, many headlines point to another “average” year for the stock market. Forecasts cite steady economic growth, anticipated interest rate cuts made by the Federal Reserve, strong corporate earnings, and continued enthusiasm around Artificial Intelligence (AI). The S&P 500 is projected to climb into the mid-7,000s, suggesting yet another year of gains1.
But averages, especially in the market, can be deceiving.
What about the often quoted 10% annual rate of return? It represents a long-term average, not a reliable year-to-year benchmark. Before making investment decisions based on what “usually” happens, it’s worth taking a closer look at what an average really represents — and what it doesn’t.
Let’s break it down.
2026 Market Forecasts: A Range, not a Guarantee
Most analysts agree: 2026 looks optimistic. Forecasts suggest positive momentum fueled by steady economic growth, potential interest rate cuts, strong corporate earnings, and continued AI innovation. The median outlook for the S&P 500 sits in the mid-7,000s. On paper, it all sounds steady, even typical1.
But there’s an important truth behind the numbers.
An “average” rate of return, often cited as 10% annually for the market, rarely happens in any single calendar year. That figure reflects decades of performance, but year-to-year, markets rarely move in a straight line.
In fact, market returns swing above or below the long-term average far more often than they land right on it. Here’s why that matters:
- Year-to-year returns are uneven. Markets are inherently volatile. Some years far exceed the long-term average; others fall well short, and very few ever hit it exactly3.
- Forecasts are not certainties. Analysts base their targets on assumptions about the economy, earnings, interest rates, consumer behavior, and more. Even the most well-informed consensus is still a prediction, not a promise of what will happen1.
The takeaway: averages are useful for building long-term plans, but they are not a guaranteed prediction of the year ahead.
If “Average” Is Rare, What Should Investors Do?
It’s tempting to act on annual forecasts, but timing the market rarely pays off. A better strategy? Time in the market, not timing the market.
Here’s why a long-term perspective tends to work better:
- Short-term predictions are notoriously unreliable. No one consistently predicts market returns accurately year after year.
- Market volatility is normal. Some years deliver big gains; others bring losses, and many fall somewhere in between.
- Long-term compounding builds wealth. Long-term investing, and the power of compounding, often beats short-term reactions.
Recent headlines reflect this view; an encouraging outlook, grounded by an understanding that markets never move in perfectly predictable ways.
A Smarter Way to Think About Returns
Instead of fixating on whether 2026 will deliver an “average” return, here are a few guiding principles to keep in mind:
- Look at your investment time horizon rather than a single year.
- Focus on diversification and consistency, not chasing annual jumps.
- Use forecasts as perspective, not as direction.
Your financial plan should be about where you’re headed, not about one year’s market return.
Financial Planning to Guide the Way
Because markets do not deliver predictable averages year after year, having a personalized plan can make all the difference. At CommunityAmerica Wealth Management, we’re here to help guide you, no matter what the markets do this year or next. With a plan tailored to your goals, you can approach uncertainty with confidence.
