January Monthly Insights - 2026 Portfolio Ideas and Tax reminder
1) 2026 Portfolio Ideas: Stay Invested, but think global
We believe the growth picture looks promising in 2026. U.S. fiscal support from the One Big Beautiful Bill Act (OBBBA) could help growth, especially early in the year.
Another big tailwind: companies have been spending heavily on AI and data centers. Over time, that can potentially improve productivity and support economic momentum around the world.
Corporate health also matters. Earnings have stayed strong, and profit margins are near record highs. When companies earn more, markets often have more room to grow.
Why we still like diversification (including non-USD exposure)
It’s encouraging that the U.S. administration seems willing to negotiate trade deals with major partners. That can potentially mitigate downside risk for foreign currencies. Investors may find attractive yields—and potential currency upside—outside the U.S.
Consensus earnings expectations (a key driver of stock returns) suggest:
MSCI Emerging Markets: 16%+ earnings growth
MSCI Europe: ~9%
MSCI Japan: ~7% (Loomis Sayles)
That’s one reason we believe holding some non-U.S. exposure can be worthwhile.
2) Direct Indexing: like an ETF, but with more tax tools
Most people know ETFs: one fund that holds a “basket” of stocks.
Direct Indexing is different:
You don’t buy one fund.
You buy many of the individual stocks inside an index (like the S&P 500).
A system builds and rebalances the portfolio for you, so you don’t have to manage each trade.
The biggest feature: Tax-Loss Harvesting
Some stocks in the index go up, some go down. Direct indexing can:
sell losing positions to create tax losses (to help offset gains), and
buy similar stocks to stay close to the index
while avoiding wash sale rules so the loss still counts
What to know
Often uses 100–300 stocks to “track” an index (doesn’t have to buy all 500)
You can exclude certain industries/companies (customization)
Tracking error is often kept within ~3% (could be slightly above or below the index)
Fees vary widely (roughly 0.09%–1.5%)
Who benefits most?
Direct indexing can potentially be helpful if you:
✅ Hold a concentrated position (like lots of RSUs or one stock) and want to diversify gradually and thoughtfully.
✅ Have a “messy” stock portfolio and want to reorganize it in a more tax efficient way—without selling everything at once.
✅ Expect significant future capital gains (from selling a business, real estate, or long-held investments) and want to build capital lossesover time to help offset those gains.
3) Tax Reminder: “pay as you go” matters
When you get together with family and friends, do you ever talk about money—taxes, investing, retirement?
I do.
Over the holidays, a friend told me he traded a lot in 2025 and realized he may owe more in taxes than he had withheld. That’s a common surprise—especially for active investors, business owners, and anyone with multiple income streams.
Here’s the key point many people miss:
Even if you pay everything by April 15, you can still face an underpayment penalty and interest if you didn’t pay enough throughout the year (via withholding or quarterly estimated taxes). The IRS generally expects you to “pay as you go,” not all at once at tax filing time.
Who may need estimated taxes?
You may need estimated payments if you have income such as:
multiple W-2 jobs
self-employment / 1099 income
rental income
interest / dividends / capital gains
K-1 income
retirement income where withholding is too low
What you can do
✅ Increase W-2 withholding (if available)
✅ Ask your brokerage about withholding on certain distributions (when applicable)
✅ Make quarterly estimated tax payments during the year
Reminder: Q4 estimated tax payment is due January 15, 2026.
