Predictions and resolutions abound at the start of every year. It is quite, well, predictable. Therefore, we are taking a different approach and starting with our ‘predictions’ about predictions for markets in 2026 and adding in our ‘non-predictions’ about the North American market.

Let us start with our predictions:

• Big things will happen that no one predicted
• Many of these big things will have greater importance than the things that were predicted to happen, but most of the big things that happen, predicted or not, will probably not seem that big after a while
• Many things that are predicted to happen will not happen and we will probably not check why
• A great number of normal things will happen that no one thought merited a prediction
• Many of the things that are predicted to happen will bear an uncanny resemblance to events that have occurred in recent memory; this applies even more so to predicted ‘risks’ (after the global financial crisis, the biggest risk people worried about was the global financial crisis)
• In December 2026, everyone will forget the predictions from a year earlier because they were mostly wrong or uninformative yet we will gladly start the exercise all over again for 2027

A reasonable retort to all of this is to wonder how we do our job of valuing and investing in businesses without making predictions about the future. After all, the entire process of working out what a security is worth is grounded in the idea of estimating future cashflows.

In analysing business fundamentals and managing a portfolio, we look at scenarios, ranges of outcomes, possibilities and probabilities. This is quite distinct from making specific predictions about specific events. The most important things do not change, or are predictable in rather unremarkable ways – we are not looking for the next big revolution that no one foresaw and instead are looking for the simple things that might be overlooked or misunderstood.

The adaptability and entrepreneurial culture will likely make sure the US is a big player in whatever way businesses need to turn

It is important to know the limits of our, and everyone else’s, ability to ‘predict’ the future and instead to take advantage of business progression that does not require heroic assumptions and forecasts. We would rather invest in businesses that can deal with predictable and unpredictable change than try to predict a specific event and find a business that might benefit from it, not least because the market may already have priced in a high probability of such an event. Furthermore, even getting a prediction right about a specific event is no guarantee of predicting the implications of such an event – the election of Donald Trump in late 2024 is a good case in point.

Having sucked the joy out of the (somewhat) harmless pastime of making new year predictions, we feel we cannot leave you empty-handed, so here are our 'non-predictions' for the year, and likely years, ahead. These are general but important messages we think investors should, at the current juncture, consider when allocating their savings, or their clients' savings.

Diversification still matters in investing and we think investors need to be ever more deliberate about how they approach it. The S&P 500 is diversified by name but not by market cap. This is not just a point about market concentration, which is evidently very high, or about how important one theme has become, but also about how many businesses have been underappreciated, in part because they are not obviously part of that overarching theme.

AI has, of course, been a dominant theme and yet it is still unclear how it will impact business fundamentals. When do real use cases start to generate real revenue? Are tomorrow’s AI winners likely to be different from the ones perceived as winners over the past six months? What about the losers, or perceived losers (no-one has actually ‘lost’ yet in a major way)? Keeping close to the fundamentals is important, and passively assuming the trends that have taken us to where we are today will continue is very likely to be a risky bet.

In analysing business fundamentals and managing a portfolio, we look at scenarios, ranges of outcomes, possibilities and probabilities

The US remains a ‘business first’ economy. It is no coincidence that the US is the epicentre of AI. It may not always be, but the adaptability and entrepreneurial culture will likely make sure the US is a big player in whatever way businesses need to turn. Like all countries, the US has its flaws but, in general, it excels at ‘doing business’ and that is what should matter most for investors.

Outside the hot topic of the moment, there are lots of other factors that are likely to matter in helping the Polar Capital North American Fund compound at an attractive rate in the coming year and beyond. These factors include a recovery in spending on agricultural equipment, a normalisation higher in managed care profitability and an improvement in construction and homebuilding markets as well as continued growth in areas like online brokerage, global travel and drug distribution. Less ‘in vogue’ businesses with strong competitive positions in their industries and sound management teams at the helm will continue to grow – just as they did in 2025 – while using their cashflows to supplement the returns from underlying operational growth. These businesses will carry on largely as normal and, in a more balanced market, will together likely offer investors a more durable and diversified source of returns.