For those of you who would prefer to listen:
Happy New Year!
The first half of the 2020s is complete. We have officially entered the second quarter of this 21st century. Can you believe it? Time sure flies.
The new year means different things to different people. For some, January 1st is just another date on the calendar. For others, it marks a new beginning with endless opportunity. It can be a reset of sorts. Health Clubs tend to see a tidal wave of business in January, while Alcohol companies see their spigots slow. Regardless, what matters most is what you do with it.
One thing is certain; This has been an incredible run for investors. Despite the bumpy end to 2025, the Stock Market entered the new year near all-time highs, completing its 8th annual gain in the last 10 years. Day one 2026 started out with a bang. Expect volatility to be a theme this year.
AI continues to drive earnings growth. Corporate America is both embracing and bracing for it. The aggressive spending keeps breaking records. It’s led to ballooning revenues and profits. We’ll find out in 2026 if the pace is sustainable. The Market seems priced as if it is.
While the Market generally focuses on profits, we mustn’t lose sight of the people. AI is disrupting pretty much everything. The adoption rate is faster than any technological advancement our society has ever seen. The implications are revolutionary. The productivity and efficiencies could be game-changing. But it all comes with a cost. Human jobs are at risk. Human brains are being replaced. Disruption is broadly felt. Every technological transformation throughout history has led to new and seemingly better jobs. Will this trend continue? That will be the real key. Opinions are strong on both sides. It’s just way too early to know.
Here’s an important question: Will the premium be placed on Artificial intelligence or Natural intelligence? Machines are indeed getting smarter. That’s not necessarily the case for humans. Ethics are very much an issue too. Is our nation going to be run by adults or algorithms? Are our future adults, as well as present, already falling victim to algorithmic tendencies? Behavior on social media suggests yes. Expect this to be a growing issue in 2026.
The year 2026 will be momentous for sports. It’s an Olympic year. The Winter Games will be held in February in Italy with Team USA back going for Gold. The Super Bowl returns to the Bay Area. Hopefully the Niners will be playing their final home game in February for the first time. Now that would be something.
And of course there’s this: 2025 was a good year to be a Hoosier. That energy and momentum have already carried into the new year. What a great story it is. The losingest program in College Football history is now #1 in the nation. Cinderella would be proud. The Indiana Hoosier story proves what an organization can do with strong leadership, a fresh mindset and a collection of aspirational, hard-working individuals coming together for a cause greater than themselves. These Hoosiers are not considered the most talented nor were they highly sought-after recruits. But they believe in their coach, who believes in them. It sure is something special to see.
Then there’s Washington… Politics will clearly play a critical role in 2026. It’s another election year. The Midterms will determine the makeup of Congress. That will influence policies which will impact the course for America. The Market will be watching closely. There will also be Supreme Court rulings, one of which is on tariffs. That will certainly have economic implications. It will all be Market-moving.
Perhaps the biggest event on the calendar this year will come in July. It marks the 250th anniversary of the birth of our nation. This Great American Experiment has been tested, time and again, over the two and a half centuries. But it keeps going, grounded in the principle of life, liberty and the pursuit of happiness. There’s no guarantees. But it’s been littered with opportunities. Ben Franklin understood the risks from day 1. He knew it was up to the people to keep the republic alive. Brilliant Ben would no doubt be impressed that the experiment is alive this long.
America’s 250th birthday is definitely worth celebrating. We must not forget that Tens of Millions of people from all over the globe try to come to America seeking a better life. The American spirit is peerless; Time tested and true. With perseverance and sound leadership, there’s nothing we can’t do. I really like those words. You might have noticed. For those of you worried that our nation is in a bad place, find some solace in the wise words once said by Winston Churchill: “The American speculative machine is not built to prevent crisis, but to survive them.”
America has faced many a crisis. So far, it’s overcome all. That’s a good track record. Challenges will continue. America will keep meeting the moment. It will also often take the circuitous route to get there. Perhaps that’s now. Churchill knew what he was talking about.
It’s an end of an era for Wall Street. Famed investor Warren Buffett finished his final day as CEO of Berkshire Hathaway. The Oracle of Omaha is an absolute legend. He clearly understood the benefits of long-term investing and compounded growth. Under Buffet’s watch, Berkshire’s stock went from $19 per share in 1965 to over $750,000 upon stepping down. The Berkshire A-shares increased a whopping 3,950,000% during his tenure. That reads nearly 4 Million percent. What a spectacular run for Mr. Buffett.
Change has been a theme everywhere you look. It’s fresh. It’s new. Change can be hard too. But it’s necessary. As we know, change is a constant. It’s inevitable. Change is all about opportunity. New ideas lead to new ways. Things evolve. That’s how good things last.
This was a significant year at Bedell Frazier. After 20 years of running the company, I transitioned to a Chairman role. Meredith Rosen took the helm as President. As I head towards the sunset, she and the Bedell Frazier team will continue to lead this organization into a new chapter. That’s been the plan. It’s the way it’s meant to be. And it’s a good thing.
Bedell Frazier is in the people business. It always has been. I believe it always will be too. The key to success is embracing change and being on the right side of it. That requires anticipation. It requires informed decision-making. I’m pretty certain the need for that will never change.
Mike Harris, our Chief Investment Officer, is hard at work on the Bedell Frazier Investment Outlook piece for 2026. It will be circulated next week. Meredith will be providing the state of the firm and action plan for the year ahead and beyond. Just know, there are many more great days ahead for this evolutionary organization.
Have a nice weekend. Happy New Year!
Mike
