Webinar Key Takeaways
Broad diversification meant owning standout companies that few investors would have thought to pick on their own. (08:33)
Strong corporate earnings help explain why the market grew less expensive even as prices rose, and those expectations already appear in prices. (15:41)
Today's largest companies may not lead tomorrow, which is a central reason to stay diversified rather than concentrated. (22:21)
Historically, gloomy sentiment and all-time highs haven't been reliable reasons to stay out of the market. (34:11)
New Capital's portfolios keep a roughly even balance between U.S. and international stocks and a short bond duration, both deliberate choices revisited as conditions change. (42:37)
A strong year makes stock picking look easy in hindsight. The companies that led the market seem obvious now. And yet, how many investors would actually have chosen them in January?
That question set the tone for the market review at New Capital's 2026 Annual Conference, presented by Leonard Golub, CFA, our President and Founder, and Jaycee Smalley, CFP®, our Vice President. The review covered market concentration, the role of AI, what the historical record says about investing through uncertainty, and how we position portfolios in response. The common thread: you don't have to predict the winners to own them.
Owning the Companies Few Would Have Picked
Some of this year's standouts weren't household names. Several were semiconductor companies in Taiwan, the Netherlands, and the United Kingdom, and Leonard put the question to the room directly.
"How many of you would have picked ARM Holdings? None of you? But you owned them, right?"
That's the quiet advantage of a globally diversified portfolio. Instead of betting on which companies or countries will lead, you hold thousands of them. Earlier that day, Dimensional's Bryce Skaff described his own portfolio the same way: thousands of companies across dozens of countries. The review showed Asian technology companies growing large enough to outweigh Europe's biggest firms, the kind of shift that's easy to miss for an investor who stays only in the regions that feel most comfortable.
Why Market Concentration Calls for Diversification
A small group of very large companies, most tied to technology and AI, now carries much of the market's weight. For investors, the lesson isn't alarm. It's a reason to own more than the leaders.
AI as the Modern Railroad
"AI is the modern industrial revolution, railroad build-out," Leonard said. The investment behind it reaches well beyond chipmakers, to memory makers, server builders, data center developers, and the power companies that keep it all running. It's a theme that also ran through our Q2 2026 market review.
What makes the build-out remarkable is that it rests on an idea, not a machine. Much of it traces back to a single 2017 paper by eight researchers at Google, Attention Is All You Need, which introduced the transformer design behind today's large language models.
The largest technology companies are spending heavily to build that capacity. So far, as we read it, the market has treated that spending as an investment in future earnings rather than a cause for concern.
Today's Leaders, Tomorrow's Question Marks
History tends to be less kind to market leaders than headlines suggest. Companies that once sat among the very largest, Exxon and GE among them, have since dropped out of the top 10. Economist Joseph Schumpeter called it creative destruction: someone builds a better mousetrap, and the old one gets left behind.
"And so this is why we diversify you, because I can't tell you 10 years from now if any of these companies are going to be in the top 10," Leonard said.
Strong Profits and a Market That Looks Ahead
Rising prices don't always mean a more expensive market. As the review laid out, corporate profits grew faster than stock prices this year, which left the market looking cheaper relative to earnings than it did a year earlier. "This is really an interesting confounding thing, but it's true."
None of this is a secret. Expectations for future earnings are already reflected in prices, a point Bryce Skaff also made earlier in the day. "The market knows about this." The risk worth watching is AI spending: if it slows, "there may be another shoe to drop."
As for how long the strength lasts, the honest answer came straight from the stage. "How long does it continue? I don't know. Couldn't tell you."
Why Headlines Make Poor Market Timers
Some of the most useful slides in the review had little to do with this year. They tested common investor instincts against the historical record.
Gloomy Sentiment Isn't a Forecast
When consumer confidence falls, it's natural to assume stocks will follow. The historical data suggests otherwise, with markets often doing better after confidence bottoms out than after it peaks. "So don't just think that because everybody around you is miserable, the stock market's going to be bad. It's not necessarily the case."
All-Time Highs Aren't a Reason to Wait
The same goes for record highs. Historically, investing at an all-time high has produced results nearly indistinguishable from investing on any other day. "So we have to be careful when we say, 'Well, the market hit a new high. I just can't invest.'"
Drawdowns Are Part of the Deal
Most individual stocks dip meaningfully at some point in a typical year, even a good one. "It's normal volatility." When worry about a deeper decline sets in, abandoning your financial plan isn't the answer. Historically, balanced stock-and-bond portfolios have taken less time to recover from large declines than all-stock portfolios, which is why our response to that worry is a more balanced mix rather than a move to cash. "This is how we respond to risk," Leonard said.
Bonds Have a Place Again
For years, bond yields left little room above inflation, and we chose not to lock clients into long-term bonds at low rates. Higher rates have changed that picture. At today's levels, we can more comfortably buy bonds that may earn something above inflation, though that could change, and we plan some adjustments to our bond portfolio to make better use of current yields.
"We like bonds in your portfolio and think they have a place."
How We Position Portfolios
Jaycee's portion of the review focused on how New Capital's portfolios are built, and two choices stand out.
First, our model portfolios hold a roughly even balance between U.S. and international stocks, more international than a market-weighted global index. "We're making a bigger bet on international even than the market. That's very meaningful, and something we have to think very, very carefully about," Leonard said. The reasoning is valuation: we see international stocks trading at a discount to U.S. stocks, though any benefit from that discount could take years to show up.
Second, bond duration stays relatively short. "Duration is a measure of how sensitive the bonds or bond portfolio are to interest rates," Jaycee explained, and shorter duration means less sensitivity when rates rise. With rates higher, we may lengthen duration somewhat, while recognizing that "we're not going to say the coast is clear on additional interest rate increases."
We also now report a Sharpe ratio for each portfolio, a measure of how much return a portfolio has delivered for each unit of risk taken. Two portfolios can earn the same return with very different rides along the way, and the Sharpe ratio helps show the difference.
Questions About What This Means for You?
No one could have named this year's standouts in advance, and that's the point. You don't need to predict which companies will lead next year to own them. If this review raised questions about your own portfolio or plan, we'd welcome the conversation. Reach our team at info@newcapitalmgmt.com or (713) 874-1444, or schedule a consultation.
For informational purposes only. Not investment advice. Past performance is not indicative of future results. All investments involve risk, including the potential loss of principal. Advisory services offered through New Capital Management LP, a registered investment adviser.