Don’t Bet the Farm

2025 was another decent year for the S&P 500. While it was largely driven by its AI constituents (MSFT / GOOG / AMZN / META / NVDA / AAPL / TSLA accounted for about 40% of the total return), the S&P was up approximately 16% in 2025. Provided S&P ETFs are a popular option in retirement accounts, many investors registered another up year.

As I noted in previous Plateau articles, the S&P’s current concentration and valuation are concerning. The “Mag 7” represents 30-40% of the index, and the forward P/E is approximately 22x. The historical average of the S&P’s P/E is closer to mid-teens. Adjusted for inflation, the index is trading close to its 2000 peak (during the dot-com bubble). It’s hard to challenge the notion that - relative to history - the S&P 500 carries considerable risk.

My firm, Access Capital Management, typically doesn’t use broader market ETFs when, as today with the S&P, certain sectors/companies within the index have an outsized weighting and an unfavorable risk-reward profile. Instead, we tend to focus on areas of the market and individual equities that we believe offer attractive risk-adjusted returns. In 2025, these areas included ex-US equities (international) and US small caps.

We are also inclined to invest in smaller companies that are not well covered by Wall Street. It is well established that market inefficiency (fewer buyers and sellers, less information) can offer attractive opportunities. As the size of a listed company declines, so goes the potential for investment banking business and - not surprisingly - related Wall Street coverage. This dynamic can be even more pronounced in the private investment arena.

Taken together and looking ahead to 2026, I am generally optimistic about the US economy and US equities. The Big Beautiful Bill and forecasted interest rate cuts should be stimulative. That said, I will continue to underweight the MAG 7. Without discounting the AI revolution, the potential that the multiyear runup in these equities is overdone seems uncomfortably high. I also continue to recommend increased exposure in US small caps and international allocations (especially smaller companies).

Within private markets, cash flows, leverage, and durability are increasingly critical. The pace of private equity fundraising and company monetization slowed in 2025. While I was an early proponent of balancing portfolios with private/alternative allocations, this area of the market is not a panacea. Private markets are inherently more opaque and altogether trickier to navigate. Absent liquidity (usually the case), investors should focus on quality, balance sheet stability, and be prepared to stay in these assets longer.

Finally, and per the above title, I encourage older (“more seasoned”) investors to maintain a fixed income anchor. Some meaningful allocation to US Treasuries (especially shorter duration) can serve as a shock absorber in a market drawdown. Compounding money is exciting, but if you live a comfortable life (and especially if you are lucky enough to spend some time on the Plateau), don’t “bet the farm” on outsized allocations to hot trends like AI and Bitcoin. You may miss some upside, but you might also protect what makes life worth living. Story dated January 5, 2026.

Note that all information contained herein is provided to you solely for informational purposes. This document does not constitute an offer to purchase any securities. This document does not create a client relationship with Access Capital Management, LLC or any of its affiliates. Note that Nic Lancelotta is an active investor in public and private securities and one or more conflicts may exist. Access Alternatives, LLC (“Access Alts”) is an alternatives focused investment manager. Access Investment Management, LLC (“AIM”) is an SEC registered investment advisor. Access Alts and AIM are separately owned and operated.

Information provided should not be deemed as investment advice or a recommendation to purchase or sell any specific security. While the information presented herein is believed to be reliable, no representation or warranty is made concerning the accuracy of any data presented. Do not treat this information as advice in relation to legal, taxation, or investment matters. Please consult with your tax, legal and investment advisors.