USA! USA! USA!

No, that’s not the raucous chanting of World Cup fans (just wait until June), it’s Goldman Sachs’ outlook for 2026. Concerns from a top-heavy stock market to the White House’s supposed threat to the Federal Reserve’s independence and foreign equities outpacing domestic returns are relatively insignificant to America’s continued dominance, the Wall Street stalwart says.

“People are underestimating US resilience,” said Goldman CIO Sharmin Mossavar-Rahmani. “In spite of all the headlines that you read about — is America on the decline, etc. — we want to make a very strong stand and say no, that is not the case.”

For plenty of advisors and their allocation, that might just mean continuing what you were doing last year. “Portfolios should be significantly overweight in US assets,” Mossavar-Rahmani said at a press event last week.

Independence Day

Political risk is a frequent concern. President Trump has been vocal about wanting lower inflation and interest rates and has suggested firing Fed Chair Jerome Powell if it would help achieve that goal. And on Sunday, Powell said that the Department of Justice began investigating him over testimony he gave to Congress last summer regarding the central bank’s building renovation, which he argues is really an attempt to weaken Fed independence.

While the rhetoric is aggressive and certain actions could increase short-term volatility, Goldman views the pressure as familiar rather than alarming. “The fact that presidents want lower rates is not that unusual,” Mossavar-Rahmani said, adding that Goldman does not believe the White House poses a threat to monetary policy independence. Last year, Trump attempted to fire a member of the Federal Trade Commission and a Federal Reserve governor. Lawyers, whomGoldman consulted, expect the Supreme Court to side with Trump in the FTC case, but not in the Fed matter, underscoring the central bank’s unique independence.

Proof Is in the Earnings

Goldman’s portfolio guidance comes even as some investors look overseas for opportunity. International equities jumped 32% last year, while US stocks gained a still-impressive but lower 18%, according to Goldman data. But returns alone don’t tell the full story:

• Earnings growth in non-US developed markets rose just 1%, compared with 12% in the US. In China, earnings declined despite equity returns climbing 31%.
• The S&P 500 is concentrated, with the 10 largest companies accounting for 41% of the index. Still, those firms boast median profit margins of 29%.

“If you don’t have the earnings to support any market move, it’s not going to last,” Mossavar-Rahmani said.

USA, A-OK. Geopolitical risks — from Ukraine and the Middle East to India-Pakistan tensions — remain a wildcard. Goldman isn’t too concerned, though, said Brett Nelson, head of tactical asset allocation at Goldman. “We do think they could be sources of volatility, but we’re only putting 25% odds on the risk of them being disruptive enough to actually result in a recession in the US.”

A billion dollars just isn’t what it used to be.

The Securities and Exchange Commission announced a proposal last week that would raise the minimum size of a “small entity” to $1 billion in assets under management, up from the current $25 million level, and significantly alter how rules impact small advisory practices. While $1 billion in assets may sound like yacht money, industry groups said the firms managing those funds are generally the size of small businesses in other industries. The average advisor in 2024 had just eight employees, two offices, and $393 million in assets, according to data from the Investment Adviser Association. While it’s not a get-out-of-regulation-free card, it will help the agency set rules that are tailored for a firm’s size and scale, and could push more of the oversight to the state level.

“The SEC is seeking to reshape their playing field with fewer registrants,” said Elina Yuabov, a capital markets attorney with Yuabov Law Group, adding that the agency is already focused on upcoming priorities, like alternative investments, cryptocurrency and AI washing. “Whether this ultimately improves retail investor protection, or just redistributes regulatory complexity, remains to be seen.”

Billion-Dollar Party

There were almost 16,000 registered investment advisors in 2024, and almost 70% of them managed less than $1 billion, according to IAA data. The SEC’s proposal would allow it to create rules on a broader set of registrants and not burden smaller firms with the same regulatory oversight as large ones, said Jonathan Scott, a former SEC enforcement attorney. “It is a big jump, but when you realize that the threshold number has not been revisited in well more than a quarter-century, it is less surprising,” he said, referring to an amendment passed in 1998 when roughly $500 million had the purchasing power of $1 billion today. It also allows the current commission to help create a more “industry-friendly” layout, he added.

The IAA data also found:

• More than nine in 10 advisors employed 100 or fewer employees in 2024.

• Advisors with less than $1 billion in assets accounted for almost all of the new SEC registrations.

“The existing threshold has been outdated for a while now, and captures many more advisories than Congress likely intended,” said Braden Perry, a litigation attorney with Kennyhertz Perry and former CFTC trial attorney, adding that the current rules are forcing smaller firms to consolidate because of compliance costs.

The Enforcement. Yuabov said small advisors would still, of course, be subject to the Advisors Act and examination authority and she expects the agency to provide risk alerts, or other communication, in the near future to allow the industry time to respond to the proposal. “Hopefully only at that point, we’d see this really roll out,” she said.

If you can’t eat the rich, tax ‘em.

As states grapple with tighter budgets, driven in part by federal cuts to programs like Medicaid, education and food assistance, lawmakers are increasingly looking to their wealthiest residents for revenue. That has sparked familiar speculation about whether high earners will flee to low-tax states like Texas or Florida. But advisors say relocation is rarely the first, or best, response.

“This is all just proposed, so until we know what the final legislation is, we don’t know if it’s going to affect our clients or not,” said Scott Schwartz, CFP, at OnePoint BFG. “We’re telling clients to just not react to it.”

The Taxman Cometh

The obvious reality is that wealthy people have a lot of money — shocker. While higher taxes are never welcome, proposed hikes are unlikely to upend millionaires’ finances, Schwartz told Advisor Upside. “I pay a lot of money in taxes, my clients pay a lot of money in taxes,” he said. “I don’t like it, but I don’t think about it. It’s just part of life.”

Some of the state tax hikes include:

• California’s Billionaire Tax Act, which would impose a one-time 5% tax on residents with net worths of at least $1 billion.
• Rhode Island’s proposed 3% surtax on incomes of more than $640,000.
• Washington Governor Bob Ferguson’s potential 9.9% tax on personal incomes over $1 million.

If a client wants to manage taxes more effectively, Schwartz first looks to options such as increasing charitable donations. “I’m certainly not going to recommend a client leave their family and friends and move to Texas just to save,” he said.

What’s My Motivation? Some advisors even worry that these tax policies could dampen ambition and innovation if taken too far, said Gabriel Shahin, founder of Falcon Wealth Planning. He told Advisor Upside he suspects there will only be a few people “who want to change the world regardless of the impact on personal wealth.”

Others worry these proposals are just the first dominos to fall toward higher taxes on the middle class. “It looks like a ‘Trojan Horse’ for broader taxation,” said Marcos Segrera, a CFP with Evensky & Katz Wealth Management.