2026 Market Outlook
Our Approach to Market Outlooks
Every year, many experts try to predict what the markets will do next. These predictions often sound confident—but they’re frequently wrong.
At Willow Creek Partners, we don’t believe that accurate predictions are the key to long-term investing success. Instead, we focus on understanding the bigger picture, staying disciplined, and choosing investments carefully.
This outlook is meant to explain what we see happening across different types of investments and what we believe will matter most for investors in 2026. Our goal is not to predict the future, but to provide clarity and perspective as we work to generate strong, well-balanced returns over time.
The Big Economic Picture
Despite negative headlines, the U.S. economy has been more resilient than many people realize.
Here’s what the data shows:
The U.S. economy is still growing.
Unemployment remains low.
Inflation has come down significantly.
Interest rates are higher than they were in recent years, but still close to long-term historical averages.
Energy prices are much lower than their recent highs.
Since the 2008 financial crisis, the U.S. has only experienced one recession—the short downturn caused by COVID in 2020. While markets remain volatile, history shows that uncertainty often creates opportunities for investors who are patient and well-capitalized.
Market returns have not been evenly distributed. Large companies have done very well, while smaller companies have lagged behind. As a result, small- and mid-sized companies are now much cheaper compared to large companies than they have been in decades.
While this gap could last for some time, history suggests that periods like this are often followed by money flowing back into smaller companies—especially when supported by long-term trends like U.S. manufacturing returning home, stronger supply chains, and changing demographics.
Private Equity
Private equity activity slowed during the period of rising interest rates, but deal activity and company sales began to recover in 2025. While total deal value exceeded $1 trillion, most of that activity involved very large deals.
Smaller, middle-market transactions are gradually returning to normal after the rapid rate increases of 2022–2023.
At the same time:
Private equity firms have over $2 trillion of capital waiting to be invested.
Many business owners—especially baby boomers—are reaching retirement age.
This is creating one of the largest business ownership transitions in history.
Some owners delayed selling their businesses because they were used to the high valuations of the zero-interest-rate era. Over time, that resistance is likely to fade.
As a result, buyers should gain more negotiating power. We expect more deals to include creative structures such as seller financing, earn-outs, and minority protections—especially in smaller businesses.
Historically, investing during periods of higher interest rates has often produced strong long-term results because investors are more selective. We believe this cycle will follow that same pattern.
Real Estate
Commercial real estate has gone through a needed price reset. Higher interest rates have increased borrowing costs and pushed property values lower across many sectors.
Office buildings face long-term challenges due to remote work and changing usage patterns. While distress is beginning to stabilize, many properties are still being worked through.
Apartments and multifamily housing are experiencing a short-term slowdown caused by overbuilding in recent years—not a long-term problem. As new construction slows and population trends continue, demand should improve over time.
Real estate downturns tend to happen quickly, while recoveries take longer. Investors with patience, strong balance sheets, and discipline are often best positioned during these transition periods.
Some property types—such as industrial facilities, logistics centers, data centers, healthcare, self-storage, and life sciences—have held up better, though each comes with its own risks and cycles.
Venture Capital
Venture capital has been more affected by higher interest rates than almost any other asset class.
The era of “growth at any cost” has largely paused. Investors are now focused on:
Clear paths to profitability
Strong business fundamentals
More realistic valuations
Innovation is still happening, but capital is being allocated more carefully. Top-tier managers continue to raise funds, while weaker projects struggle to survive.
From an investor’s perspective, this is a healthy shift. Company governance is improving, valuations are more reasonable, and businesses are built on stronger economics. While returns may be uneven in the short term, these changes support better outcomes over the long run.
Fixed Income and Private Credit
For the first time in many years, bonds and income-focused investments are once again attractive.
Cash accounts, money markets, government bonds, corporate bonds, and private credit now all offer meaningful returns and can play an important role in diversified portfolios.
Private credit has grown rapidly as traditional banks pulled back during the interest-rate transition. While some areas deserve caution, many private lenders focus on strong borrower quality, conservative deal structures, and steady income.
In today’s environment, choosing the right credit investments matters more than ever. Assuming no major global disruptions, we expect lending markets to continue stabilizing into 2026.
What This Means for Investors in 2026
We believe 2026 will reward investors who stay disciplined, selective, and thoughtful in how they build their portfolios.
Rather than reacting to headlines or bold forecasts, investors are best served by evaluating each opportunity carefully—considering risk, liquidity, and long-term goals.
No investment approach removes uncertainty. What matters most is investing based on strong fundamentals, smart deal structures, and a meaningful margin of safety.
About WCP
At Willow Creek Partners, we remain focused on deploying capital responsibly and creating long-term value. We use a value biased lens to buy real-world assets as private equity investors. Our business model is built on 3 things:
1. Understanding the macro economy.
2. Belief that private investment will become a greater portion of investors’ capital allocation.
3. Investing in businesses that we can help scale through the use of technology and operational expertise.
If this approach resonates with you, we’d welcome your partnership. Contact Alex Gregory at gregory@willowcreekpartners.com to start at conversation.
We appreciate your continued trust and look forward to building durable businesses together in the year ahead.