In the fourth quarter of 2025, equity markets benefitted from strong corporate earnings, better-than-expected economic growth and a shift to a more neutral monetary policy stance, which produced a 2.7% return in the quarter for the S&P 500 Index.
This return capped off a third consecutive year of double-digit returns for the S&P 500 Index which ended up 17.9% for the full year, while all other major U.S. equity categories also posted double digit returns. Further, International stocks led all returns, rising 31.9% for the developed markets (MSCI EAFE Index) and 34.4% for the emerging markets (MSCI EAFE Index).
Despite rather lackluster fixed income markets in the quarter, primarily due to a long government shutdown and sticky inflation reports, bonds also produced solid returns across the yield curve for the year. This performance was a welcomed change from 2024 which saw negative performance from longer maturity Treasuries.
While the U.S. equity markets ended the year on a strong note, the year did not come without great volatility. After the announcements of new US tariffs, investors experienced a correction followed by a rapid recovery. The ensuing months and recovery for the S&P 500 Index brought on 36 record closing highs amid geopolitical, tariff and inflation related tensions coupled with a government shutdown and labor market concerns.
Key risks for 2026 include earnings disappointments (given elevated market expectations), a resurgence of inflation pressures, geopolitical escalation, renewed trade tensions and an economic slowdown. While we remain mindful of these risks, we continue to see upside potential in both U.S. and international equities across both growth and value styles.
For more detail, please click on this link: 2025 Q4 Review & Outlook. And, please click here for your individual performance report or set up a call.
In honor of Warren Buffett (former Chairman, Berkshire Hathaway) we close with the following:
“The most important quality for an investor is temperament, not intellect.”
Thank you for your confidence in us!