2025 Market Review
The Power of Patience & Staying the Course
Markets entered 2025 expecting falling inflation and early Fed rate cuts, but tariff uncertainty triggered sharp pullbacks that briefly pushed the S&P 500 into bear‑market territory. Despite this volatility, resilient earnings and stabilizing rate expectations supported a rapid recovery.
U.S. equities finished strong
The S&P 500 returned 17.9% closing within 1–3% of all‑time highs, with leadership broadening beyond mega‑cap tech as small‑caps reached new highs for the first time since 2021.
International markets outperformed
The MSCI EAFE gained 31.2%, its best relative performance versus U.S. large‑caps in nearly two decades, aided by a weaker dollar, attractive valuations, and improved corporate governance. Emerging markets rose 33.6%, supported by semiconductors, global manufacturing, and commodity strength.
Fixed income delivered solid results
The Bloomberg U.S. Aggregate Bond Index returned 7.3%, and the Global Aggregate returned 8.2%. After mid‑year volatility, three Fed rate cuts (Sept., Nov., Dec.) helped turn the yield curve positive for the first time in nearly three years.
Alternatives diverged
Gold surged over 60%, its strongest year since 1979, driven by central‑bank buying and geopolitical tension. Oil drifted lower on oversupply, while natural gas strengthened on rising domestic demand. Housing remained constrained as prices stayed near $426,800 amid limited inventory.
Key Lessons
- Diversification mattered as leadership rotated across regions and asset classes.
- Patience was rewarded as investors who stayed invested saw markets rebound to new highs.
- Discipline—rather than prediction—drove outcomes.
Looking to 2026, easing monetary policy, a normalized yield curve, and attractive valuations outside U.S. mega-caps create a more balanced opportunity set for diversified, long‑term investors.
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