As we embark on another year together, we wanted to share a brief look at how markets finished 2025 and what may be ahead in 2026. Our goal with these updates is simple: to keep you informed in a clear, approachable way that supports the decisions you’re making for your financial future.

Markets provided a strong finish to 2025 – albeit with plenty of volatility. Domestic and global stocks ended near their highs for the year. U.S. stocks rose 17.86% while international stocks increased a stunning 32.03% as measured by the S&P 500 and MSCI EAFE indices respectively. Bonds also provided solid total returns. This is thanks to higher yields and falling interest rates. The 10-year treasury yield fell from 4.57% to 4.16% over the course of the year and diversified U.S. bonds rose 7.30% as measured by the Bloomberg Aggregate Bond Index. 

Advances in artificial intelligence promised greater productivity as a result of process and task automation and enhanced decision making. This was a main driver in propelling U.S. stocks higher for a third year in a row. As a result, valuations at present seem stretched compared to historical standards, yet corporate earnings growth next year may justify these lofty expectations. Investors are wise to temper their expectations as future returns have historically been held back when starting from such elevated valuations. In addition, the ever-present prospect of geopolitical turmoil and uncertain policy actions coming from Washington D.C. may elicit short-term negative catalysts such as were experienced in 2025. We enter 2026 with a balanced outlook between stocks and bonds. 

The most recent data showed a mixed picture for the health of the U.S. economy. Unemployment ticked higher, ending the year at 4.6%. Yet inflation appears to be cooling. CPI most recently showed progress, rising at a cooler 2.7% rate as opposed to the 3+% experienced previously. Some skepticism is warranted as the recent government showdown impacted the quality of the data. Nevertheless, if subsequent reports confirm the recent trend, the Fed will have reason to continue cutting short term rates. This, in addition to stimulus provided from recent tax legislation, will provide a tailwind for U.S. consumers and businesses as we move through 2026. Most economist and market prognosticators expect continued expansion in the U.S. and globally. 

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As always, if you have questions about these trends or what they could mean for your financial plan, your Wealth Management Officer is here to talk through them. We’re grateful for the trust you place in us and remain committed to providing steady guidance in every market environment.