Despite pulling back fractionally, all major stock indexes remain within earshot of closing record highs as we enter 2026. Other than a black swan event, currently we see investor complacency, valuation and a challenge to the independence of the Federal Reserve from the bond market as the most serious threats to a fourth consecutive year of gains.
In quoting a line from the poem Stopping by Woods on a Snow Evening, by Robert Frost, we have “miles to go before I (we) sleep,” we promise to continue to work hard on behalf of our clients, doing our best to help them secure their financial goals. Best wishes for a Happy, Healthy and Prosperous 2026!
- Which will most likely not come as a surprise to investors, the Trump Administration initiated an invasion of Venezuela, arresting its dictator, Nicolas Maduro along with his wife Cilia Flores, on “narco-terrorism” charges early Saturday. President Trump during a news conference stated that “we are going to run the country until such time as we can do a safe, proper and judicious transition.”
- In 2025, the U.S. stock market achieved its third consecutive year of double-digit gains, characterized by high volatility but ultimately resilient performance. The S&P 500 rose approximately 16.39%. Meanwhile, the NASDAQ Composite finished 20.36% higher for calendar year 2025. The Dow Jones was the laggard of the three, rising 12.97%. Of note is that as of the market close April 8, 2025, on a year-to-date basis, those three indexes had fallen 15.28%, 20.94% and 11.51%, respectively. It was on the following morning that President Trump reversed his harsh stance on tariffs and began to negotiate with our trading partners. Despite pausing at times, stocks did not look back. record highs despite significant mid-year turbulence.
- In addition to trade noted above, some of the Major Themes that at least partially played out in 2025 included the AI Boom; artificial intelligence remained the primary engine for growth. Nvidia reached a historic $4 trillion market valuation, while other firms like Alphabet and Micron saw massive surges. The Federal Reserve as despite a tense relationship with the White House and "sticky" inflation around 3%, the Fed implemented three rate cuts late in the year to support a softening labor market. Perhaps the reality of a K-Shaped Economy is setting in. While markets soared, consumer sentiment hit multi-year lows. Higher-income households continued to spend, but lower-income consumers struggled with rising debt and the "higher-for-longer" interest rate environment. Finally, while U.S. markets were strong, international and emerging markets outperformed them for the first time in years, with some global indexes gaining more than thirty percent.
- In 2025, the U.S. bond market experienced a significant shift toward normalization and recovery, largely driven by a pivot in Federal Reserve policy and a cooling inflationary environment. The Bloomberg U.S. Aggregate Bond Index posted its strongest performance in several years, delivering a total return of approximately seven percent. The yield on the 10-Year U.S. Treasury ended the year at 4.18%, down thirty-four basis points from 4.58% at the close of 2024. A major theme of 2025 was the "un-inversion" of the yield curve, as long-term yields began to sit higher than short-term yields, reflecting a more typical economic outlook.
It’s The Economy…”
- Initial Claims for Unemployment Benefits for the week ended December 27th fell 16,000 to 199,000 from 215,000, which was revised higher by 2,000. Meanwhile, the four-week moving average rose 1,750 to 218,750 from 217,000, which was revised higher by 250. Continuing claims for the week-ended December 20th fell 47,000 to 1,866,000 from 1,913,000 the prior week. The continuing claims four-week average fell 17,750 to 1,873,500 from 1,891,250. (Source, U.S. Department of Labor)
- According to the Federal Home Loan Mortgage Corporation (FreddieMac), “after starting the year close to 7%, the average thirty-year fixed-rate mortgage moved to its lowest level in 2025 this week, an encouraging sign for potential homebuyers heading into the new year.”
Economic Reports scheduled to be released this week, include the following – on Wednesday, October Factory Orders and the Job Openings and Labor Turnover Survey (JOLTS); on Thursday, Initial Claims for Unemployment Benefits, October Balance of Trade and October Wholesale Inventories; and, on Friday October Housing Starts, December Non-Farm Payroll Report, December Unemployment and Preliminary January Consumer Sentiment from the University of Michigan.
Several potentially market moving companies are scheduled to report earnings, to include Albertsons (ACI), Constellation Brands (STZ), Jefferies Financial Group (JEF), Acuity (AYI), Commercial Metals (CMC), WD-40 (WDFC), Greenbrier (GBX) and Lindsay (LNN).