As we close the books on 2025, it’s a good time to step back and look at what actually happened in the markets—and what it means moving forward.

This year was a reminder that markets rarely move in straight lines, even during strong years.

Where We Started

Markets entered 2025 near all-time highs following a strong finish to 2024. Optimism around economic growth, corporate earnings, and emerging technologies—particularly artificial intelligence—continued to support equity markets early in the year.

The April Pullback

Volatility resurfaced in the spring. In April, markets experienced a sharp pullback driven by renewed concerns around inflation, interest rates, and policy uncertainty. While uncomfortable, this period served as the most meaningful test of investor discipline in 2025.

Importantly, the pullback did not signal a broader breakdown in the economy or markets. It was a reminder that short-term declines are a normal part of long-term investing.

The Recovery and New Highs

Following the April volatility, markets steadily recovered. By late June, the S&P 500 had not only regained its losses but went on to reach new all-time highs. Strength broadened across multiple sectors, with technology remaining a major driver but not the only contributor to returns.

As of December 30, 2025, the S&P 500 finished up roughly 17%, marking another strong year for U.S. equities (third back-to-back year).

Federal Reserve Policy Shift

Monetary policy was a key storyline in the second half of the year. After holding rates steady early on, the Federal Reserve began easing policy as economic data showed signs of slowing.

The Fed implemented three rate cuts in 2025, reducing the federal funds rate from its early-year range of roughly 4.25%–4.50% to 3.50%–3.75% by year-end. These moves helped support financial conditions and contributed to improved investor sentiment later in the year.

The Bigger Picture

Despite headlines, pullbacks, and policy shifts, 2025 reinforced several long-standing investment principles:

• Market volatility is normal—even in strong years

• Short-term declines do not negate long-term opportunity

• Staying invested through uncertainty matters

• Discipline tends to be rewarded over time

Looking Ahead to 2026

As we turn toward 2026, uncertainty remains—as it always does. Economic growth, inflation trends, interest rates, and geopolitical risks will continue to shape markets.

Rather than trying to predict each twist and turn, our focus remains on:

• Thoughtful portfolio construction

• Managing risk appropriately

• Maintaining diversification

• Aligning investments with long-term goals

2025 reminded us that successful investing is less about reacting to headlines and more about maintaining perspective.

If you have questions about how your portfolio is positioned as we head into 2026, we’re always happy to talk.

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