December 2025 Market Review & Commentary

We hope you had a wonderful holiday season and that your New Year is off to a great start! Our family enjoyed the holidays, although, like many others, we couldn't escape the flu this year. Channing started feeling unwell on Christmas day, and soon the rest of us followed suit. Despite the illness, we cherished the holidays and appreciated the much-needed break.

As we move past a year full of significant events, we'll review the December year-end market performance and look ahead to 2026.

Fourth Quarter and December Summary

In the fourth quarter, markets faced a challenging environment. The quarter began with a 43-day government shutdown that delayed key economic data releases. The lack of timely information complicated assessments of the economy's strength, leading to volatility as the market reacted to incomplete data. The Federal Reserve reduced interest rates by -0.50% but indicated a pause, suggesting fewer cuts than anticipated in 2026. Investors are enthusiastic about artificial intelligence, but there's a growing focus on which companies can capitalize on AI demand for immediate profits.

Although there was no Santa Claus rally at year-end, U.S. stocks gained some momentum in December. A new CPI report showed cooling inflation, boosting stocks across the board. The last three years have been excellent for investors, with the S&P 500 showing strong returns each year. The S&P 500 ended 2025 with a +17.9% gain, and the Dow Jones Industrial Index also posted a positive result of +14.9%.

From a sector perspective, Health Care led the fourth quarter with +11.22%, while Technology slowed to +2.14%. It was unsurprising that Real Estate underperformed at -4.23% for the quarter, but the Utility sector's underperformance at -2.32% was unexpected.

2026 Outlook:

As we enter 2026, it's crucial to maintain a broad perspective. Markets have yielded returns over the past five years, but each year brings its own challenges. While the future is unpredictable, we believe a disciplined approach focusing on long-term goals, diversification, and calm risk management is key to navigating the market. Our team will continue to monitor economic data and market trends closely to ensure portfolios align with your long-term objectives, regardless of short-term market fluctuations.