The past year delivered an uncommon mix of steady economic growth, easing inflation, and strong market performance—all against a backdrop of ongoing uncertainty. Below is a recap of the major forces that shaped 2025 and the themes that may influence the year ahead.

Tech Leadership Continues to Shape Equity Gains

U.S. stocks posted another year of broad double‑digit gains, supported largely by technology and AI‑focused companies. Strong earnings growth from mega‑cap tech and major financial firms helped propel the S&P 500, Nasdaq 100, and Dow Jones Industrial Average to solid results. International markets also advanced meaningfully, underscoring how performance varied across regions and sectors and highlighting the importance of selectivity.

Fed Policy Shift Supports Bond Markets

The Federal Reserve’s three rate cuts marked a clear turn toward a more gradual easing cycle. Treasury yields declined over the year, and high‑quality fixed income finally delivered positive total returns after a challenging period of rising rates. Core bonds regained their role as a stabilizing portfolio component, though we remain mindful of potential risks in lower‑quality credit as borrowing conditions tighten for some segments of the economy.

Housing Activity Remains Slow Despite Lower Rates

Mortgage rates moved down from their earlier highs, yet housing activity remained restrained. Home prices continued to edge higher, showing that elevated borrowing costs can limit movement without meaningfully improving affordability. For households considering transitions, careful planning may be helpful as rates decline gradually but remain above pre‑pandemic norms.

Tariffs and Geopolitics Add Persistent Complexity

Policy changes, including higher tariffs and ongoing advances in technology adoption, reshaped several areas of the economy. These shifts supported investment in automation and domestic manufacturing while pressuring certain trade‑sensitive industries. Geopolitical tensions remained a steady presence, and with no singular crisis but multiple areas of concern, flexibility and scenario planning were especially important for investors.

What Defined the Economic Picture

The U.S. expanded at a moderate pace, with AI‑driven innovation playing a notable role in growth. Not all sectors shared the same momentum, reflecting an uneven environment even as overall progress continued. Inflation moved closer to the Federal Reserve’s preferred range, though the final months of the year brought some challenges tied to tariffs and housing costs. Markets also adjusted to policy news, periodic volatility, and the continued influence of the largest tech companies.

Looking Toward 2026

As we enter the new year, the themes of balance and discipline remain central. While moderating inflation and resilient earnings offer support, factors such as elevated tariffs, ongoing deficit spending, and a maturing AI investment cycle provide reasons for careful positioning. Staying diversified and focusing on companies with strong fundamentals may help investors navigate the evolving landscape.

For guidance tailored to your goals and circumstances, we encourage you to connect with our financial team for support as you plan for the year ahead.