2025 turned out to be a very strong year for investors as nearly every type of investment did well. U. S. stocks were up roughly 18%, after already posting previous two years of gains over 20%. International stocks performed even better, with developed markets up roughly 32% and emerging markets up over 34%. One of the reasons international investments performed so well was due the weakness of the U. S. dollar, which fell by nearly 9%.

Smaller U. S. companies also performed well, and every major sector of the stock market ended positive on the year. Bonds had a good year returning just over a 7% return, and higher-risk bonds performed even better. The biggest surprise was precious metals—gold rose around 64% and silver surged roughly 145%, their strongest performance in decades.

Even though gains were spread across more companies, much of the U. S. stock market’s rise was still driven by the so-called “Magnificent 7”—large technology companies tied closely to artificial intelligence (AI). These companies accounted for almost half of the market’s annual gain. While their influence declined slightly from last year, it’s still high. Investors continue to debate whether AI stocks are forming a bubble like the dot-com era, or whether real profits and demand justify today’s prices. In 2026, we are monitoring if investors become more selective and start rewarding companies who show clear, real-world benefits from AI. Currently, Wall Street expects company earnings to keep growing at a strong pace.

A Look ahead, the markets are starting the year on solid footing, but political uncertainty around the midterm elections most likely will create volatility. Historically, midterm years tend to be choppier for markets, though they are often followed by strong rebounds. Early signs suggest Democrats could gain momentum, which may slow this administration’s policy initiatives.

Two major policy developments that have had a big impact thus far. One, tariffs caused market turmoil earlier in the year because they were initially expected to act like a massive tax increase. While the final tariff levels are lower than first announced, they remain elevated and most likely will stay in place for some time. However, we are still waiting on The Supreme Court who will ultimately decide how much authority the administration has and whether refunds are owed.

Two, the passage of the “One Big Beautiful Bill Act” was passed with expectations of injecting money into the economy in 2026. Consumers may receive about $150 billion through tax refunds, while businesses could see around $230 billion in tax benefits. This may provide support for economic growth and reduce recession fears, but it may also be a barrier for inflation to reach the Fed’s 2% target. So, further updates will follow as new data becomes available

With the economy still strong and inflation remaining persistent, the Federal Reserve appears close to concluding its cycle of interest-rate cuts. Markets expect up to two more small cuts, but there is a lot of uncertainty. Especially since a new Fed Chair will replace Jerome Powell later this year and whoever is confirmed will face pressure from both financial markets and the current administration.

In 2026 we are not expecting big moves in long-term rates as forces are pushing both up and down. Inflation and government deficits put upward pressure on rates, while Treasury strategies (how the U.S. government raises money, manages its cash and debt, and supports stable financial markets while minimizing long-term borrowing costs)

and slowing growth pull them lower. The uptick in unemployment to 4.6 % is the highest level in several years, though still historically low compared with prior recessions. The concern still to watch is government spending remains very high, which is unusual given how strong the job market still is.

Our investment approach has remained disciplined and deliberate. We’ve selectively increased exposure to companies benefiting from advances in artificial intelligence, while continuing to emphasize high-quality businesses with strong cash flows and a history of growing dividends. We remain less concentrated in the largest technology companies than in the broader market. We also see attractive opportunities in mid- and small-capitalization stocks, provided economic conditions remain supportive, which we believe they will.

International equities were standout performers and continue to trade at meaningful discounts relative to U.S. stocks. Many overseas markets are benefiting from increased government investment and pro-growth reforms. However, ongoing trade policy uncertainty and geopolitical risks underscore the importance of careful, selective positioning.

Bond markets were more stable this year and now offer compelling income opportunities. We believe high-quality bonds can provide both income and portfolio stability going forward, though we remain cautious on longer-duration bonds given interest-rate uncertainty.

Gold delivered its strongest performance in decades, driven by central banks diversifying away from the U.S. dollar, rising government debt levels, global uncertainty, and declining interest rates. We believe gold and other alternative investments can play an important role in portfolio diversification during periods of elevated uncertainty.

As always, this information is provided for educational purposes only and should not be considered personalized investment, tax, or legal advice. Past performance does not guarantee future results, and market conditions may change without notice.