MARKET UPDATE
Xerxes Nabong, CFP®, CDFA®
Philip M. Maliniak, CRPC®
Nicole Brown-Griffin, CFP®, CDFA®, EA
Aaron Petty, Client Associate
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2025 Market Recap & What We’re Watching for 2026
With 2025 officially in the rearview mirror and the “Happy New Year” messages behind us, one word stands out when describing the markets: resilient.
Despite a steady drumbeat of headlines ranging from political uncertainty and a prolonged government shutdown to geopolitical tension and shifting monetary policy, 2025 financial markets delivered strong results for diversified investors. The path was anything but smooth, but fundamentals ultimately mattered more than noise.
What Happened in 2025
- Stocks delivered another strong year: U.S. equities posted solid gains for the third year in a row, supported by moderating inflation, steady consumer spending, and continued innovation, particularly in artificial intelligence and infrastructure-related investment. While a handful of mega-cap technology companies continued to contribute meaningfully, an important shift occurred as the year progressed: market leadership broadened. More sectors, industries, and companies began to participate in gains, a healthy development for long-term investors.
- International markets stood out: After several years of lagging the U.S., international stocks meaningfully outperformed in 2025. Improving earnings trends, more attractive valuations, and easing financial conditions helped drive strong returns across Europe and parts of Asia.
- Bonds regained their role as a stabilizer: As inflation continued to cool and the Federal Reserve began easing policy, high-quality bonds posted positive returns and once again provided diversification benefits. Balanced portfolios benefited from contributions across both stocks and fixed income.
- Volatility was present but temporary: Markets navigated a wide range of challenges, including the longest U.S. government shutdown on record. While these events created short-term uncertainty, their economic impact proved limited, and markets refocused on earnings, growth, and policy trends.
Key Themes We’re Carrying Into 2026
- A more supportive interest-rate environment: The Federal Reserve has shifted from fighting inflation to supporting continued economic expansion. While future rate cuts will depend on incoming data, financial conditions are meaningfully easier today than they were a year ago.
- Economic growth is moderating, not stalling: Job growth has slowed, and consumers are becoming more selective, but overall economic activity remains resilient. Corporate balance sheets are healthy, and investment in productivity-enhancing technologies continues.
- Broader participation may continue: As earnings growth expands beyond a narrow group of large companies, opportunities may emerge across a wider range of sectors, company sizes, and global markets. This environment tends to reward diversification and thoughtful portfolio construction.
What This Means for Investors
After several strong years for equities, it’s natural for portfolios to drift from their original targets. Periods like this often present an opportunity to rebalance, manage risk, and realign portfolios with long-term goals, not because markets are “about to turn,” but because discipline matters most after success.
While risks remain from geopolitics to policy uncertainty history continues to show that investors who stay diversified, remain patient, and avoid reacting to short-term headlines are best positioned for long-term success.
Managed Advisory Program Portfolio Updates
For clients invested in our managed advisory programs, we made the following updates:
- Growth: We recently made targeted adjustments to our stock fund lineup to reduce concentration risk, improve diversification, and position portfolios for broader market participation. Over the past several years, market performance has been driven by a relatively narrow group of large-cap U.S. technology companies, increasing concentration risk within the U.S. equity market. To address this, we increased exposure to international equities, emerging markets, and small- and midcap U.S. companies. These segments offer access to more attractively valued markets and have historically benefited from improving liquidity, easing monetary policy, and periods of economic expansion. As market leadership broadens, these areas are well positioned to contribute more meaningfully to portfolio returns.
- Fixed Income: We refined our fixed income investment selection to enhance income generation while continuing to manage interest rate and credit risk. As interest rates decline, traditional core bond strategies can face challenges generating attractive total returns, prompting a shift toward more flexible, incomeoriented solutions. By replacing less efficient strategies with higher-yielding and floating-rate exposures, such as preferred stock and senior secured loans, we aim to improve portfolio yield and reduce sensitivity to interest rate and reduce sensitivity to interest rate movements. While this modestly increases the risk profile within the sleeve, the allocation remains more conservative than the broader aggregate bond market. These changes help preserve the defensive role of fixed income while better aligning it with the current rate environment.
- Alternatives: Adjustments to the alternatives sleeve were made to improve diversification and downside protection while maintaining attractive income potential. We removed more aggressive strategies that carried equity-like drawdown risk to ensure this allocation continues to serve as a stabilizing component of the portfolio. In their place, we added marketneutral and merger arbitrage strategies that seek returns driven by security selection and corporate activity rather than overall market direction. These additions provide differentiated sources of return, lower correlation to traditional assets, and a more consistent risk profile during periods of market volatility.
And as always, we will continue to monitor market conditions and make adjustments as needed to stay aligned with a sound long-term strategy. Looking ahead, we expect moderate growth, easing interest rates, and continued rotation across markets during the first half of 2026. Should you have any questions, we are here to help and welcome any questions about your portfolio or plan.
Your Team at Wealth Avenue,
**The views expressed are based on current conditions and are subject to change. There is no guarantee that any statements of future expectations will come to fruition. All information presented is collected from sources believed to be reliable, but may not be guaranteed.
P.S. As you know, we are always grateful for the introductions you’ve made on our behalf. 2025 was a great year, and we truly appreciate every introduction you’ve made. Thanks to you, our practice continues to grow, and we’re honored by the trust you place in us.
As January unfolds, many people move beyond resolutions and begin making real decisions about their finances. Looking toward 2026, many individuals are reassessing their goals and exploring smarter ways to position their wealth. If you know someone who is approaching retirement, navigating new tax laws, or simply looking to get more organized with their finances, we would be grateful for the opportunity to support them. We are always happy to welcome new introductions.
With tax season on the horizon and as we plan for the updates and strategies your tax strategies, please know that we are also happy to collaborate directly with your CPA and estate planning attorney. Working together ensures everyone is aligned and that your financial, tax, and estate strategies remain fully coordinated.
Speaking of tax season, below is a recent Wall Street Journal article that highlights several important shifts heading into 2026, from rising federal tax brackets and standard deductions to new thresholds for capital gains and an expanded estate tax exclusion. These changes may create meaningful exclusion. These changes may create meaningful opportunities for tax planning, investment decisions, and long-term wealth strategies, making this an ideal time to revisit your plan and explore what adjustments could have the greatest impact.
Jan. 13, 2026
By Kristin McKenna, Senior Contributor
