Market Recap:
2025 will go down as a year that had just about everything. Political volatility, interest rate uncertainty, persistent AI bubble speculation, major market rotations, a decisive breakout in metals, international equity outperformance relative to the U.S., and meaningful crypto underperformance to name a few.
Despite all of that, the S&P 500 finished the year up around 16%. However, as I have mentioned previously, the majority of that performance came from a concentrated group of large technology stocks while the rest of the index lagged. The equal-weight S&P 500 returned just under 10%, which is a more accurate reflection of overall stock market performance.
Year-End Notes:
2025 highlights exactly why we rely on an active, systematic approach as no one can consistently predict global events or market outcomes. The most common response to this reality is to simply buy and hold through everything. While that approach has worked well for an extended period, it has not always worked and it won’t continue forever.
History suggests that markets move through long-term regimes. The concept of a buy-and-hold stock and bond portfolio did not meaningfully exist prior to the 1980s. Not because investors lacked sophistication or because the 60/40 portfolio was some groundbreaking innovation. It did not exist because it did not work.
Between 1900 and 1980, there were decades where stock and bond portfolios experienced volatility without meaningful inflation-adjusted growth. Markets moved, sometimes violently, but real wealth did not compound and bonds added no diversification benefit.
And then from 1982 through 2022, we experienced a historically unique period marked by declining interest rates. The advisory and wealth management industry grew around the buy-and-hold 60/40 framework during this time.
We believe conditions are changing again, and that model is already becoming less effective. As always, our focus is not on predicting a single outcome, but on positioning portfolios to navigate a wide range of possibilities while managing downside risk.
What We’re Watching in 2026:
While much of the market’s attention remains focused on AI and large-cap technology, we believe some of the more important signals are coming from metals and the broader commodity complex. Gold and silver have broken out decisively, often a sign of underlying monetary or inflation-related pressures rather than short-term speculation. The first chart shows long term commodity cycles. We are potentially still in the early phases of a commodity bull cycle. The second chart is a repeat of the one I posted last month but is worth resharing.
We’re also watching international markets closely. For the first time in a long time, international and emerging markets outperformed U.S. markets in 2025. As shown by the third chart, these performance cycles tend to span 10-15 years. Are we in the early stages of international outperformance? Only time will tell.
