Year-in-Review for 2025
2025 was a year defined by resilience in financial markets despite significant political and economic turbulence. U.S. equities continued their historic run, with the S&P 500 posting gains of roughly 16–19% depending on the measure, the Dow rising around 13%, and the Nasdaq advancing more than 20%, marking a third consecutive year of double‑digit returns. Markets endured major disruptions—including the April “tariff shock,” which briefly erased trillions in global market value, and a 43‑day government shutdown in the fall—yet ultimately climbed to record highs as investors looked ahead to stabilizing inflation and improving economic momentum. International equities also outperformed U.S. markets for the first time since 2017, buoyed by currency dynamics and strong performances in emerging markets such as Brazil, Mexico, South Korea, and Taiwan.
The investment landscape was further shaped by extreme divergence across asset classes. Precious metals dominated the year, with silver soaring more than 140% and gold rising over 60% as investors sought hedges against inflation, geopolitical tension, and trade-policy uncertainty. Commodities broadly benefited from supply‑chain constraints and strong industrial demand, particularly from AI infrastructure, renewable energy, and electrification trends. Bonds also staged a strong rebound, with the Bloomberg U.S. Aggregate Bond Index returning between 7–8%—its best performance since 2020—supported by global rate cuts and renewed demand for duration as inflation moderated.
Policy and politics played an unusually influential role in shaping market sentiment throughout the year. The tariff announcements in early April triggered the sharpest two‑day selloff since the pandemic, while subsequent partial suspensions helped markets quickly recover. Monetary policy was also a defining driver: the Federal Reserve implemented three consecutive 25‑basis‑point cuts in the second half of the year, bringing the federal funds rate into the mid‑3% range and helping fuel a powerful year‑end rally across equities and credit markets. Meanwhile, global policymaking grew more fragmented as geoeconomic tensions, regulatory divergence, and shifting trade alliances introduced new uncertainties—conditions the World Economic Forum warned could cost the global economy up to $5.7 trillion in the long run.
Another consequential development in 2025 was the passage of the One Big Beautiful Bill Act (OBBBA), a sweeping tax overhaul signed into law on July 4. The legislation made several expiring provisions from the 2017 tax law permanent—including maintaining the 21% corporate tax rate—and reinstated 100% bonus depreciation. It also extended the 20% Qualified Business Income deduction, introduced new deductions for tips and overtime pay, and increased the SALT cap to $40,000 through 2032. These updates affect individual, corporate, and international tax rules, requiring investors, business owners, and advisors to evaluate potential impacts on entity structure, capital‑investment timing, depreciation strategy, and cross‑border planning in the years ahead.
Geopolitical and technological forces also played major roles in shaping investment outcomes in 2025. AI remained a dominant theme across markets, driving both enthusiasm and volatility, with the “Magnificent Seven” contributing meaningfully to U.S. equity gains despite periodic corrections and growing scrutiny over valuation and profitability expectations. At the same time, geopolitical hotspots—from Ukraine to the Middle East—contributed to spikes in energy prices early in the year before renewed supply concerns sent oil lower, illustrating the fragile balance between global demand and geopolitical instability. Against this backdrop, investors increasingly favored safe‑haven assets and diversified global allocations, underscoring the importance of discipline and a long‑term perspective in a year defined by both disruption and opportunity.
With 2025 in the rearview mirror, the year’s events reinforced the value of staying disciplined amid both volatility and opportunity. Looking ahead, investors who remain focused on long‑term goals rather than short‑term noise will be best positioned to navigate whatever 2026 brings.
2026 Outlook and Portfolio Changes
Historically, I have had to read through 10+ market outlooks from different firms and try to digest all the information and compare them. This year, I took a different approach, leveraging AI to pull the outlooks and research from 20, hand-selected firms, analyze it, and create an executive summary for me. This included identifying consensus themes, along with contrarian positions, and the rationale for those stances. I also had it review any updates/changes in outlook for the 2ndhalf of January, as many of those outlooks were put together between Oct-Dec 2025, and a lot has changed since then. Below is an executive summary of my findings.
2026 Market Outlook: What We’re Watching and How We’re Positioning
As we head into 2026, the investment landscape looks constructive—but not without important cross‑currents. Most major investment firms broadly agree on the direction of the economy and markets, even if they differ on the pace and the path.
Below is our high‑level view of what’s shaping markets this year, and what it means for portfolios.
The Big Picture
The consensus outlook for 2026 ismoderate but resilient global growth, with inflation continuing to cool and interest rates gradually moving lower. The U.S. economy is expected to remain relatively strong compared to other developed regions, supported by consumer spending, corporate investment, and ongoing innovation—particularly around artificial intelligence.
That said, markets are no longer priced for perfection. After strong gains in recent years,selectivity and diversification matter more than ever.
Stocks: Still Positive, But Broader
Most firms remainconstructive on equitiesoverall, including U.S. stocks. However, a common theme is that leadership is likely tobroadenbeyond the handful of mega‑cap technology companies that dominated earlier gains.
What we’re seeing:
- U.S. equitiesremain a core holding, but valuations are higher, which argues for balance and discipline.
- International developed markets(especially Europe and Japan) look more attractive than they have in years, helped by policy support, improving corporate governance, and more reasonable valuations.
- Emerging marketsare seeing renewed interest, particularly in parts of Asia, aided by global supply‑chain shifts and a potentially weaker U.S. dollar.
Bottom line:This is not an “all‑or‑nothing” market. Broad, global equity exposure—rather than narrow bets—appears increasingly important.
Bonds: Income Is Back
After years of frustration, bonds are once again doing the job they’re supposed to do.
With yields still elevated relative to the past decade,high‑quality bonds now offer attractive income and better diversification benefitsthan they did in the ultra‑low‑rate era.
Key themes:
- Investment‑grade bonds and municipalsare widely favored for income and stability.
- There’s less agreement on how much exposure investors should have to long‑term Treasuries; many managers prefer keeping duration balanced rather than aggressive.
- Inflation‑protected bonds (TIPS)are often cited as sensible insurance if inflation proves stickier than expected.
Bottom line:Bonds are once again a meaningful source of income and portfolio ballast—not just a placeholder.
Alternatives & Real Assets: Diversification Still Matters
Many institutional investors continue to emphasizediversifiers—assets that behave differently than traditional stocks and bonds.
Common areas of focus include:
- Private credit, which benefits from ongoing financing needs and offers attractive income when managed carefully.
- Infrastructure and real assets, tied to long‑term investment in energy, power grids, and technology.
- Gold and commodities, which have regained attention as hedges against geopolitical risk, inflation surprises, and currency weakness.
Bottom line:Alternatives can play a useful supporting role, especially in a world where stock‑bond correlations may be less reliable than in the past.
The U.S. Dollar & Global Exposure
Many firms expect theU.S. dollar to weaken modestlyover time as interest rate differences narrow and global growth becomes more balanced.
For investors, this has two implications:
- International investments may benefit both from local market returns and currency effects.
- Currency exposure should be intentional, not accidental—especially in larger portfolios.
What This Means for Portfolios
Putting it all together, the dominant message for 2026 is“stay invested, but stay diversified.”
Our guiding principles remain:
- Maintain exposure to growth assets, but avoid over‑concentration.
- Emphasize quality—both in stocks and bonds.
- Broaden portfolios globally, rather than relying solely on U.S. markets.
- Use income‑producing assets and diversifiers to help manage risk and volatility.
Markets will inevitably experience pullbacks and headline‑driven swings. The goal isn’t to predict every move, but to build portfolios that canparticipate in growth while remaining resilient across a wide range of outcomes.
Portfolio Adjustments
Before I summarize the changes, I want to note that I have not done the full rebalance yet, as it appears we’re at a point of potential trend reversal (downward) for US equities. As such, I’m likely going to be implementing the portfolio changes in strategic tranches, especially with the roughly 5% from the structured notes that matured in December, which I parked in a high-yield money market.
Based on the combined outlooks and recent updates from those 20 firms, here is a high-level overview of the portfolio changes we are making:
- Remaining overweight stocks vs bonds
- Reducing our US vs International stock exposure (78% of equity sleeve down to 69%)
- Despite the high trailing 12-month Price/Earnings (PE) ratio for our Utilities fund, we are going to continue holding it based on sector outlook and continued (and likely increasing) demand for power due to AI adoption
- Replacing the two existing India index funds with an actively managed ETF in that region, as we believe stock selection could be more advantageous in this space.
- We are replacing the existing Emerging Markets fund with a variation that includes exposure to India and China
- Adding a small allocation to US Small Cap stocks
- Adding a dedicated Chinese tech fund, as we believe there will be a shift in demand from their US counterparts, due to the impact tariffs are having on US products/services, as well as AI being on of China’s top national priorities
- While precious metals had a great year, and arguments can be made for why they may continue to climb, the outlook for the remainder of the year doesn’t indicate a high likelihood of Gold increasing much further from where it’s currently at, with Silver and Copper both have an even lower outlooks for the remainder of the year.
- Shifting back into the unbuffered indexes for the S&P and NASDAQ
- Further diversifying our bond sleeve to include High Yield and Emerging Market (local currency) bond ETFs, as well as increasing exposure to corporates
- We will be using Innovator ETF’s Buffered/Dual-Directional line-up, in addition to the FT Vest ones we’ve previously used, for allocations in between our structured note purchases
As always, we’ll continue monitoring developments and adjusting thoughtfully—not reactively—as conditions evolve. In the interim, feel free to reach out if you want to discuss this (or anything else) further.
Laurence
Disclosures
Investing involves the risk of loss. This content is for informational purposes only and should not be, nor regarded as personalized investment advice or relied upon for investment decisions. Laurence Schiffman and Traverse Planning are affiliates of Clear Creek Financial Management and may maintain positions in the securities discussed in this video. All opinions expressed here are solely those of Traverse Planning and do not reflect the opinions of Clear Creek Financial Management.
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