Welcome back to our December recap. We hope you all had a wonderful holiday season with friends and family. Joel traveled to spend Christmas with his wife’s family in Iowa, and Hunter and I were able to take a memorable trip to the Galapagos Islands over the New Year. We are now back and ready to take on 2026.
In this month’s recap, we will cover market performance for December, and in lieu of our topic of the month, we plan to send out a separate 2025 year-in-review recap soon.
The Markets in December
December brought a reversal of fortunes for U.S. equity markets, with large-cap indices struggling to maintain momentum while international equities surged. The S&P 500 ended the month nearly flat, posting a modest 0.06% total return, while the Nasdaq slipped another 0.47%, extending its weakness from November. Technology stocks continued to face pressure from valuation concerns and mixed earnings guidance, contributing to the Nasdaq’s underperformance.
Small-cap stocks, which had led in November, lost ground in December. The Russell 2000 declined by 0.58%, reflecting investor caution around cyclical sectors and domestic economic uncertainty. Meanwhile, the Dow Jones Industrial Average managed a 0.92% gain, buoyed by strength in defensive sectors and dividend-paying names. This divergence between the Dow and other U.S. indices underscores a continued rotation toward lower-volatility assets as investors reassessed risk heading into the new year.
International markets outperformed their U.S. counterparts by a wide margin. Emerging Markets rebounded sharply with a 3.02% gain, while developed international markets rose 3.01%. These gains were driven by improving global growth expectations, a softer U.S. dollar, and signs of stabilization in key economies such as China and the Eurozone. The strong performance abroad suggests that global diversification remained a valuable strategy in a month where U.S. equities were largely range-bound.
Overall, December capped off the year with a mixed tone—highlighting strength in global equities and defensive U.S. sectors, while growth-oriented and small-cap names faced renewed headwinds. Investors now turn their attention to 2026 with hopes for monetary clarity, earnings resilience, and geopolitical calm.
US Equity Sectors
In December, sector leadership was clearly concentrated at the top, with Financials delivering the strongest return at 3.05%, supported by improving credit conditions and stronger year‑end sentiment. Communication Services followed at 2.35%, buoyed by resilient advertising trends and continued demand for digital media and platforms. These two sectors meaningfully outperformed the rest of the market, while most other cyclicals posted more modest gains.
On the downside, performance was weighed down most heavily by Utilities, which dropped 5.09% amid a broad rotation out of rate‑sensitive defensives. Real Estate was the next‑weakest sector, falling 2.12% as elevated financing costs and softness in commercial property continued to pressure the group. Together, these two laggards underscored a decisive shift away from defensive, yield‑oriented sectors as investors favored more economically sensitive areas to close out the year.
Bond Performance
Bond performance in December was mixed, with short‑term U.S. exposures providing the strongest relative stability. These shorter‑duration segments benefited from their low interest‑rate sensitivity, offering steady gains as markets reassessed the likelihood and timing of 2026 rate cuts. Their resilience stood in contrast to longer‑duration benchmarks, which gave back some of the strong rally seen in November.
Intermediate‑term U.S. bonds were modestly negative, as yields drifted slightly higher late in the month. Global bonds continued to face headwinds, reflecting uneven international monetary policy trajectories. Overall, December underscored the defensive strength of ultra‑short and short‑term U.S. bonds, while both intermediate U.S. duration and global exposures struggled amid shifting rate expectations.
Topic of the Month– 2025 Year-in-Review coming soon!
Again, instead of our regular topic of the month, keep an eye out for our 2025 Year-in-Review soon, where we will cover some of the most notable events and trends that shaped the year.
Closing Comments
That’s a wrap for December and 2025! As 2026 begins, we are thankful for the opportunity to partner with you through the challenges and opportunities that lie ahead. Looking ahead, investors who remain focused on long‑term goals rather than short‑term noise will be best positioned to navigate whatever 2026 brings.
Happy New Year to you, and we hope you can rest easier knowing we’re here to keep your plan moving forward.
See you next month!
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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