QuickTake: Market Insights, 2025 in review

Dear Clients,

Markets move in a matter of minutes lately. We remind you that we will always stand by diversification and remaining invested. My team and I recently presented at a large sales meeting, please find key takeaways below.

  • International equities materially outperformed U.S. markets in 2025, with the MSCI EAFE Index (developed international) and MSCI Emerging Markets Index both up roughly 30% or more over the year. Performance was driven primarily by U.S. dollar weakness and renewed investor interest in relatively cheaper international valuations. 
  • U.S. equity returns were mixed by market cap, despite strong headline performance. Large caps led, with the S&P 500 Index gaining nearly 18%. Small caps lagged, with the Russell 2000 Index underperforming the S&P 500 by roughly 5 percentage points. Mid caps disappointed, as the S&P MidCap 400 Index rose only about 7%, offering limited diversification benefits. 
  • Equity leadership remained highly concentrated, as the “Magnificent 7” stocks once again drove index-level gains. As a group, they rose ~25%, compared with ~16% for the remaining stocks in the S&P 500, underscoring narrow market participation. 
  • Index concentration risk continues to rise, particularly in growth-oriented benchmarks. 
  • Equity markets experienced sharp volatility early in the year, with the S&P 500 suffering an 18–19% correction in March–April—nearing bear-market territory—before fully recovering and ending the year higher. 
  • Volatility spiked alongside the equity drawdown, as the VIX Index rose above 50, reflecting heightened investor anxiety. Markets rebounded sharply afterward, reinforcing the historical cost of exiting equities during periods of stress. 
  • Growth stocks outperformed value dramatically following the April low, with the Russell 1000 Growth up about ~49% vs. ~28% for its Value counterpart. Low volatility strategies lagged, gaining only about 12% based on the MSCI USA Minimum Volatility Index. 
  • Fixed income posted broad-based gains, supported by a decline of roughly 40 basis points in the 10‑year U.S. Treasury yield, which provided a tailwind to bond prices. 
  • Investment-grade bonds outperformed Treasuries, as the Bloomberg U.S. Corporate Investment Grade Index rose about 7.8%, benefiting from yield carry in addition to duration exposure. 
  • Credit spreads were largely unchanged over the year, meaning fixed income returns were driven mainly by yields and duration. 
  • High yield bonds outperformed investment grade corporate bonds, with the Bloomberg U.S. High Yield Index beating the Bloomberg U.S. Aggregate Bond Index, despite lower duration. Strong returns were driven by higher carry rather than improving credit spreads. 
  • Emerging markets debt delivered standout performance, with the JP Morgan EMBI Global Diversified Index returning about 14%, supported by yield advantage, currency appreciation, and improving fundamentals in select regions. 
  • Recent U.S. equity returns are historically exceptional, with the S&P 500’s three-year return exceeding 85%, placing it near the 90th percentile of outcomes since 1928, strengthening the argument for diversification rather than outright de-risking. Market observations as of 12/31/2025, excerpted from a 1/14/2026 presentation, and subject to change. Not to be used, or interpreted, as investment advice or recommendation.

IMPORTANT INFORMATION

Definitions:

S&P 500 Index is a weighted index of common stocks of 500 leading companies in leading industries of the U.S. economy, capturing 75% coverage of U.S. equities. The index is capitalization weighted, thereby giving greater weight to companies with the largest market capitalizations.

Russell 1000® Growth Index measures the performance of those Russell 1000® Index companies with higher price-to-book ratios and higher forecasted growth values. It is market-capitalization weighted.

A basis point (BPS) is a unit of measure used to indicate percentage changes in financial instruments. Basis points are typically expressed with the abbreviations "bp," "bps," or "bips." One basis point is equal to 1/100th of 1%, or 0.01%. In decimal form, one basis point appears as 0.0001 (0.01/100).

Information provided in this newsletter is general in nature, is provided for informational purposes only and should not be construed as investment advice. The views and opinions expressed are those of the author(s) as of the stated date of their contribution and any such views and opinions are subject to change at any time based on market, or other conditions, and are not intended to be a forecast of future events, a guarantee of future results or investment advice. Securities and sectors referenced should not be construed as a solicitation or recommendation, or be used as the sole basis for any investment decision.

All investments contain risk and may lose value. Statements concerning financial market trends or portfolio strategies are based on current market conditions, which will fluctuate. There is no guarantee that these investment strategies will work under all market conditions or are appropriate for all investors and each investor should evaluate their ability to invest for the long term, especially during periods of downturn in the market. Outlook and strategies are subject to change without notice.

Past performance is not a guarantee of future results. Portfolio re-balancing and diversification do not guarantee a profit or protection against loss in a declining market.

No guarantee or representation is made that investment objectives and/or opinions stated will be achieved. The experience of each specific client or investor may vary.

Due to the subjective aspect of these analyses, the effective evolution of the economic variables and values of the financial markets could be significantly different from the projections, forecasts, anticipations and hypotheses, which are communicated in this material.

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