MONTHLY COMMENTARY

As 2025 has come to a close, we wanted to share our December and year-end market wrap-up.  While December was largely flat from a performance perspective, we view the month as an important period of “catch-up” across several dimensions.

First, a backlog of economic data was released following the reopening of the government, providing investors with a clearer and more comprehensive view of economic conditions. Second, we saw a rotation in equity markets, with sectors that had lagged Technology and Communication Services earlier in the year beginning to outperform, a trend that may continue into 2026. Finally, the Federal Reserve continued to catch up to improving inflation dynamics, delivering its third rate cut of the year.

In December, the S&P 500 returned 0.06%, as investors rotated out of Technology and Communication Services, which had led performance for much of the year. The traditional “Santa Rally,” which typically spans the final five trading days of the year and the first two trading days of January, was muted in its early phase. Value stocks outperformed growth during the month, returning 0.67% versus a decline of 0.62% for growth. International equities posted strong gains, with both developed and emerging markets rising approximately 3.0%, supported in part by a weaker U.S. dollar against a broad basket of currencies.In fixed income markets, the yield curve steepened in December as long-term yields moved higher while short-term yields declined following the Fed’s rate cut. Economic data continued to show contained inflation, steady GDP growth, and a gradually cooling labor market. U.S. bonds declined modestly, returning -0.15% for the month, while municipal bonds outperformed with a positive return of 0.09%.

While December itself was relatively uneventful, 2025 as a whole was anything but. The year brought meaningful change for investors, including a new administration, evolving trade policy, tariff announcements beginning in April, and ongoing geopolitical developments, particularly in the Middle East. Despite these challenges, markets delivered a strong third consecutive year of double-digit gains. The S&P 500 generated a total return of 17.86% in 2025.  International markets outperformed U.S. equities, with developed markets returning 32.03% and emerging markets 34.29%, approximately one-third of which was attributable to U.S. dollar depreciation. Within the U.S., growth stocks returned 18.55%, outperforming value stocks, which gained 15.88%. At the sector level, Communication Services, Technology, and Industrials were the top-performing sectors, while Energy, Consumer Staples, and Real Estate lagged. Real Estate was the only S&P 500 sector to post a negative return for the year.

In fixed income, the 10-year Treasury ended the year at 4.17%, down from 4.57% at the end of 2024, after reaching a low near 3.94% in October when concerns about economic slowing peaked. For the year, global bonds outperformed, returning 8.17% in U.S. dollar terms, while the U.S. Aggregate Bond Index returned 7.30%—both representing strong outcomes for fixed income investors. Municipal bonds delivered returns closer to historical averages, finishing the year at approximately 4.25%.

While it is difficult to fully capture an entire year of developments in just a few paragraphs, 2025 was ultimately a strong year for markets and investors. As we look ahead, we expect some of the themes that defined 2025 to continue, alongside new opportunities and challenges that will emerge. We look forward to discussing these in greater detail in our 2026 Outlook, which we will share in the coming weeks.

Data source: Bloomberg as of 1/4/2026. Past performance is not indicative of current or future performance and is not a guarantee.

Investment Advisory Services offered through Beacon Advisors Holdings, LLC (“Beacon Advisors”), a Registered Investment Adviser. The information contained herein has been obtained from sources believed to be reliable, but we cannot guarantee its accuracy or completeness. Neither the information nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. In preparing these materials, we have relied upon and assumed without independent verification, the accuracy and completeness of all available information from public and internal sources. Beacon Advisors shall not in any way be liable for claims and makes no expressed or implied representations or warranties as to their accuracy or completeness for statements or errors contained in or omissions from them.

The market adage "As goes January, so goes the year" remains a compelling historical indicator. Our analysis of Bloomberg data for the S&P 500 since 1950 reveals that this trend has held true 88% of the time based on price index performance, and 93% when factoring in total returns including dividends. Over the past 75 years, the S&P 500 has posted positive January returns in 45 instances; in 43 of those years, the index finished the calendar year in positive territory. This represents one of the most statistically reliable factors we track. This year, the S&P 500 concluded January with a 1.44% gain, though this performance was accompanied by significant volatility.

Geopolitical developments dominated the headlines throughout the month. The arrest of Venezuelan President Nicolas Maduro during the first weekend of January carried profound implications for global oil markets and sent a decisive signal regarding international anti-cartel efforts. By the second week, market attention shifted toward the complexities of the Greenland dispute. Fortunately, tensions eased following productive negotiations at the World Economic Forum in Davos. While global leaders converged in Switzerland, domestic stability was tested by civil unrest in Minneapolis. The month concluded with a transition in monetary leadership following the appointment of Kevin Warsh as the next Federal Reserve Chairman.

Despite this turbulent backdrop, global equity markets largely looked past geopolitical friction. International markets began the year with notable strength, supported in part by a weaker U.S. dollar. Developed International markets gained 5.24% for the month, while Emerging Markets surged 8.86% (non-annualized). In fixed income, the Federal Reserve maintained interest rates, a decision later validated by persistent inflation data. U.S. bonds rose 0.11% in January, while Municipal bonds outperformed with a 0.94% return.

Corporate earnings for the fourth quarter are now underway. While only approximately one-third of the S&P 500 has reported thus far, 79% of those companies have exceeded expectations. Although earnings are on track for another quarter of robust growth, concerns regarding elevated technology valuations weighed on sentiment, contributing to a volatile final week of trading.

While we remain optimistic that January’s positive performance signals a favorable trajectory for 2026, we anticipate that the volatility experienced this month may also persist throughout the year. We feel that our portfolios are well-positioned for an unpredictable environment, and we will continue to monitor developments closely.

Data source: Bloomberg as of 2/2/2026. Past performance is not indicative of current or future performance and is not a guarantee.

Investment Advisory Services offered through Beacon Advisors Holdings, LLC (“Beacon Advisors”), a Registered Investment Adviser. The information contained herein has been obtained from sources believed to be reliable, but we cannot guarantee its accuracy or completeness. Neither the information nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. In preparing these materials, we have relied upon and assumed without independent verification, the accuracy and completeness of all available information from public and internal sources. Beacon Advisors shall not in any way be liable for claims and makes no expressed or implied representations or warranties as to their accuracy or completeness for statements or errors contained in or omissions from them.

Historically, February often serves as a period of market normalization following the new year. Since 1935, the S&P 500 has closed lower in February 48% of the time, with a marginal average total return of -0.04%. This trend persisted this year; despite the index declining -0.76% during the month, year-to-date performance remains positive at 0.67%.

Market volatility was driven primarily by a rotation from Technology into defensive sectors, with Utilities, Energy, and Materials leading performance. Within tech, software valuations experienced pressure as investors weighed the potential for AI-driven disruption. Notably, our portfolio’s specific factor tilts proved effective, outperforming the broader index and maintaining a lead over the S&P 500 for the year. International markets also continued to outpace the U.S., with Developed International and Emerging Markets gaining 4.65% and 5.50%, respectively.

In fixed income, U.S. Treasuries performed well as investors sought safety amid economic uncertainty. The U.S. Aggregate Index rose 1.64%, while Municipal bonds increased by 1.25%. Economic data remained mixed; while higher inflation readings reinforced the Federal Reserve’s "higher for longer" stance, robust payroll data helped alleviate immediate recession fears. We leveraged this strength in the bond market to reduce duration and move toward a more neutral positioning.

Economic and geopolitical volatility remained a market driver throughout February, punctuated by a landmark Supreme Court ruling that the International Emergency Economic Powers Act does not authorize executive-led tariffs. This decision has introduced significant uncertainty regarding future trade policy, its inflationary consequences, and the logistics of potential refunds. Market pressure intensified the last day of the month following coordinated military actions against Iran by the U.S. and Israel, an escalation foreshadowed by a strategic buildup of regional naval and military assets, which catalyzed a sharp rise in oil and gold prices. While we are closely monitoring the situation, immediate market reactions appear contained and broader regional stability remains in place. We are hopeful that these developments will ultimately facilitate a transformative and more stable era for the Middle East.

We remain constructive on the long-term outlook and view the current broadening of sector participation as a healthy market development. The recent pullback in technology appears to be a valuation reset rather than a fundamental breakdown of the core thesis. We maintain a slightly defensive posture designed to navigate ongoing rotation, geopolitical uncertainty, and evolving macroeconomic conditions.

 Data source: Bloomberg as of 3/2/2026. Past performance is not indicative of current or future performance and is not a guarantee. 

Investment Advisory Services offered through Beacon Advisors Holdings, LLC (“Beacon Advisors”), a Registered Investment Adviser. The information contained herein has been obtained from sources believed to be reliable, but we cannot guarantee its accuracy or completeness. Neither the information nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. In preparing these materials, we have relied upon and assumed without independent verification, the accuracy and completeness of all information available from public and internal sources. Beacon Advisors shall not in any way be liable for claims and makes no expressed or implied representations or warranties as to their accuracy or completeness for statements or errors contained in or omissions from them.

While the month of March typically brings the anticipation of collegiate basketball tournaments, this year the markets experienced a different and far more volatile form of "March Madness." The escalation of conflict involving the U.S., Israel, and Iran became the primary narrative, dictating market direction throughout the period. Investor sentiment was driven by three critical questions: the potential duration of the conflict, the ceiling for oil prices, and the ultimate impact on inflation and corporate profitability.

Historically, geopolitical conflict introduces economic disruption; however, the closure of the Strait of Hormuz—effectively choking 20% global energy supplies—created profound shocks to the global economy. Consequently, market volatility reached its highest levels since Liberation Day in April of 2025. Because the crisis simultaneously impacted various sectors, we observed a rare, synchronized decline in both equities and fixed income. Crude oil peaked at $113 per barrel, while gold, traditionally viewed as a safe haven, fell -11.5% as investors liquidated positions in favor of cash.

This environment fundamentally shifted the narratives established in January and February. Discussions regarding potential Federal Reserve rate cuts became moot; at one point, the market even began pricing in rate hikes as a next possible move. While the conflict persists, it is our view that the Fed will remain on hold until hostilities cease and the full impact on inflation can be accurately assessed. If history serves as a guide, supply-side price shocks tend to reverse relatively quickly, and we anticipate a similar trajectory here.

Looking closer at market returns, the prevailing equity narrative surrounding Technology and Artificial Intelligence took a back seat in March, influencing only select names. Energy was the sole sector of the S&P 500 to post a positive return for the month. The S&P 500 ended March down -4.98%, erasing year-to-date gains. While we are encouraged by the rebound observed on the final day of the month, future performance likely remains contingent upon the timing of a diplomatic resolution. Our factor positions provided some defense, yet international markets were sharply impacted; Developed International markets fell -10.18% in March, while Emerging Markets dropped -13.04%, pulling their year-to-date performance into negative territory.  Within fixed income, U.S. bonds declined by -1.76%, while municipal bonds fell -2.32%.

As we conclude the month, we find encouragement in improved equity valuations and the fact that corporate earning potential remains strong. Heading into April, we are optimistic regarding recent reports of increased communication between the U.S., Iran, and other conflicting parties regarding the potential for a cessation of hostilities. Furthermore, we look forward to the upcoming Q1 earnings season.

Data source: Bloomberg as of 4/2/2026. Past performance is not indicative of current or future performance and is not a guarantee. 

Investment Advisory Services offered through Beacon Advisors Holdings, LLC (“Beacon Advisors”), a Registered Investment Adviser. The information contained herein has been obtained from sources believed to be reliable, but we cannot guarantee its accuracy or completeness. Neither the information nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. In preparing these materials, we have relied upon and assumed without independent verification, the accuracy and completeness of all information available from public and internal sources. Beacon Advisors shall not in any way be liable for claims and makes no expressed or implied representations or warranties as to their accuracy or completeness for statements or errors contained in or omissions from them.