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.