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.

The month of April began with significant uncertainty but ultimately proved to be a historic period across multiple sectors. Geopolitical tensions headlined the start of the month, as 40 days of hostilities with Iran transitioned into a ceasefire on April 8th. Despite initial challenges in peace negotiations, the U.S. implementation of a blockade at the Strait of Hormuz emerged as a potent strategic lever. However, Iran’s retaliatory closure of the strait created a global economic deadlock, characterized by a cycle of failed proposals and escalating rhetoric. Despite these pressures, the broader economy remained resilient as it entered the second month of conflict. Inflation data reflected the anticipated impact of rising energy costs, with CPI, PPI, and PCE figures trending higher; notably, these increases remained within expectations given the geopolitical climate. The labor market further demonstrated its durability; while layoff announcements rose, displaced workers were absorbed quickly, sustaining the "no hire, no fire" narrative. Furthermore, the initial first-quarter GDP reading of 2.00% fell within historical norms, allowing market participants to shift their focus toward corporate performance.

Corporate earnings for the first quarter provided a significant boost to investor sentiment, beginning with robust results from major financial institutions. Strong performance in sales, trading, and investment banking fees offered tangible evidence of continued economic activity, while attractive valuations further incentivized buying. This momentum accelerated through the final week of the month as five of the "Magnificent Seven" companies reported earnings. These firms largely exceeded expectations and signaled a renewed commitment to AI integration by increasing aggregate capital expenditure from $670 billion to $725 billion. This surge in investment reassured the market that the AI-driven growth thesis remains intact. Consequently, equity markets recorded their strongest performance in years. The S&P 500 gained 10.49%, its best month since November 2020, while the Tech Sector surged 17.44%, marking its strongest monthly performance since October 2002. International markets also saw substantial gains, with Developed International up 7.56% and Emerging Markets rising 14.74%.

For fixed income, volatility persisted as the 10-year Treasury yield fluctuated between 4.22% and 4.43%. U.S. Bonds ended the month essentially flat at 0.11%, while Municipal bonds outperformed with a 1.15% gain. A primary focal point was Jerome Powell’s final meeting as Chairman of the Federal Reserve, concluding a tenure marked by unprecedented challenges ranging from a global pandemic and generational inflation to geopolitical instability. As expected, the Fed maintained the federal funds rate at 3.50% to 3.75%. However, the meeting was notable for having four dissenting governors—the highest number since 1992—suggesting a shift toward a more dynamic internal environment. Additionally, the Department of Justice concluded its investigation into the Federal Reserve's building renovation expenses, clearing a path for Kevin Warsh’s confirmation.

While we are encouraged by this month’s exceptional market performance, we remain vigilant regarding potential headwinds. We will continue to monitor developments in the Middle East and upcoming corporate earnings releases closely.

Data source: Bloomberg as of 5/1/2026. 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.

The month of May brought a complex mix of macroeconomic and geopolitical developments, serving as a vivid reminder of the old financial adage that the market loves to "climb a wall of worry." Despite plenty of headlines to trigger anxiety, global markets showed remarkable resilience in the face of these headwinds.

The dominant macro theme remained the US-Iran conflict and the ongoing blockade of the Strait of Hormuz, with energy markets serving as the primary transmission mechanism for inflation worries and consequences, resulting in volatility. Brent crude began the month near $100 per barrel but tumbled roughly 19% in May, its sharpest monthly decline since March 2020, as optimism grew surrounding a potential resolution. While pockets of hostility flared toward the end of the month, anxieties were eased by a welcome 60-day extension of the truce.

On the corporate front, earnings season delivered exceptionally strong results, sparking highly positive market reactions. With 97% of S&P 500 companies reporting, quarterly earnings growth surpassed 27%, which is a staggering figure by any historical standard. Driven by semiconductors, which logged their best start to a year on record, the S&P 500 surged 5.26% in May. Combined with April's gains, the index returned 16.31% over the two-month period, a milestone matched only four other times since 1950. 

This momentum pushed all three major US equity indices to new all-time highs while crossing significant psychological benchmarks. The Dow Jones Industrial Average closed above 50,000, the S&P 500 crossed above 7,500, and the Nasdaq Composite finished above 25,000. International markets also posted strong gains, with Developed markets returning 3.17% and Emerging markets jumping 9.70%, fueled by robust AI-related capital inflows and a stable US dollar.

Inflation, however, remains a persistent concern. The Personal Consumption Expenditures price index (“PCE”), the Federal Reserve's preferred inflation gauge, rose 3.80% year-over-year, marking its highest reading since 2023, while Core PCE climbed 3.30%. These stubborn figures present a challenging path forward for the Federal Reserve, which officially transitioned leadership as Kevin Warsh was confirmed as the new Chairman.

Bond markets reacted to the sticky inflation data by selling off and driving yields higher. The 10-year US Treasury yield climbed from 4.37% to a peak of 4.66% before recovering to end the month at 4.45%, leaving US Bonds up 0.31% and Municipal bonds up 0.37% for the month. We anticipate that even after the conflict in Iran resolves, it will take some time for consumer prices to normalize, leading us to adjust our outlook to expect only one Federal Reserve rate cut this year, followed by a few modest adjustments in 2027 depending on economic data.

In summary, May 2026 was defined by two powerful, offsetting forces: the inflationary pressures of the US-Iran conflict weighing on fixed income and consumer spending, and an AI-driven equity rally of historic proportions. While we are highly encouraged by blockbuster corporate earnings, we remain vigilant regarding the broader health of the consumer and the economy.

Data source: Bloomberg as of 6/2/2026. 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.