Summary

• 2025 Market Review
• What Comes Next
• Dealing With Dissonance
• January Reset for College Planning
• Media for the New Year

It's a Wrap: 2025 Market Review

Often from Christmas through year end, investors are treated to a “Santa Claus Rally”, where stock prices rise. But 2025 followed the atypical pattern from 2024: stock prices fell during the final days of the year.

The waning-days-of-2025 drop marks the 13th time the benchmark S&P 500 index fell by more than 1% over that span since 1952.

As catalogued in our Review last year at this time, a “Santa Slump” does not necessarily foreshadow poor returns for the year ahead.

Bespoke Investment Group found that, in the twelve months following a year-end decline of more than 1%, stocks tended to do better. Large company stocks’ median performance after Santa Slum years, in fact, has been a gain of about 12%.

For 2025 as a whole, it was another strong year for U.S. stocks. In 2025, the S&P 500 index of large-company stocks rose nearly 18% and hit 39 new all-time highs along the way. This follows annual returns of 25% in 2024 and 26% in 2023.

Once again, the technology sector was a major contributor to these more-than-satisfactory gains. Tech was the top-performing sector in the S&P 500 during 2025, gaining nearly 25%.

Furthermore, the seven largest tech companies (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla), often referred to as the “Magnificent 7”, contributed about half of the S&P 500’s price return in 2025.

Outside of the US, stock returns were even more impressive. The MSCI EAFE (Europe, Australasia, and the Far East) index of foreign stocks rose by 31.6%.

One reason why foreign stock returns bested US stocks is that the US dollar fell by about 7.5% compared to other major foreign currencies. Dollar weakness boosts foreign stock returns, when those returns are measured in US dollars.

Even though bond returns lagged behind stock returns, bonds had a good year, too.

A key driver of the positive performance for bonds has been declining interest rates, which helped to push up bond prices. Over the course of 2025, 3-Month Treasury bill yields dropped by 0.7 percentage points, and 5-Year and 10-Year Treasury bond yields declined by 0.6 and 0.5 percentage points, respectively.

For 2025, high quality intermediate-term bonds, measured by the benchmark Bloomberg US Aggregate Bond Index, returned 7.2%. For short-term bond funds, where prices are much less influenced by changes in interest rates, results were less impressive, with returns landing in the 4-6% range.



Here’s a snapshot of US stock and bond performance in 2025; the 5-year average annual return for each asset class is included for comparison purposes.

Source: Moore Financial Advisors & Morningstar

What Comes Next?

One question at the forefront of many investors’ minds, particularly at the start of a new year is: how might things unfold in the year ahead?

There are cognitive, cultural, and practical reasons why this question is more relevant to us in January than at other times of the year.

From a cognitive perspective, most people find it easier to simplify continuous time into “mental containers”. Chunking time into blocks (like one year) gives the brain manageable units for memory, planning, and comparison.

Culturally, society reinforces annual cycles. Many institutions – from government and schools to private sector employers – organize life around yearly cycles, so we tend to internalize these rhythms and learn to think in this format automatically.

From a practical perspective, year-long blocks match human-scale planning. A year is short enough to imagine, plan for, and track, but long enough to realize meaningful change.

It is important to recognize that, for planning purposes, what happens in the financial markets over the long term is far more important than what occurs tomorrow, next month, or in any one particular year.

It’s also important to recognize the human desire to have a frame of reference for the year ahead. It’s in this spirit that I share my financial market expectations for 2026.

Return Expectations

• Stocks: given three very strong years of stock market returns (nearly 23% annualized from 2023 – 2025), it’s prudent to expect lower returns for stocks going forward: a 7% - 10% return range is a reasonable expectation for 2026. Note that over the very long term (past 100 years) stocks have returned an annualized 10.5%, according to Siblis Research. Also note that JP Morgan Asset Management’s well-regarded research team projects stocks will return a bit under 7% over the next 10-15 years. These are two important reference points to consider when forming an expectation for stock returns in the year ahead.
• Bonds: return prospects for intermediate-term bond funds are sound:10-Year Treasury bond yields remain above 4%; the Bloomberg US Aggregate Bond Market Index’s yield to maturity is close to 4.5%; and JP Morgan expects 5.2% return for investment grade bonds in the years ahead. So, targeting a 4% - 5% return range for high-quality bonds is a reasonable expectation for 2026.
• Cash: 3-Month Treasury bill yields are a good reference point for forming a return expectation on cash invested in very short-term, high-quality securities or money market funds. T-Bills currently have an annualized yield of 3.6%, and yields are likely to decline if the Federal Reserve continues to bring down short-term interest rates. So a 2.5% - 3.5% return range on invested cash is a reasonable expectation for 2026.

Risks

• Policy Risk: Surprise economic policies from the Trump administration, including the potential for imposition of higher tariffs for political purposes, pose a major potential risk for financial markets in 2026.
• AI Risk: Investors are optimistic that the vast resources that technology-focused companies are plowing into Artificial Intelligence will pay off quickly; if positive AI-related sentiment cools (for whatever reason) it likely would mean downward adjustments for tech company shares and probably a broader-based slump for the stock market a whole.
• Labor Market Risk: Many households and workers feel that the jobs market is not working particularly well. In 2025, there was a sizable increase in the unemployment rate. It wouldn’t take that much more labor market deterioration for economists to start worrying about the increased possibility of recession.
• Financial Market Risk: The risk of a steep and extended stock market decline in any given year resulting from problems in the financial markets should never be ruled out. However, current economic conditions are more likely to support growth and positive financial market returns. Instead of girding for the next crash, it’s more constructive to mentally prepare for episodes of stock selling and price fluctuations which typically happen over the course of a year.
• The previous bullet point is worth expanding upon. The chart below, courtesy of JP Morgan Asset Management, is one to keep in mind. It shows that annual returns for US stocks are usually positive and often satisfactory, but that intra-year downdrafts are part of the investment landscape.

Annual Returns and Intra-Year Declines for the S&P 500, 1980 - 2025

Source: JP Morgan Asset Management

The key take-aways from the above chart are:

• During the course of any given year, the S&P 500 Index of large-company US stocks falls, on average, by 14.2% (red dots show intra-year declines)
• Going back to 1980, annual stock market returns have been positive in 35 of 46 years, or three-quarters of the time
• The average annual return for large-company US stocks over the past 46 years has been 10.7% (grey bars show full-year returns)

Dealing With Dissonance

Many of us are feeling a degree of dissonance today—an uncomfortable gap between what we sense in the world around us and what we know we should do with our long‑term financial plans.

Some clients have expressed a version of the following sentiment: "I'm worried about where the country is heading. Maybe we should reduce risk until things settle down.”

This reaction isn’t irrational. It’s human. When the social or political climate feels tense, uncertain, or discouraging, it’s natural to want to create stability somewhere—and the easiest lever to reach for is the investment portfolio. Wanting safety when everything feels unsafe is an understandable impulse.

But as understandable as it is, history tells us that making portfolio decisions based on fear, dismay, or frustration with the state of affairs has consistently been a poor long‑term strategy. Not because the feelings are wrong, but because they rarely correspond to actual economic fundamentals.

In this article, I want to do three things:

1. Acknowledge the emotional reality many people feel today.
2. Explain why pessimism and portfolio management don’t mix well.
3. Offer a more constructive framework for evaluating your financial future—one grounded in economic resilience, not political anxiety.

Why We Feel Dissonance

When external events feel chaotic or divisive, we instinctively brace ourselves. Our brains have evolved to treat negative information as a call to action. In other words, the more unsettled we feel, the more likely we are to seek swift, protective measures.

In personal finance, this often leads to two common urges:

• The desire to reduce risk (“Let’s lower stock exposure for now.”)
• The urge to protect gains (“The market has done well; maybe we should step aside before things turn.”)

These feelings do not arise because of portfolio conditions—they arise because of life conditions. And the danger is that we adjust our portfolios based on emotion, rather than based on data and long-term requirements.

This is the core of the dissonance: the world around us can feel worse even while the economy and markets continue to function, adapt, and grow.

Why Acting on Pessimism Is Historically Counterproductive

• Feelings do not predict financial outcomes. Researchers have repeatedly found that consumer sentiment, political sentiment, and investor mood frequently diverge from actual market performance. At various times in history, Americans have felt deeply pessimistic about the nation’s direction—even during periods of strong corporate earnings, rising GDP, and resilient labor markets. Markets care about productivity, innovation, interest rates, earnings, global demand, cash flow, corporate reinvestment, and labor efficiency—not the daily emotional climate of society.
• Major market gains often occur during times of maximum discouragement. Some of the strongest market performance has happened in years when public confidence was especially low. Market behavior is forward‑looking, and investors who wait for “things to feel better” often end up missing out on significant positive returns.
• The long‑term track record of disciplined investors tends to be strong. Over any extended timeframe—20, 30, 40 years—the U.S. stock market has shown remarkable resilience. It has grown through wars, recessions, inflationary cycles, political polarization, technological disruption, global crises, and periods of profound national division.

What Actually Deserves Your Attention Right Now

• The broader health of the U.S. economy. Even in times when the social mood is sour and politics are polarized, economic fundamentals can remain robust. Employment, consumer spending, corporate investment, productivity growth, innovation, and global demand all play central roles in shaping market performance. Today, many of these fundamental economic indicators are trending in a positive direction.
• The resilience and adaptability of companies. Most successful companies are not fragile—they are adaptive organisms. They evolve in response to changing consumer preferences, technological shifts, supply chain challenges, and cost pressures. And the stock funds selected for your portfolio tend to emphasize large, well-managed, profitable companies.
• Your personal financial plan—not the news cycle. Your investment strategy is built to support your retirement timeline, spending needs, risk tolerance, tax situation, and estate planning goals. Adjustments should be made in the context of these factors, and not in reaction to political developments.

How to Navigate the Dissonance Productively

• Acknowledge the emotion without acting on it. It’s OK to feel unsettled. The goal is not to eliminate the feeling—just to prevent it from dictating your financial decisions.
• Use data, not moods, as decision inputs.
• Reaffirm your long‑term purpose. Your portfolio is designed to support your life for decades, including years when the world feels off‑kilter.

If you’re experiencing dissonance today, you are not alone. Susan, Donna, Alex and I are here to address your concerns and help you stay the course with your investment strategy and your financial plan.

January Reset for College Planning

January is one of the most important months in the college planning process. It is a natural time to take a breath and reset, evaluate where you are and create a clear strategy for the months ahead.

Whether you are a junior gearing up and getting into the nitty gritty of it all, or a senior facing decision points, there are opportunities at this stage in the year to set yourself up for success in both admission outcomes and affordability.

Here are some focus points to help you get the year started on the right track.

1. Financial Aid and FAFSA deadlines

Deadlines are critical for these applications to maximize your financial aid. Also, some schools require the forms for merit scholarships even though they are not need-based.

• Families should be completing the FAFSA and CSS Profile (if required) if they have not already- early submission ensures you do not miss priority windows for university grants
• Check for other college-specific deadlines such as unique scholarship opportunities separate from merit scholarships

2. Review Academic Progress and Mid-Year Grades

Reflect on your academic progress and be sure to have a plan for the second half of the school year.

• Mid-year grades matter- colleges use them to confirm academic consistency, make decisions for students who were deferred in the early action process, and evaluate the academic rigor for juniors
• Check in with teachers if you have any concerns about finishing the year strong to get extra support

3. Evaluate and Focus on Extracurricular Activities and Their Impact

Think ahead about what else you would like to get involved with before college for your own growth and interest and to help with your college applications.

• Reflect and consider what you want to focus on for spring and summer
• Do you want to take on a leadership role? Start an impactful project? Set up an experience for summer that will be meaningful for you and your college application?

4. Make a Standardized Testing Plan (Juniors)

Spring is a common testing window. Start making your plan now for spring.

• Decide on testing or test optional
• If you take tests, which will you take? SAT, ACT, or both?
• What will be your test prep? Also, how many attempts will you make?

5. Plan for Spring College Visits Now

College open houses fill up for February and April breaks.

• Sign up for open houses early and make your hotel reservations early if needed
• Create a spreadsheet or list of items to compare for each college such as costs, student environment, geography, academics, unique features, etc.

6. Refresh Your College List

Your college list will likely evolve, and that is a good thing. It is a good time to re-evaluate based on these items:

• Your academic interests
• Your academic performance
• Information from your research on the college
• Likelihood of a merit scholarship (important affordability factor)
• Geographical location
• A “best fit” both financially and for the student’s overall experience and comfortability

7. Create Your Student and Family Timeline for the Next Six Months

Having an organized plan and roadmap of upcoming deadlines and “to dos” will help the whole family stay on track and reduce stress.

Some Items for Your January to June Timeline:

• Testing dates and prep plan
• Financial aid application deadlines
• Campus visits
• Application items for seniors
• Setting up activities for spring and summer
• College List review of your top criteria and schools
• Family meeting times- set time aside during these busy years to create a calm space for discussing your college plans
• Anything else that needs to be done!

January is a great time to set up expectations and success for the coming year. Thinking about your strategy now and following your own plan and committing to steps will go a long way to being successful in finding the right college fit for the student and the family’s financial situation.

Start your plan NOW knowing you will have a momentous year ahead, approaching the exciting “move-in” day when you see your efforts pay off!

Media for the New Year

The new year can act as a catalyst to expand horizons and vary daily routines. So far in 2026, I’ve expanded my regular news diet to incorporate balanced and diverse points of view from foreign-domicile media sources.

Here are three podcasts that I’ve been tuning into regularly, which you might find helpful:

• BBC News – Newshour: the British Broadcasting Corporation (BBC) is the UK’s national public service broadcaster, founded in 1922 and operating as a chartered corporation, independent from government influence. This podcast is “long-form”, with daily episodes running about 45 minutes.
• Reuters World News: the Reuters news agency was established in London in 1851 and acquired by the Thomson Corporation of Canada in 2008. This podcast is “short-form”, with daily episodes running about 10 minutes.
• FT News Briefing: The Financial Times (FT) was founded in London in 1888. The British company Pearson, which had owned the FT since 1957, sold it to the Japanese holding company Nikkei a decade ago. This podcast has a financial markets orientation and is “short-form”, with daily episodes running about 10 minutes.

These daily productions can be accessed using a web browser, but you may find following via a podcast app more convenient. My favorite podcast app is Pocket Casts, which can be downloaded to your phone using the Apple App Store or through Google Play.

At Moore Financial Advisors, we celebrate liberty, equality, and justice - and those who remind us of the importance of upholding those virtues - especially on MLK Day!

Best regards,

Rob, Susan, Donna & Alex