Looking Back at 2025

2025 was a strong year for investors, even though it didn’t always feel that way. After a shaky start with concerns about inflation, tariffs, and hiring, markets rebounded quickly from an April low.

• The S&P 500 finished the year up nearly 18%.
• Company earnings stayed strong, especially in technology, health care, and communication services.
• AI spending continued to boost productivity.
• The Federal Reserve cut interest rates three times.
• Consumer spending stayed solid, and economic growth picked up in the second half of the year.

A Strong Start to 2026 – With Volatility Along the Way

January gave us an early reminder of that lesson. Despite sharp swings during the month, most major asset classes finished January higher.

• The S&P 500 rose about 1.5% in January, ending the month just below its all-time high.
• Smaller and mid-sized companies led the way, with small-cap stocks posting their strongest monthly return since last summer.
• International stocks outperformed U.S. markets, helped by a weaker U.S. dollar.
• Bonds were modestly positive, with municipal bonds and high-quality fixed income holding up well.

Markets were also influenced by headlines around geopolitics, tariffs, and changes at the Federal Reserve. While these developments created short-term noise, underlying economic data continued to point to a resilient economy, moderating inflation, and healthy corporate earnings.

Key Themes as We Move Further Into 2026

As we look ahead, a few trends are becoming clearer:

1. Moderate economic growth remains the base case as inflation cools and interest rates stay relatively stable.

2. Earnings growth continues to be the primary driver of market returns, not headlines.

3. Market leadership is broadening, with more participation beyond mega-cap technology companies.

4. AI-related productivity gains are expanding across more industries, not just tech.

5. Selectivity matters, especially in crowded areas where expectations are already high.

January’s performance reinforced that leadership can shift quickly, and diversification across sectors, styles, and regions remains important.

How We’re Positioning Retirement Plan Portfolios

Our outlook for 2026 remains constructive, but we expect volatility to remain part of the journey. With that in mind, portfolios are positioned with a long-term focus:

• Utilizing funds that emphasize high-quality companies with strong balance sheets.
• Maintaining exposure to productivity and AI-driven themes while avoiding overcrowded areas.
• Leaning into industrials and infrastructure, where earnings growth is improving.
• Staying selective in consumer-focused areas facing margin pressure.
• Keeping portfolios diversified and aligned with long-term retirement goals.

Our Message to You

There will always be headlines – tariffs, global events, interest rate speculation, and rapid changes in technology. But beneath the noise, the fundamentals remain solid.

We continue to monitor markets closely, review portfolios proactively, and make adjustments when appropriate to keep your retirement plan on track. If you have questions about your account, recent market activity, or what this means for your long-term strategy, we’re always here to help.

Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing. Additional risks are associated with international investing, such as currency fluctuations, political and economic stability, and differences in accounting standards. All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful.