Performance and the Markets
2025 was another strong year for U.S. stocks. It marked the third straight year of double-digit gains for the S&P 500. Over the last three years (2023–2025), the S&P 500’s cumulative return has been about 78%, more than double the long-term pace of roughly 30% for a three-year period. Growth indexes did even better: the iShares Russell 1000 Growth ETF (a proxy for large-cap growth stocks) gained about 30% per year over the past three years, which is roughly 3 times the return we would normally expect.
A good deal of these outsized gains can be attributed to a handful of giant technology names (think Amazon, Tesla, or Apple). However, as we analyze the overall market, we continue to find many solid, reasonably valued companies across sectors whose fundamentals and risk-return trade-offs look attractive.
As you already know, we don’t “time” the markets. We invest client capital in companies where we believe the potential reward justifies the risk, and we work to stay disciplined. For 2025, our Growth & Income composite returned a bit over 12% (gross of fees). That’s more than we’d normally expect, and with that result. It also reflects our focus on balancing opportunity with risk.
Perspective matters. Shorter spans (3, 5, 10 years) can look quite different from longer spans (20–25 years). That’s normal. We encourage you to view performance through a long-term lens and to remember that markets rarely move in a straight line.
The Economy: What We’re Watching in 2026
Overall, we think our economy will remain relatively strong and resilient. Key indicators improved late in 2025, and consensus expects moderate growth in 2026. We’ll continue to prepare portfolios for surprises—good or bad—because preparation beats prediction.
Interest rates: The Federal Reserve cut rates three times in 2025 (September, October, December), bringing the federal funds target to 3.50%–3.75% at the end of the year. Policymakers currently signal that one to two more reductions are possible in 2026, depending on the data. We don’t build portfolios on rate forecasts, but an incrementally easier policy should lead to a better economy, and share prices tend to follow the growth of our economy over the long run.
Inflation: As of late December, it appears inflation will clock in at about 2.7% for 2025. This is somewhat higher than the 2% the Federal Reserve has targeted, but much cooler than 2022–2023. We feel our current inflation rate is one that both companies and consumers can live with.
Money supply: After contracting in 2023, M2 has resumed growth. Current reports show that it has increased about 4.5% over the past year, which is about the same amount that our economy has grown over the same time. We’re advisers, not economists, but we feel the current monetary policies are reasonable.
Employment: The unemployment rate ended 2025 at 4.4%, up from earlier 2025 readings near 4% as job creation slowed. That’s still historically low, but we’re watching the trend carefully.
Housing: Housing starts softened in the fall of 2025 versus the prior year. Lower mortgage rates would typically help new construction, but it can take some time for buyers to catch up with the rate reductions.
We expect choppy but positive conditions in 2026. The path won’t be perfectly smooth, so our plan is to focus on quality, price discipline, and risk control. Thanks for letting us do that work for you.
* Data not audited
** Results reported gross of fees
*** Past performance does not assure future results. Investors cannot invest directly in the stock market indexes such as the S&P 500. Investment return and principal value of an investment will fluctuate. Investor value, when sold, may be worth more or less than its original cost.