As the holiday season begins, it’s a good moment to pause and appreciate what has gone right—both in life and in the markets. Investors naturally focus on risks, but this year offers plenty of reasons for gratitude.
Strong Market Performance Across the Board
Financial markets have delivered solid returns in 2025. The S&P 500 is up more than 15% with dividends, and bonds have returned roughly 7% as measured by the Bloomberg U.S. Aggregate Bond Index. International stocks have outperformed U.S. stocks for the first time in years. Many diversified portfolios benefited from strength across asset classes.
We are now entering the fourth year of the bull market that began after the October 2022 bottom. While past performance doesn’t guarantee future returns, bull markets historically last longer and deliver cumulative gains over many years.
Inflation is Improving and the Fed is Cutting Rates
Inflation has risen about 3% over the past year—still a challenge, but far more stable than in prior years. This moderation has allowed the Federal Reserve to begin cutting rates to support a cooling job market.
Historically, lower rates are positive for both stocks and bonds: they reduce borrowing costs, improve corporate conditions, and increase the value of existing bonds. While inflation and rates will remain important themes, the fear of runaway inflation appears to be behind us.
The Value of Asset Allocation in an Uncertain World
Looking ahead, 2026 will bring new uncertainties—just like every year. Instead of reacting to each headline, long-term investors benefit most from disciplined asset allocation and diversification across sectors, asset classes, and global regions.
Valuations are elevated in parts of the market. The S&P 500 trades at a price-to-earnings ratio of 22.6x, approaching levels last seen during the dot-com era. While valuations don’t predict near-term returns, they highlight the importance of holding areas of the market with more attractive long-term opportunities.
Questions around artificial intelligence, geopolitical developments, tariff changes, and national debt will continue to influence sentiment. But recent history shows that overreacting to these events can derail financial plans more than the events themselves.
The Bottom Line
The holidays are an ideal time to step back and recognize the many reasons to be thankful—especially the resilience of markets, the progress on inflation, and the ongoing benefit of diversified portfolios.
A well-constructed allocation remains the most reliable way to navigate both challenges and opportunities in the year ahead.
Interested in Working with Us?
If reading this sparked questions about your own portfolio or whether your current allocation is positioned for 2026, let’s talk. You can schedule a 👉PersonalPath Intro Call here now. It’s a simple, no-pressure conversation designed to help you understand where you stand — and what steps may support your goals in the year ahead.
