Quarterly Client Update Q4 2025
As we wrapped up the year, we found ourselves in familiar end‑of‑year routines: kids’ sports seasons wrapping up, holiday travel plans coming together, and, in Mike's case, running fire drills as part of his church’s safety team.
Fire drills are rarely elegant. It usually involves reminding volunteers to move calmly, to take the stairs in an orderly way, and yes, to keep the baby cribs level when carrying them upstairs so the kids don’t tumble out. It’s slightly chaotic, a little uncomfortable, and absolutely necessary.
The point isn’t perfection in the moment. It’s preparation ahead of time, so that if something unexpected ever happens, people don’t panic – they move with purpose.
That same dynamic shows up in markets as well. The most challenging periods for investors are rarely the ones that can be predicted in advance, but the ones that test whether preparation and discipline hold when conditions change.
From a market perspective, 2025 delivered several surprises. U.S. stocks finished the year strong, extending a multi‑year run of above‑average returns. For the full year, the U.S. stock market returned approximately 17%, while international developed and emerging markets delivered even stronger results, each finishing above 30% for the year.¹
The fourth quarter itself was more measured. U.S. stocks rose about 2.4%, international developed stocks gained roughly 5.2%, and emerging markets were up about 4.7%, while bonds provided modest positive returns1. Despite frequent headlines warning of recessions, rate shocks, or geopolitical stress, markets once again demonstrated how quickly they can absorb bad news and how unpredictable short‑term outcomes remain.
One important perspective: strong recent performance does not mean future returns are necessarily weaker. Historically, markets have often gone on to deliver solid long‑term returns even after reaching new highs. In fact, new highs are a normal feature of long‑term market growth, not a warning sign on their own.
At the same time, history reminds us that smooth markets are the exception, not the rule. Even in years that finish strong, there are meaningful swings along the way. Looking back over long periods, roughly one out of every four calendar years has delivered a negative stock market return.2
Periods like 2022 – when both stocks and bonds struggled – are uncomfortable, but they are also part of the cost of earning long‑term returns. Over longer horizons, markets have rewarded patience: over the past decade, U.S. stocks have compounded at roughly 14% annually, while international developed stocks have compounded at roughly 8.5% annually and emerging markets at about 8.4% per year over the same period.1
Preparation matters most before emotions enter the picture. You don’t learn evacuation routes when the alarm is sounding. You learn them ahead of time, during ordinary days, so that stress doesn’t dictate decisions.
Your portfolio is built with this reality in mind. Diversification exists because no single market, country, or asset class reliably leads every decade. History offers many reminders, including long stretches in which once-dominant markets underperformed for years, that outcomes vary widely and unpredictably.
This plan does not eliminate uncertainty. It prepares for it.
Periods of strong markets can present their own challenges. When returns are strong and headlines are optimistic, it can be tempting to let discipline slip, whether by taking on more risk than intended or assuming recent conditions will persist. Our role is to help you stay grounded through both.
If you have questions about your plan, recent market performance, or how current conditions affect your long-term goals, we’re always happy to talk. Preparation works best when it’s shared and understood.
Sources:
¹ Dimensional Fund Advisors Quarterly Market Review, Q4 2025
2 A Wealth of Common Sense (Ben Carlson), analysis of investor flows during the Global Financial Crisis and subsequent recoveries
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
All investing is subject to risk, including the possible loss of the money you invest. Diversification does not ensure a profit or protect against a loss.
Investment advice offered through Private Advisor Group, a registered investment advisor.