Market Review

Diversification paid off in 2025. A balanced global 60/40 stock/bond portfolio delivered strong returns of 16.9% for the year. Global equities continued their robust performance with major markets like South Korea, Taiwan, the UK, Germany, and the US all reaching new record highs. 2025 was also a year in which bond markets globally posted positive returns amidst central bank policy shifts.

The S&P 500 finished 2025 up nearly 18% after a volatile start, delivering its third consecutive year of double-digit gains. The technology sector remained the primary driver, buoyed by robust spending on artificial intelligence. However, for the first time in several years, all 11 of the S&P 500 sectors delivered positive returns, albeit with wide variance, showcasing that the gains in 2025 were modestly less concentrated than in prior years. Only two (Nvidia and Google) of the Magnificent-7 stocks beat the S&P 500 as AI bubble concerns surfaced in the latter half of the year.

International equities were a significant bright spot, beating the S&P 500 by the widest margin since 2009 despite tariff policies. Developed international and emerging markets returned nearly 32% and 34%, respectively. Shares of tech firms trading in Hong Kong and South Korea surged higher, helping emerging markets, while European defense and bank stocks also tacked on big gains. A weaker US dollar was also a tailwind for these markets.

Bond markets also delivered strong returns in 2025, outperforming cash with the widest margin since 2020, benefiting from the Federal Reserve's resumption of rate cuts in September, which lowered short-term yields. The Bloomberg U.S. Aggregate Bond Index returned 7.3% for the year, while the lower-quality high-yield bond market saw returns of over 8%. International bonds also generated strong gains, helped by a weaker US dollar.

Finally, it was a banner year for precious metals. Gold rose 62% and had its best year since 1979, driven by renewed demand for safe-haven investments, while silver outperformed most assets with a 139% surge on robust industrial demand from high-tech and supply deficits. Bitcoin, by contrast, ended the year with losses. Oil headed toward its deepest yearly loss since the pandemic in 2020, pressured by concerns about a significant supply surplus.