As we approach the end of the year and look forward to the new year, we often reflect on the events of the past year, the highs and the lows as well as other significant events. As we look at the markets, 2025 was a high. The S&P 500 saw its third consecutive year of double-digit gains (so far), which was a bit surprising to many since the S&P 500 plunged about 12% very quickly in April after the global tariffs were announced. Only after the 90-day pause for the implementation of the tariffs did the markets stabilize and start moving back up. And they haven’t looked back since that time.
One more reason to be merry going into the new year is that the Federal Reserve recently cut interest rates another 25 basis points at its December meeting, as expected. Their target range is now 3.5% - 3.75%, the lowest since October of 2022. Also, the next Fed chair, which is likely to be Kevin Hassett, has said there is “plenty of room” to cut rates further. The market was predicting a more “hawkish” fed at the December meeting, but it turned out to be more “doveish” with the Fed cutting rates as well as announcing that they would again start purchasing Treasuries to maintain its balance sheet from shrinking. That was enough to trigger a green light for stocks, at least in the short term.
Another positive for 2025 was international stocks. After years of underperformance compared to the U.S. stock market, international stocks finally had a great year with the MSCI All Country World Ex-USA Index significantly outperforming the S&P 500. 12% as of December 12th. That is the biggest outperformance in 15 years. Even better news is that strong returns in both U.S. and international don’t necessarily mean weak returns ahead. Since 1928, there have been 36 calendar years that followed a three-year stretch of up-years. As the table in the link below shows, the median return in the fourth year is 15%.
The last item that I wanted to mention which is significant going into 2026 is the passage of "The One Big Beautiful Bill Act” or OBBBA which was signed into law on July 4th of this year. The link below highlights the tax reductions that were extended as well as additional new tax benefits. As we meet with our clients in the coming year, we will be discussing with each of you how these changes may be able to benefit you and help you to reduce your taxable income in the new year and beyond.
Highlights of The One Big Beautiful Bill Act
We hope that you have a joy-filled and safe holiday season. We look forward to seeing you in the new year.
Blessings,
Kurt, Anders, Maggie and Molly
“There are far better things ahead than any we leave behind.”
C.S. Lewis