16 Jan Market Update: Fourth Quarter 2025
Happy New Year! The fourth quarter of 2025 capped off a strong year for investors, rounding out a period in which virtually every major asset class delivered positive returns. Equity markets continued to advance during the quarter, supported by resilient corporate earnings and a shift toward easier monetary policy, while fixed income benefited from declining interest rates and stable inflation. For the quarter, the S&P 500 gained +2.6%, U.S. Small Cap rose +2.1%, and International Developed equities advanced +4.7%.
For the year, the S&P 500 gained +17.7%, U.S. Small Cap rose +12.7%, and International Developed equities advanced a whopping +31.6%! Although markets experienced bouts of volatility tied to geopolitical developments and policy uncertainty, those disruptions ultimately proved temporary.
That said, beneath the headline results, performance was uneven across markets. While participation in these gains was broader towards the end of the year, a relatively small group of large U.S. companies tied to capital investment, productivity, and artificial intelligence drove a significant share of equity gains in 2025. International stocks, after years of underperformance, showed signs of renewed strength as valuations proved more compelling, global growth broadened and the dollar fell.
In fixed income, bonds once again played an important role, though returns varied across maturities and credit sectors. In general, longer-term bonds outperformed shorter maturities, but risk is rising in long bonds as fears of inflation escalate. As is often the case, diversification mattered more than any single market call. For the full year, diversified portfolios were rewarded as both stocks and bonds contributed positively.
With equities coming off three consecutive strong years of double-digit returns, it’s natural for investors to wonder whether markets have moved too far, too fast. History suggests that periods of strong returns are often followed by heightened anxiety, even though market advances rarely unfold in straight lines. Importantly, market highs are not unusual – they are a normal feature of long-term progress. Attempting to step in and out of markets in anticipation of pullbacks can be costly, as some of the strongest returns often occur during periods of uncertainty. Rather than reacting to short-term concerns, investors are generally best served by maintaining appropriate allocations for their goals and risk tolerance, rebalancing as needed, and staying committed to a disciplined, long-term strategy. Over time, patience and diversification remain the most reliable tools for navigating markets through both calm and turbulent periods.
We thank you for your continued trust and confidence. Please don’t hesitate to reach out with any questions or if we can be of assistance in reviewing your portfolio or financial plan. Happy New Year, and best wishes for continued success in 2026!
Information is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products, or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.
The commentary in this post (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of Angela Wright, an Investment Adviser Representative of Gemmer Asset Management LLC (“GAM”) and should not be regarded as the views of GAM, or a description of advisory services provided by GAM or performance returns of any GAM client. References to securities or market-related performance data are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.
The information presented herein may contain links to third party websites with which we have no affiliation. A link to any third-party website does not mean that we endorse it, or the quality or accuracy of the information presented on it.