As much of the U.S. prepares for a major winter storm expected to bring heavy snowfall from the Southern Rockies to New England this weekend, the widespread nature of this event is a reminder of last year’s market performance. Much like the storm system, strong market returns were felt across a broad range of asset classes rather than concentrated in just a few areas.
Driven by strong corporate earnings, 2025 marked another solid year for equity markets. Large-cap technology stocks once again played a major role, with the cap-weighted S&P 500 outperforming the equal-weighted index by more than 600 bps, as the equal-weighted S&P returned 11.4%.
What was particularly encouraging in 2025 was the broadening of market performance beyond U.S. large-cap stocks. After the S&P 500 led returns in both 2023 and 2024 (up 26% and 25% respectively), international equities took the lead last year. Emerging markets and developed markets equities returned over 34% and 31%, respectively. Small cap equities quietly also had a strong year, marking a third consecutive year of double-digit returns.
Fixed income added value as well. Bonds returned approximately 7%, while high-yield bonds exceeded 8%, supported by lower interest rates and tightening credit spreads.
Looking ahead, market attention on Artificial Intelligence (AI) is likely to remain elevated. The AI theme has evolved through three phases:
1. Development- building trust in the technology
2. Build-out- heavy capital investment and productivity-enhancing applications
3. Cultivation- rising corporate adoption, with a growing focus on measurable productivity gains that drive earnings and cash flow growth
While elevated valuations-particularly in large-cap equities-may temper overall return expectations, supportive fiscal, monetary, and regulatory policies continue to provide a constructive backdrop for economic and corporate earnings growth.
We will continue to monitor markets and the economic backdrop for investment opportunities. For clients, our focus remains on building diversified portfolios across stocks and bonds, aligned with individual risk tolerance and guided by a comprehensive financial plan.
Market Proxies: Domestic Large Cap: S&P 500, Emerging Markets Equity: MSCI Emerging Markets, Developed Markets Equity: MSCI EAFE, Small Cap Equity: Russell 2000, U.S. Fixed Income: Bloomberg US Aggregate Bond Index, High Yield Bond: Bloomberg US Hight Yield. International market returns in USD terms.
Sources: FactSet, JP Morgan Guide to the Markets Q1’26, Charles Schwab, Orion
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Christopher Perry is an investment adviser representative of CJ Perry Financial. The firm is a registered investment adviser and only conducts business in jurisdictions where it is properly registered, or is excluded or exempted from registration requirements. Registration as an investment adviser is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability.
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