Despite some roller-coaster events last year, the S&P 500 Index posted its third consecutive year of double-digit gains in 2025. While investors were busy celebrating the holidays and spending time with friends and family over the final weeks of the year, markets ended 2025 in a relatively quiet fashion. That said, December's performance across major stock averages should remind investors that momentum is continuing to cool, even if the overall market remained relatively calm heading into the new year. On a total return basis, the S&P 500 Index finished up +17.9% in 2025, while the NASDAQ Composite gained +21.1%. Fourth quarter stock performance was generally constructive. U.S. equities rose for a third straight quarter, with the S&P 500 and NASDAQ advancing over +2.5% in Q4 on a total return basis. Several international benchmarks outperformed in Q4 and for the full year on a U.S. dollar basis, with the MSCI All Country World Index rising by +5.2% in the final three months of the year and finishing 2025 higher by nearly +32.0%.(Before the Bell, 1/5/2026)
We believe 2026 should be a constructive year for asset prices and economic conditions. That said, investors should also expect fits and starts during the year that will likely challenge their conviction and test their patience. For most investors, this means leaning on strong active management and strategies designed to uncover opportunities beyond the Magnificent Seven. Notably, we believe that maintaining exposure to quality-focused approaches can help mitigate concentration risk, while temporary drawdowns in broader markets may present opportunities to deploy excess cash into high-quality growth strategies or rebalance toward strategic targets. And finally, we believe diversification strategies across international markets, alternatives, and real assets (which proved effective in 2025) should remain critical levers to mitigate U.S. valuation risk and potential pullbacks in Big Tech, should they occur during the year. (Ameriprise IRG, Before the Bell, 1/2/2026)
Adding to the 2026 uncertainty is the continued expectation of a Technology-led investment cycle, as artificial intelligence (AI) becomes a more dominant theme, extending beyond the past three years of “usual suspects”-chip makers and hyper-scalers. In our view, a key theme for 2026 will be the transition of AI adoption from the infrastructure and data center build-out phase to operational deployment across various sectors and end markets. (Ameriprise IRG, Annual Equity Market Outlook Executive Summary, 12/17/2025)
We continue to be comfortable holding risk assets into 2026. A Federal Reserve that is likely lowering rates this year along with strong growth prospects in the tech space should be a recipe for continued positive returns. Our model portfolios continue to be slightly overweight stocks (specifically large cap stocks) while our fixed income sleeve favors higher credit quality positions to insulate against an unexpected slowdown in economic growth. We continue to hold a small position in gold as a diversifier against both stocks and bonds.
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