As we close the books on 2025, we reflect on a year that tested investors' resolve and rewarded those who maintained disciplined, diversified portfolios. This was a year defined by policy uncertainty, persistent inflation concerns, and dramatic rotations across asset classes—yet one that ultimately delivered solid returns for patient, long-term investors. For high-net-worth families, 2025 underscored the enduring importance of portfolio construction that balances growth, income, and true diversification.
The S&P 500 delivered approximately 17% total returns in 2025, marking the third consecutive year of double-digit gains. This performance, while impressive by historical standards, was achieved through considerable turbulence.
The year began with optimism surrounding President Trump's second inauguration and promises of deregulation and tax reform. Markets climbed steadily through the first quarter, with the S&P 500 reaching new highs. However, April's announcement of sweeping "reciprocal" tariffs—invoking emergency powers to impose levies on virtually all U.S. trading partners—triggered what became known as the 2025 stock market crash. The S&P 500 briefly declined by over 12% as investors grappled with the implications of the most aggressive trade policy shift in modern history.
The recovery that followed demonstrated market resilience. By June, as the administration began negotiating tariff reductions and signing trade deals with key partners, including the UK, Japan, and eventually China, equities rebounded sharply. The S&P 500 closed at a record 6,909.79 in late December, validating the patience of investors who maintained their allocations through the volatility.
Notable equity market dynamics:
Over half the S&P 500's return came from profit growth rather than multiple expansion, with forward earnings per share rising approximately 7% through the year. This fundamental support provided a crucial foundation during periods of volatility.
The defining policy event of 2025 was undoubtedly the administration's comprehensive tariff program. Beginning with "Liberation Day" on April 2nd, the U.S. imposed a baseline 10% tariff on most countries, with rates reaching 50% or higher for nations with the largest trade imbalances with America. The tariffs affected approximately $2.2 trillion of U.S. goods imports, representing 67% of total imports.
The economic impacts were multifaceted. Consumer prices rose modestly as import costs increased, though core inflation remained below earlier fears. More significantly, the policy created tremendous uncertainty for corporate planning and capital allocation decisions. Supply chains that had gradually diversified from China over the previous decade accelerated that shift toward Vietnam, Indonesia, Thailand, and India.
By year-end, the trade deficit had narrowed substantially as imports declined and U.S. exports found new opportunities. However, this came at a cost: trading partners from Switzerland to Japan experienced economic contractions, with global growth slowing materially. The longer-term implications for American corporations with international exposure remain a key consideration for 2026 portfolio positioning.
The Federal Reserve cut its benchmark rate by 25 basis points in December to a range of 3.50%-3.75%, marking the third reduction of 2025. This brought the total easing cycle to 175 basis points from the 2024 peak.
What made 2025's monetary policy particularly notable was the deep division within the Federal Open Market Committee. The December decision featured three dissenting votes—one member wanting deeper cuts, two preferring to hold rates steady. This represented the most divided Fed in years, reflecting the complex mandate of supporting employment while managing inflation that remained above the 2% target.
The "dot plot" projections indicated just one additional cut expected in 2026, signaling the Fed believes rates are approaching neutral territory. However, markets are pricing in two cuts, suggesting continued disagreement about the appropriate policy path. With Chairman Powell's term ending in May 2026 and President Trump widely expected to nominate a more dovish successor, monetary policy uncertainty is likely to persist into the new year.
Fixed income implications:
If 2025 had a star performer, it was gold. The precious metal surged approximately 70%, marking its strongest annual gain since 1979. Gold reached record highs above $4,500 per ounce, driven by multiple converging factors.
Central banks, particularly from emerging markets, continued aggressive gold purchases as part of a broader de-dollarization strategy. The U.S. dollar weakened approximately 9-10% against major currencies through the year, making dollar-denominated gold more attractive to international buyers. Trade uncertainty, geopolitical tensions from Ukraine to Venezuela, and concerns about U.S. fiscal sustainability all contributed to gold's safe-haven appeal.
JPMorgan expects gold prices to push toward $5,000 per ounce by year-end 2026, with central bank demand and investor diversification trends showing no signs of exhaustion. Silver also posted exceptional returns, rising over 140% to reach all-time highs above $72 per ounce, while platinum broke above $2,300.
For investors who maintained 5-10% gold allocations as portfolio ballast, 2025 validated that positioning. The precious metals complex served its intended purpose as both an inflation hedge and a diversifier uncorrelated to traditional financial assets.
In stark contrast to gold's explosive performance, Bitcoin declined 7% in 2025, confounding many bulls who had expected the cryptocurrency to benefit from the same forces driving gold higher.
After reaching a new all-time high above $126,000 in October, Bitcoin experienced severe volatility, falling as low as $80,650 in November—a 36% decline from the peak. Year-end found Bitcoin trading around $87,000-90,000, essentially flat from where it began 2025.
The divergence between gold and Bitcoin revealed important distinctions between the assets. While both served as alternatives to fiat currency, institutional and central bank buyers overwhelmingly preferred gold's established role as a monetary reserve asset. Additionally, the crypto regulatory environment remained uncertain despite a more favorable administration, and several high-profile failures of crypto-related businesses earlier in 2025 dampened retail enthusiasm.
For investors who maintained small tactical Bitcoin allocations (1-3% of portfolios), the asset served as a reminder of the inherent volatility of emerging store-of-value alternatives. We continue to view cryptocurrencies as speculative positions rather than core portfolio holdings.
Private equity and venture capital markets experienced a constructive year after several challenging quarters. Distribution activity accelerated meaningfully as sponsors found exit opportunities through both strategic sales and a reopened IPO market. Many vintages saw distributions exceed capital calls, improving liquidity for limited partners.
However, new fund deployment remained disciplined. Valuation expectations between buyers and sellers continued to present challenges, and many managers focused on operational improvements within existing portfolios rather than aggressive new acquisitions. The days of "growth at any cost" venture investing remain firmly in the past.
Private market developments:
Several critical themes emerged from 2025:
The dramatic policy shifts of 2025—from tariff announcements to regulatory changes to debates over monetary policy—created unprecedented uncertainty. Portfolios positioned to withstand volatility and maintain flexibility performed best. This argues for maintaining adequate liquidity, avoiding excessive concentration, and stress-testing portfolios against multiple scenarios.
While U.S. large-cap equities dominated through much of the year, the fourth quarter saw meaningful contributions from previously lagging segments. Small-caps, value stocks, and alternative assets all had their moments. Investors who abandoned diversification in frustration earlier in the year likely missed important relative value opportunities.
Between gold's extraordinary returns and infrastructure's steady income generation, real assets validated their role in the portfolio. In an environment of persistent inflation concerns, currency uncertainty, and geopolitical risk, tangible assets provided both returns and psychological comfort.
In a higher-rate environment with trade policy uncertainty, companies with strong balance sheets, consistent cash flow generation, and pricing power outperformed leveraged peers. This dynamic should persist as the "free money" era remains firmly in the past.
The U.S. economy grew at a robust 4.3% annualized rate in Q3 2025, far exceeding expectations and demonstrating remarkable resilience despite tariff headwinds. Consumer spending remained solid, unemployment stayed low, and corporate earnings continued growing.
However, cracks appeared beneath the surface. Manufacturing activity contracted amid supply chain disruptions and higher input costs. Business investment paused as executives awaited clarity on trade policy. International trading partners experienced more severe slowdowns, with Japan, Switzerland, and several European economies contracting.
The divergence between U.S. economic resilience and global weakness created both opportunities and risks. American exceptionalism continued, supported by AI infrastructure investment, strong household balance sheets, and fiscal stimulus. Yet our economic interconnectedness meant global weakness could eventually impact domestic growth.
As we position portfolios for 2026, we face a complex set of crosscurrents. Equity valuations remain elevated by historical standards, with the S&P 500 trading above 21x forward earnings. The path of trade policy remains uncertain, with key agreements subject to renegotiation and potential Supreme Court challenges to tariff authority. Federal Reserve leadership will change, introducing additional uncertainty into monetary policy.
Yet the fundamental backdrop remains broadly supportive. Corporate earnings continue growing, employment remains solid, and technological innovation—particularly in artificial intelligence—drives productivity gains. The U.S. economy's relative strength versus international peers suggests continued capital inflows and dollar support.
For investors who maintained disciplined, diversified portfolios throughout 2025's turbulence, the results validated the approach. While the path was rarely smooth, the combination of equities, fixed income, real assets, and alternatives delivered solid risk-adjusted returns while managing downside exposure during volatile periods.
The investment environment grows increasingly complex—policy uncertainty, geopolitical tensions, and technological disruption create both risks and opportunities. Yet these challenges are not new; they are simply the latest iteration of the uncertainties investors have always navigated. What remains constant is the importance of thoughtful asset allocation, disciplined rebalancing, and a long-term perspective.
As we enter 2026, we remain constructive on risk assets while acknowledging elevated valuations and increased uncertainty. The key to success will be maintaining the flexibility to adjust as conditions evolve, while avoiding the temptation to make dramatic portfolio shifts driven by short-term noise.
We are grateful for your continued trust and confidence. Our commitment to transparency, thoughtful risk management, and unwavering alignment with your long-term objectives remains the foundation of our partnership.
Here's to a prosperous and less volatile 2026.
Disclaimer - The blog is provided for informational purposes only and should not be construed as investment advice. Past performance is not indicative of future results. All market data and returns are approximate and subject to revision. Please consult with your advisor regarding your specific situation and investment objectives.