New Year, New Trends, New Uncertainties

The start of this new year has come with more focus on uncertainty, instability, and risk. Typically, we start the year with a growth-oriented mindset, excited for new opportunities and change. With so many events causing concern, it is important to not only focus on positive change for our world but also reflect on the positive momentum we experienced throughout the last year.

The last quarter of the year ended with slightly muted returns but rounded out another positive year in client portfolios. The S&P 500 was up 2.7% in the fourth quarter, ending the year with a positive 17.9% total return for 2025. This was the third consecutive year of double-digit returns for the S&P 500. We saw volatility early in the year, primarily in technology and small caps, but the pressure in these categories quickly reversed, and both ended the year in positive territory. International investments came to life this year and contributed to the overall return in client portfolios. This has been the first time in over a decade that international stocks have outperformed US Domestic, and it is a trend we continue to monitor, as there may be additional opportunities this year.

We continue to pay attention to concerns over slowing economic and job growth, as well as concerns over geopolitical instability. The war in Ukraine is still ongoing, the damage in Gaza will take years to repair, and the sudden leadership change in Venezuela are all cause for concern. Pair this with instability within our own borders, and many investors are concerned about the outlook going forward. In a recent Schwab market commentary, it was noted that ‘typically, geopolitical risk is transmitted to global markets via oil prices,’ and ‘have rarely had a lasting impact on the stock market.’ The following chart was shared in that article to show S&P 500 returns in the months following historic conflict events. [1]

Given the recent market performance and the increased concerns, we have been taking profits in client accounts. We believe in rebalancing when the market has been favorable, and we know that shielding these profits will lessen exposure to volatility and preserve funds for cash flow needs. If we see increased volatility in the upcoming months, we can feel reassured that we have shielded some profits so we can focus our attention on mental stamina to stay the course for whatever comes.

During the quarter we will be monitoring the news as to who will be the next head of the Federal Reserve when that change occurs in May. There will be many investors that will speculate what the change will mean.  However, knowing that our client portfolios are well diversified helps us to understand that changes may bring added volatility in the short term as investors react.  The well-diversified portfolios within our client households help reduce added volatility.  

We know that changes confront us every day as investors.  The longer the time being invested generally results in better outcomes.  We will be here to guide you through the changes and look forward to our conversation with you as we kick off 2026.  Reach out to us with your questions and/or concerns.  

  _{IMPORTANT DISCLOSURES:  The opinions presented in this communication are subject to change without notice and no representation is made concerning actual future performance of the markets or economy.  Information obtained from sources is considered reliable but is not verified.  The research and other information provided herein speak only as of its date.  We have not undertaken and will not undertake any duty to update the research or information or otherwise advise you of changes in the research or information.  Performance information presented is not an indication of future results and index data is provided for market reference purposes only.  This is not an offer to buy or sell or the solicitation of an offer to buy or sell any security/instrument or to participate in any particular trading strategy.  This document is the property of Legacy Financial Advisors and is intended solely for the use of the Legacy client, individual, or entity to which is addressed.  This document may not be reproduced in any manner or re-distributed by any means to any person without the express consent of Legacy.  This material is for educational purposes only.  Mis-transmission is not intended to waive confidentiality or privilege.} 

^{[1] https://www.schwab.com/learn/story/forwardbackward-2025-review-with-note-on-venezuelaReturns – JP Morgan Guide to the Markets}