Parker G. Trasborg, CFP® (Senior Vice President), Brian T. Jones, CFP® (Chairman), Kevin E. Donovan, CFA (Portfolio Research Director), and Jessica R. Ness, CFP® (Senior Vice President), review 2025 market performance and discuss volatility, earnings growth, and expectations for investors heading into 2026.
Introduction: Reflecting on 2025 and Looking Ahead to 2026
Parker G. Trasborg:
Hello, and happy 2026. My name is Parker Trasborg. I’m a Principal with CJM Wealth Advisers. And today, as always, I’ve got Kevin Donovan, our Portfolio Research Director and two fellow Principals, Brian Jones and Jessica Ness as well. We wanted to spend a couple minutes today talking about 2025 and provide some thoughts looking ahead into this year, 2026.
Biggest Market Surprise of 2025: Rapid Volatility in April
So I’ll start with you, Brian, and pick on you a little bit. Looking back to 2025 last year, what was your biggest surprise?
Brian T. Jones:
Thanks, Parker. I think the biggest surprise to me at least was the speed with which markets moved in the month of April. If we kind of remember first week in April in particular, that’s when the new administration came out with a lot of the tariff announcements. And frankly, in the first week after those announcements, at one point in time, the S&P had moved about, it was down about 11%. If I look at the NASDAQ, it was down even a little bit more, actually over really just two days. It was April 3rd and April 4th. Very quick movement in terms of markets. Now, the flip side of this is for the balance of April, we managed to dig out of a lot of the losses sustained in the front end of April and May as well. But the headline risk really was what remained for the balance of the year.
So it was really a year where patients really paid off when it came to surviving the year.
Staying Invested During Market Volatility
Parker G. Trasborg:
Yeah, I mean, it certainly was. Markets snapped back very quickly. And I think it goes back to highlight the importance of staying in the market and not trying to time the market because you can time it very wrong and lock in that 11% two-day loss very quickly.
2025 Market Performance: Stocks, Bonds, and International Markets
So Kevin, we’ve had three good years in a row now with markets up double digits, 15% plus the last three years, 20% plus in ’23 and ’24. How did we fare last year?
Kevin E. Donovan:
Yeah, it makes my job a lot more fun when the markets go up. So it’s been a good three years. It’s been a good run for us here and hopefully it makes our clients happy as well. I’m sure it does. So let’s look at the charts and see what 2025 looks like. And it was a good year, as you said. The S&P 500, up 16%, so a little lower than the prior two years, but still double-digit earnings. And it was up above the average return for the S&P for a year. So typically the S&P average is nine to 10% return a year. Last year was 16%, so 50% or more above that, above average. But last year really was International’s chance to shine. And it’s been a while since International has led, but it had a really good year last year. That’s the blue line at the top of the chart, and it was up almost 28% for 2025.
NASDAQ was up 20%, and bonds are up 7%, which obviously not as good as stocks, but it’s the second year in a row that bonds return 7%, which is a good run for bonds.
Bonds as a Stabilizer During Market Selloffs
If you look, Brian was talking about the big selloff in April, and you can see towards the left of that chart where it shows the big V, that’s the selloff and the recovery. The green line for bonds didn’t really sell off that much. So bonds kept steady and kept growing throughout the year at a good pace. The next chart shows how the market’s performed since that selloff in April. And you can see the gains off the bottom were really remarkable. So the top line, that reddish line is the NASDAQ and it was up over 50% since the bottom in April while the other equity indexes were up over 30%. Bonds were up only 5%, but like I said, they didn’t really sell off during that April market panic that we had, brief market panic that we had back then.
Fourth Quarter 2025 Market Performance
And then finally, let’s look at the fourth quarter, decent quarter. We didn’t really have that end of year Santa Claus rally that we get towards the end of good years, but still a decent quarter with the S&P 500 up about 2%.
The international index finished strong up about 4.5% and bonds were pretty steady.
Key Drivers of Market Performance in 2025
So we had what was leading to these outperformance for 2025, we had really good corporate earnings, we had continued economic growth, inflation was kept in check. We didn’t have a spike in inflation that some people feared at the start of the year. We had three Fed rate cuts during the year, which also helped, particularly in the latter half. Those cuts came in September, October, and December. So these are the things that helped the market do well in 2025.
Market Broadening Beyond the Magnificent Seven
Parker G. Trasborg:
Yeah, and it was nice to see a little bit of a broadening out too, where it wasn’t just the magnificent seven leading the markets as it has been the last couple of years. And to see bonds actually start to perform like bonds and have a decent year as well at the end of the year.
2026 Market Outlook: Volatility, Stability, and Growth Expectations
So Jess, we’re already a week into the new year. What are some of your expectations if you were to forecast out into 2026 looking ahead?
Jessica R. Ness:
Great question. As we all know, it is nearly impossible to predict the future. So of course, all the normal disclosures apply here, but essentially our expectations are not only continued volatility. There’s a lot of things happening this year in addition to an election later on this year. We just expect certainly markets to zig and zag as they digest the information, but ultimately we expect continued economic stability. As we had sort of talked about earlier here, there was a lot of uncertainty in ‘25. Going into ‘26, we have less policy uncertainty, so that should help to support business confidence movement, but ultimately our expectation is that continued corporate earnings and growth really drives the market higher. But Kevin, curious your thoughts there as well.
Corporate Earnings Expectations for 2026
Kevin E. Donovan:
Yeah, corporate earnings are expected to be solid again next year. So we’ve had two years in a row of double-digit earnings growth for the S&P 500. Next year, it’s expected to accelerate beyond that to be about 15% earnings growth rate. We had 12.5% last year, so earnings are expected to get better and stock prices follow earnings, that old maxim. So hopefully that’ll translate into higher stock prices over the coming year. As you said, we can’t predict the future and there may be unforeseen things that happen, but right now expectations are for another solid year of corporate earnings, which is good for stock prices.
Valuations, Long-Term Investing, and Final Thoughts
Parker G. Trasborg:
Which will be nice because it’ll support some of the valuations that we’re seeing at the moment that may be slightly stretched, but not uncomfortably so. Oh, so Kevin, Brian, Jess, thank you again so much for contributing today. Viewers, as always, thank you for taking time out of your day to join us and watch. We wish you all a very happy and healthy 2026, and we will see you next time. Thank you.
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