Santa brought a mixed bag for the holidays, but despite the flat end to the year, investors still had plenty of reason to cheer as the books closed on 2025.
December brought a mixed finish to what was ultimately a strong year for markets. While inflation data and GDP growth came in better than expected, the labor market showed continued softness as jobs growth remained sluggish and the unemployment rate ticked higher. Despite these mixed signals, markets held relatively steady amid the economic crosscurrents.
US equity performance was varied for the month, with the Dow Jones Industrial Average leading the way gaining 0.92%. The S&P 500 and CRSP US Small Cap Index were essentially flat, posting modest gains of 0.06% each, while the Nasdaq 100 dipped 0.67% as tech stocks continued to take a breather to close out the year. Cyclical sectors fared better than defensive sectors, though value outpaced growth as a style for the month.
International markets delivered strong results in December, outperforming their US counterparts. Developed international stocks surged 3.18% while emerging markets advanced 0.95%, capping off a year where global diversification proved its worth. Improving sentiment overseas and a softer dollar helped support international equities throughout the month.
Bonds faced some headwinds as the Fed navigated a tricky policy environment. Aggregate US bonds fell 0.15% as the 10-year Treasury yield climbed from 4.02% to 4.18%. The Fed delivered its third rate cut of the year, lowering rates by 25 basis points, but yields moved higher as uncertainty surrounding the 2026 rate outlook weighed on bond prices. Markets are currently recalibrating expectations for monetary policy in the year ahead.
Looking back at 2025, there were certainly some bumps along the way as tariff volatility, geopolitical tensions, and shifting economic data kept investors on their toes. However, when the dust settled, it was a broadly positive year across the board. This underscores an important lesson: staying disciplined and focused on your long-term plan can help you navigate uncertainty, even when the immediate path forward isn’t always clear. As we head into 2026, maintaining that same steady approach will continue to be key.
Have you ever done something in the heat of the moment only to regret it shortly after?
Mark Zuckerberg knows the feeling. Back in 2021 he renamed Facebook to Meta, stating “the metaverse will be the successor to the mobile internet.”
Now, Zuckerberg’s looking for a redo button. Reality Labs, Meta’s metaverse division, has blown through more than $70 billion since the rebrand with little to show for it.
Meta announced it’s slashing its metaverse budget by as much as 30% in 2026, with layoffs expected as early as January. The cuts will primarily target teams working on Quest virtual reality headsets and Meta Horizon Worlds.
The pivot away from building virtual worlds is expected to free up more resources for AI development. Meta’s latest chatbot underwhelmed users, but it’s hoping to catch back up to the competition with the shift.
This section of the newsletter is brought to you by the letter K.
First it was KPop Demon Hunters taking over Netflix during the summer. Now it’s all about the K-shaped economy.
With mixed signals from the labor market, inflation data, and consumer sentiment, economists have been focusing on the split of Americans spending habits.
Specifically, what they are finding is wealthier consumers are driving spending higher while lower-income consumers are tightening the belt.
Examples of this trend include declining online pizza orders, an increase in customers at dollar store chains, and a rise in appetizer sales as budget-conscious eaters forgoing pricier entrees.
Looking ahead, economists expect this pattern to persist into 2026 as the Fed looks to balance inflation while lowering borrowing costs.
Broad Market Returns
| Asset Class | 1 Month | 3 Month | YTD | 1 Year |
| S&P 500 (VOO) | 0.08% | 2.70% | 17.82% | 17.82% |
| NASDAQ (QQQ) | -0.67% | 2.45% | 20.77% | 20.77% |
| Large Cap Growth (VUG) | -0.51% | 1.82% | 19.40% | 19.40% |
| Large Cap Value (VTV) | 0.79% | 2.94% | 15.27% | 15.27% |
| Small Cap Growth (VBK) | -0.51% | 1.64% | 8.50% | 8.50% |
| Small Cap Value (VBR) | 0.55% | 1.98% | 9.09% | 9.09% |
| Developed International (VEA) | 3.18% | 6.02% | 35.16% | 35.16% |
| Emerging Markets (VWO) | 0.95% | 1.17% | 25.60% | 25.60% |
| REITs (VNQ) | -2.24% | -2.32% | 3.24% | 3.24% |
| Aggregate Bonds (BND) | -0.30% | 0.90% | 7.08% | 7.08% |
| Corporate Bonds (VCIT) | -0.17% | 1.15% | 9.34% | 9.34% |
| High Yield Bonds (JNK) | 0.60% | 1.36% | 8.76% | 8.76% |
| Long Term Treasuries (VGLT) | -2.07% | -0.41% | 5.35% | 5.35% |
| International Bonds (BNDX) | -0.52% | 0.29% | 2.86% | 2.86% |
Market Health Indicator
The Market Health Indicator (MHI) measures market health on a scale of 0 – 100, analyzing various market segments such as economics, technicals, and volatility. Higher scores indicate healthier market conditions.
Fun Facts
- Studies show 80% of people abandon their New Year’s resolutions by February… maybe next year!
- The January Barometer is an old adage stating that returns in January predict those for the rest of the year, with an accuracy rate of around 80% since 1950.
- Actor Roy Scheider improvised the iconic line, “you’re gonna need a bigger boat,” in the movie Jaws.
- Approximately 90% of the world’s population lives in the Northern Hemisphere.
– The Aspire Wealth Team
Weekly Wake-Up
