Fourth Quarter Market Update 2025- The Year of the Threepeat
Back-to-back double-digit growth years are not that uncommon, but 3 years of double-digit stock market growth is pretty darn rare. In fact, the S&P 500 has had 10% or greater growth for 3 years in a row only 11 times in the last 100 years!
If you glance below at the absolute banger of a year 2025 was, you might forget about the near-bear-market crash we had back in April.
Source: Y-charts
Those are some beautiful numbers, but 2025 was not all sunshine and roses. In April, we experienced a tariff fear-induced correction. During two days, the S&P 500 plummeted 10%, and the Nasdaq entered bear territory.
The beautiful part about that time period was that I was able to call clients and let them know that, although the S&P 500 declined by approximately 15%, the diversified accounts we observed experienced smaller drawdowns—typically in the 7–9% range. This highlights the benefit of diversification, which helps reduce downside risk and mitigate potential losses during market downturns.
Which brings me to my next train of thought on 2025. International stocks rocked it! Emerging markets and international developed stocks were both up around 30%. We’ve long been believers in global diversification, and 2025 was another great example of its many benefits. This trend has carried over into 2026 so far as well.
Meanwhile, small-cap stocks (particularly high-quality ones) underperformed in 2025, although they still produced a strikingly positive result. In addition to stocks, bonds also did quite well given the cuts in interest rates. This is a trend we expect will continue, but time will tell.
Looking ahead to 2026, we don’t see any particularly specific economic headwinds, although valuations are quite high. We will continue to monitor conditions.
What do I mean by that?
Essentially, stocks trade based on their earnings. A simple way of looking at stocks would be to say you're buying a business, and if the business is making more money, it's worth more. The problem arises when a business goes up in value; its earnings must also continue to grow. For three years now, the market has pushed prices higher, which means earnings must keep growing, or we will see a downturn.
A slowdown in earnings growth could happen for a variety of reasons, many of which are unpredictable, such as world events, policy changes, shifts in consumer spending, or cyclical factors.
As I said previously, we don’t see anything on the horizon that is immediately concerning, while at the same time, we acknowledge that a 4th year of double-digit growth is exceptionally rare.
Stay warm, my friends!
Written by: Brice Carter
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