As 2025 drew to a close, U.S. equities delivered another year of solid gains despite a subdued finish in December, capping three consecutive years of double-digit returns for major indices. The S&P 500 rose approximately 16.4% for the year, driven largely by continued enthusiasm for artificial intelligence and resilient corporate earnings, though the Nasdaq outperformed with around 20% gains fueled by tech-heavy weighting. The Federal Reserve concluded the year with its third consecutive 25-basis-point rate cut in December, bringing the federal funds rate to 3.5%-3.75%, reflecting a balanced approach to supporting employment amid inflation that remained modestly above the Fed’s target. Looking ahead, a resilient economy—with robust third-quarter GDP growth of 4.3%—provides a stable foundation to our economy for 2026, but we expect there will be slower job creation. Remember that retirement portfolios benefit from diversified strategies which focus on long-term growth and income stability.

Inflation decreased slightly again by year-end, with the Consumer Price Index (CPI) coming in at 2.7% year-over-year in December. The Fed's preferred PCE gauge additionally showed similar moderation. The labor market ended on a softer note, adding just 50,000 jobs in December and totaling only 584,000 for the year—the worst annual job gains outside recession periods in decades—with the unemployment rate dipping to 4.4% and average hourly earnings rising 3.8% annually. Precious metals shone brightly, as gold and silver posted extraordinary gains amid economic uncertainty. Bond yields eased modestly, supporting lower borrowing costs, including 30-year fixed mortgage rates near 6.2%. As we enter 2026, a realistic outlook emphasizes prudence: ongoing inflation trends and labor market cooling suggest maintaining balanced allocations to weather potential volatility while capturing opportunities in quality equities and fixed income.

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— Shasha Tax & Retirement