Equities Slip in the Final Week of the Year, Wrapping Up a Strong Year for Markets

Equities Slip in the Final Week of the Year, Wrapping Up a Strong Year for Markets

Stocks finished lower in the final trading week of 2025, capping another strong year for equity returns. Global equities, as measured by the MSCI ACWI, declined 0.29% for the week, while domestic large-cap stocks, measured by the S&P 500, fell 1.00%. Despite the late pullback, 2025 delivered robust gains, with the MSCI ACWI up more than 33% for the year and the S&P 500 posting its third consecutive year of double-digit returns, finishing just under 18%.

Fixed Income Market

The fixed income market also delivered strong performance in 2025, with the Bloomberg U.S. Aggregate Bond Index gaining more than 7% for the year, its strongest annual return since 2020. Performance was supported by meaningful shifts in the outlook for inflation and monetary policy, as interest rates moved lower over the course of the year. The 10-year U.S. Treasury yield peaked near 4.80% in January, briefly fell below 4.00% in October, and ultimately ended 2025 at 4.17%, down from 4.57% at the end of 2024.

FOMC Meeting Minutes Released

The Federal Reserve released the minutes from its December 9–10 policy meeting, where policymakers voted to cut the federal funds rate by 25 basis points. The minutes showed that while most officials believe additional rate cuts could be appropriate if inflation continues to move lower, some favored keeping rates unchanged for a period following the December move. Market reaction was muted, with equities closing modestly lower and expectations for a January rate cut holding near 15%, according to the CME FedWatch tool.

Housing & Labor Markets Update

Recent data pointed to improving momentum in both housing and labor markets, as the National Association of Realtors reported that pending home sales rose 3.3% in November, the largest monthly increase since February 2023, supported by improving affordability from lower mortgage rates and wage growth outpacing home prices, while the Labor Department showed initial unemployment claims fell to 199,000 for the week ended December 27, one of the lowest readings of the year, with continuing claims also declining to 1.866 million, reinforcing signs of ongoing labor market resilience.

Looking Ahead

For the week ahead, the focus will be on key labor, manufacturing, and consumer data, with releases including the Institute for Supply Management’s manufacturing index, the Job Openings and Labor Turnover Survey from the Bureau of Labor Statistics, consumer credit data from the Federal Reserve, weekly unemployment claims and the monthly jobs and unemployment report from the Labor Department, and the preliminary reading of the University of Michigan Index of Consumer Sentiment.

As Always

I’d like to leave you with the final line we’ve used since we started these commentaries back at the very height of market volatility in March 2020. Always remember that we create financial/investment plans not for the easy times, but to prepare for the tough ones.