Market Viewpoints
Winter 2026
By Keith Bonjour, CFP®
Senior Vice President, Portfolio Manager
The fourth quarter of 2025 closed with the U.S. economy showing resilience despite challenges earlier in the year, including tariffs and a 43-day government shutdown. While GDP growth slowed compared to 2024, it remained positive, supported by steady consumer spending and business investment. Inflation continued to ease but stayed above the Federal Reserve’s 2% target. Some economic data was inconsistent due to reporting delays caused by the shutdown.
Employment softened during the quarter, with unemployment rising to about 4.4%, signaling a cooling trend in the labor market. We will monitor labor conditions closely in 2026 for signs of stabilization or further weakness.
The Fed cut interest rates 0.25% in both September and December, bringing the federal funds rate to 3.50 – 3.75%. These moves made monetary policy less restrictive. The Fed’s projections suggest the possibility of one additional cut in 2026 and another in 2027, though future decisions will depend on inflation, labor market trends, and GDP growth.
Stocks delivered strong returns in 2025, with Developed International and Emerging Market equities outperforming U.S. stocks. A weaker U.S. dollar supported international markets, while U.S. equities benefited from Fed rate cuts, robust AI-driven earnings, and technical market strength.
The question for 2026 is whether corporate earnings, AI investment momentum, consumer spending, and potential fiscal tailwinds will offset higher equity valuations and concentration risks.
The bond market rebounded after a challenging three-year period. Higher starting yields and Fed rate cuts helped the Bloomberg Barclays U.S. Aggregate Bond Index return over 7% in 2025. Fixed income remains attractive heading into 2026, with yields still at compelling levels.
As we begin the new year, we remain mindful of risks such as lingering tariff impacts, geopolitical tensions, persistent inflation, and labor market weakness. We recommend maintaining a long-term investment strategy, remembering that markets move in cycles and historically reward patience.
If you anticipate any short-term cash needs, please contact us so we can manage distributions proactively and help protect your portfolio from potential volatility.
Thank you for your continued trust. We remain committed to making prudent investment decisions as we navigate an evolving market landscape.