2025 Year End Review and Commentary
(Something for everyone)
The year that was 2025 has been an interesting one for many reasons. Q1 saw an almost immediate bear market as the universe collectively figured out the economy wasn’t as good as thought. This created the narrative change centered on “Federal reserve interest rate reduction”. We followed said decline with a consistent upward march with little volatility or correction. Net result was an approximate 16 percent rise in the general equity markets (as measured by the S&P 500). Concurrently, fixed income investors were rewarded with a combination of rates coming down a little while still remaining high enough to generate a nice yield in one’s portfolio. All around it was an optimal year for investors in traditional asset classes. Balanced investors came out with ballpark returns of 10 percent with reasonable risk for most. The universe is healing….
Looking at 2026, numerous issues are in the background. While some (or none) may come to pass, it’s worth consideration. These include the push and pull of interest rates, negative economic impact of AI on the job market, probable government shut down, and inflated equity valuations. Not saying that “trees don’t grow to the sky” or “parties don’t last forever” but…..they don’t. Important considerations for the prudent investor.
Quick sidenote, looking back at the 2025 prognostication, here is the tape…
We remain optimistic about the markets moving forward and are maintaining a balanced, market-neutral position, with a slight overweight in short-term bonds and large-cap equities. While we anticipate 2025 will bring periods of volatility and market declines, our overall outlook remains positive. Since everyone has a prediction, we are targeting high single digit returns on equity (think 8 percent ish) with a 4 percent net cash flow on fixed income. After the significant gains of the past two years, now is not the time to take excessive risks. As always, staying invested in alignment with your risk tolerance and financial plan remains the best strategy for long-term success.
Our positioning for 2026 remains similar. We are neutral, but conservatively so. Overweight large and mid-cap stocks, underweight international and small cap stocks. On the fixed income side, we are keeping duration short and intermediate and staying away from the higher risk income categories. Maintaining balance and staying grounded when the bulls are running is just as important as not bailing when the markets are declining. We are not calling for an immediate decline but are being mindful of stretched valuations and historical precedence.
As always, we thank you for entrusting us as your financial partner and allowing us to be a part of your financial life. It is a trust that we don’t take lightly and work to solidify every day. If you have questions, concerns, or topics to discuss, don’t hesitate to reach out. We work for you.
Ed, Frank, & Tammy
Edward Stiles
200 N Union St.
Kennett Square, PA 19348
cell 610-745-1931
Stilesed@retire-me.com
Securities and Advisory Services offered through Commonwealth Financial Network®, member FINRA/ SIPC, a Registered Investment Adviser. Fixed insurance products and services are separate from and not offered through Commonwealth Financial Network
All indices are unmanaged, do not incur fees, charges, or expenses, and investors cannot invest directly into an index. Past performance does not indicate or guarantee future results. All references to markets, equities, bonds, interest rates, or any other security is notional and for illustrative and educational purposes only. This material is for educational purposes only and is intended solely for clients of Retirement Capital Advisors only. It is NOT investment advice, a solicitation or invitation or recommendation to buy or sell any security or investment product. Please contact your own financial advisor for your specific investment situation.