These monthly market commentaries share a synopsis of the U.S. financial markets with intelligent insights.
December 2025 Market Recap
As we move into 2026, the S&P 500 is flirting with its third consecutive year of 20%+ gains. All the while, headlines have swirled about geopolitical events, government shutdowns, even an “AI Bubble”… making it difficult to truly decipher what is noise and what is really moving markets.
Connor & Gallagher Wealth Management attempts to look through that noise, letting diligent research, risk profiles, and price guide us to points of relative strength across different areas of the ever-evolving investment landscape.
Our Investment Philosophy: We aim to deliver sustainable, long-term value by combining strategic discipline with active market insight. Our approach emphasizes consistency, adaptability, and a deep understanding of client goals.
A few observations about 2025 overall: US equity markets had another strong year, delivering 18% for the S&P 500. This is the third straight year of above average returns and five of six years since the start of the decade of 18% or higher returns for the S&P.
Overseas markets significantly outperformed the US, with MSCI EAFE up 31% and MSCI Emerging Markets up 34%. 2025 was the first year in this decade that non-US stocks outperformed the US.
US fixed income markets also performed well, with the Bloomberg Aggregate index delivering 7% returns, its best year since 2020.
Here are observations on what occurred across the investment markets in December:
Broad Market Performance1
| Index | Dec | 3M | 1 Year | 3 Year |
| S&P 500 | 0.1 | 2.7 | 17.9 | 23.0 |
| MSCI EAFE | 3.0 | 4.9 | 31.2 | 17.2 |
| Bloomberg US Aggregate Bond | -0.2 | 1.1 | 7.3 | 4.7 |
Data as of December 31, 2025
Domestic Equity2
International and Global Equities3
Fixed Income Markets4
Specialty Markets5
Sectors6
Dear Valued Investor,
The year 2025 offered a clear illustration of today’s prevailing market regime — one that has been shaped less by traditional fundamentals and business cycle dynamics and more by fiscal and monetary policy. While policy has always influenced markets, its role has increasingly grown. What does this mean as we look ahead to 2026?
In an environment where policy decisions are one of the most powerful forces steering market direction, our research believes patience is essential. Avoid overreacting to short-term sentiment swings, as policy- and momentum-driven markets tend to produce sharp price fluctuations — which can challenge our behavioral biases. We saw this in 2025, when stock prices swung from policy-induced lows to momentum-driven highs.
The good news: our research anticipates policy will remain a net tailwind for markets in 2026. Short term interest rates are likely to continue easing as economic growth moderates and inflation stays contained. Corporate earnings may provide support, while core bonds quietly offer value(and should benefit from a more dovish Federal Reserve). In addition, given correlations can spike in policy-driven markets, investors may want to consider non-correlated alternative investments as part of a diversified approach.
Several key themes will likely continue shaping the landscape in 2026. Equity markets should remain resilient but vulnerable to volatility, while a fragmented economic backdrop limits clear trends in bonds. Policy decisions in Washington will remain a dominant force, influencing sentiment. The post-pandemic cycle is still distorted, with growth steady yet uneven, inflation persistently above target, and labor markets gradually softening. Add to this the effects of massive fiscal spending, an AI-driven capital investment boom, and more, and the result is an environment that defies traditional patterns. In this setting, diversification and agility are critical.
These are just some of the insights, you can join us for our upcoming webinar on January 14th at 12pm CST. The agenda will include:
CGO 1st Quarter Investment Markets Update
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Thank you for your trust along your financial journey.
Sincerely,
1-6 All data referenced in the table and comments supplied by Morningstar.
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References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.
All index data from FactSet.
The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
Past performance does not guarantee future results.
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