Market Overviews

The first quarter saw a 9% drawdown in U.S. stocks driven by the U.S. conflict with Iran. This marks the 32nd drawdown of 5+% for U.S. stocks since March 2009 (which averages out to roughly two drawdowns per year over the past 17 years). As we like to remind clients, volatility like we’ve experienced recently is the “price of admission” for owning stocks and should be expected with regularity.

The big story for the fourth quarter was continued strength from international stocks (in both relative and absolute terms). Developed and emerging market stock indices finished 2025 up >30% (vs. U.S. stocks up “only” 17% for the year) with help from a weakening U.S. dollar but also from a narrowing of the gap in relative valuation levels (with international stocks still trading below their historical average discount to U.S. stocks).

Third quarter performance was strong across every asset class we track led by Emerging Market stocks [international small countries] (+10%) and U.S. stocks (+8%). While geopolitical tensions continued to generate headlines, corporate earnings came in better than expected with quarterly earnings for the S&P 500 coming in much better than expected at +11% higher than last year’s second quarter.

It seems hard to believe now that we’re sitting at or near all-time highs again for U.S. equities. As recently as April 8th, this year had gotten off to the fourth-worst start (down 15%) of any year since 1928. The past few months have been another great reminder of how quickly things can change when investing in public markets.

It’s safe to say that the peace and quiet is over for a bit and we’ve got some volatile markets in store for us. Regardless of who is or isn’t in office, let us remind you that markets remain unpredictable. Let’s not make the mistake of thinking that just because the political climate or policies have changed that we now know what’s in store. 

Market Review In the fourth quarter, U.S. stocks returned 2.6% to finish the year up 23.8% overall. International stocks lagged in the fourth quarter with developed market and emerging market stocks down 7.5% and 8.0% respectively. The bar chart below highlights how much U.S. stocks have outperformed international stocks over every recent time period –…
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