U.S. equities posted strong gains in the fourth quarter and finished 2025 with solid positive performance, reinforcing market resilience after the significant volatility and drawdowns experienced between February and April. The S&P 500 returned 17.9% for the full year and 2.7% in Q4, while the Nasdaq outpaced peers, climbing 21.2% for 2025 and 2.7% in the final quarter. The Dow Jones Industrial Average advanced 14.9% for the year and 4.0% in Q4, with small- and mid-cap stocks also posting gains, though more modestly than large caps.
Performance was driven by continued strength in technology and growth sectors alongside solid corporate earnings and economic resilience, allowing equities to close the year on firm footing despite late-December weakness. Consistent with the broader 2025 theme, technology-oriented sectors accounted for a disproportionate share of S&P 500 returns: while the average return across the 11 GICS sectors was a strong 14.1%, Information Technology and Communication Services (Mag-7 sectors) significantly outperformed, gaining 24.0% and 33.6%, respectively.
International equities also delivered strong gains in the fourth quarter and significantly outperformed U.S. markets for the full year in 2025, benefiting from improving global growth expectations (global GDP forecasts improved throughout 2025), easing financial conditions (many non-US central banks paused rate hikes or signaled future easing), and supportive currency dynamics (weaker USD).
European equities finished the year at multi-year highs (MSCI Europe +6.3% Q4, +20.2% 2025), supported by strength in financials, industrials, and improving earnings momentum, while Asian markets (MSCI Asia +3.5% Q4, +28.7% 2025) continued to benefit from structural reforms and technology-related growth. Emerging markets (MSCI EM +4.8% Q4, +34.3% 2025) also posted solid gains as a weaker U.S. dollar and stabilizing global demand supported capital flows. While some late-year volatility persisted, international equities closed 2025 with strong momentum, aided by attractive relative valuations and broader market participation than in U.S. equities.
Despite a strong rally in the Spring and Summer of 2025, cryptocurrencies saw pullbacks into Q4 to close out the year. Bitcoin had reached a peak near $125k in October but closed the year near $87k, approximately 6.5% lower for 2025. Ethereum followed a similar trajectory, peaking in the summer just shy of $5k, but sliding to just under $3k to end 11.1% lower for 2025. The crypto pullback reflected broader macro pressures, including elevated interest rates and persistent inflation, alongside regulatory uncertainty around exchanges and stablecoins. While Bitcoin is often viewed as a portfolio diversifier, its correlation with equities shifted throughout 2025, as it has in prior years. It traded as a risk-on asset during periods of market stress early in the year, rallied independently in the summer, and decoupled again as it sold off in Q4. 2025 highlighted that Bitcoin’s diversification benefits remain conditional rather than structural.
Unlike digital assets, precious metals had an exceptional year, with gold, silver, platinum, and palladium all posting significant gains for both Q4 and 2025. Gold advanced 11.9% in Q4 and 64.6% for 2025, a rally that was fundamentally linked to macro uncertainty, lower real rates, and its position as an equity hedge for investors. Silver outpaced gold, gaining 53.6% in Q4 and 148.0% for the year, its largest annual gain since 1979. Silver was driven higher by a combination of strong industrial demand (technology, solar, electric vehicles), tightening supply, and safe-haven demand along with broader equity market volatility.
The U.S. Agg returned 7.3% in 2025, lagging global fixed income’s 8.2% return (in part due to weakness in the dollar, U.S. Dollar Index -9.4% 2025). On the year, U.S. yields were relatively stagnant in the 20 and 30 year part of the curve, while 10 year and shorter maturities came in materially (2Y-76.8bps, 5Y -65.7bps, 10Y -40.3bps). On the year 2s10s bull steepened 36.5bps, with nearly half of the move (15.2bps) occurring in Q4 as the Federal Reserve lowered its target rate (the Fed cut rates by 25bps three times in 2025, with two cuts occurring in Q4).
With the exception of a hawkish Bank of Japan (BOJ raised its target rate by 25bps in 2025), global central banks were more dovish than the U.S. (Bank of England, Bank of Canada, and European Central Bank all cut 100bps in 2025). The decline in front-end yields was the most pronounced in the U.S. curve, however.
In 2026 we face a potentially more dovish Federal Reserve, with Jerome Powell’s term set to expire in May. Notably, no full cuts are priced in until after that time (1.346 cuts priced in by June meeting, 2.342 cuts priced in for the year as of 12/31/25). The data of 2025 showed us that even with dovish changes to policy, the Federal Reserve has limited control over the long-end of the yield curve. In 2026, factors such as inflation expectations and supply / demand technicals may continue to play a role in term premiums.
From a data perspective, the Fed has limited information to work off of. On paper, 2025 payrolls have reflected weakening in the labor market, albeit there have been some pockets of strength. Recent inflation data has indicated cooling in Core Services, however the government shutdown in Q4 created gaps in the data, reflected in the lack of an October report and missing information from the November report. The narrative for dovish policy in 2026 is not clear from an inflation perspective, but it is becoming clearer from a labor perspective.
We highlighted previously in this note that long-end rates, which are critical in determining mortgage rates, will require more than a dovish Fed to come down in 2026. While the rate on a 30-year fixed mortgage came in 76bps in 2025, rates remain above 6% (6.15% as of 1/1/2026) and housing affordability is near an all-time low, even as inventories recover. Toward the end of the year, the Trump Administration became more vocal on potential remedies to address the affordability crisis, including a 50-year fixed mortgage as well as a more recent proposal to buy $200 billion in mortgage bonds.
In the Mortgage-Backed Security (MBS) market, Current Coupon (CC) Agency MBS tightened materially over the quarter, while Investment Grade (IG) Corporates widened. In our Q3 2024 newsletter we highlighted the relative cheapness of Agency MBS to corporates and the potential for a reversal. That reversal has begun to play out through 2025, with Agency MBS CC tightening 29bps and IG AAA widening 33bps. This occurred while money market assets sit near $8 trillion and front-end yields (those that impact money market assets) declined materially.
Disclaimer
The content in this note is for informational purposes only and is not a recommendation to purchase securities or investment advice. Unless otherwise specified, the data in this note is sourced from Bloomberg. We do not represent that the information in this note is correct, complete, or accurate. This note reflects the views of Secure Asset Management, LLC on the date it was written and may change without notice. CC refers to “Current Coupon,” MBS refer to “Mortgage-backed securities,” CPI refers to the “Consumer Price Index,” PCE refers to “Personal Consumption Expenditures,” YoY refers to “Year over Year,” TTM refers to “Trailing Twelve Month.” Unless otherwise stated, performance numbers are total return and assume dividend reinvestment. Unless otherwise stated, Q3 is the period starting 06/30/2025 and ending 09/30/2025, Q4 refers to the period starting 09/30/2025 ending 12/31/2025, YTD and 2025 refer to the period starting 12/31/2024 ending 12/31/2025. Unless otherwise specified, yield changes in US treasuries are derived from Bloomberg’s Mid YTM closes in the Graph Curves function, and forward rates are calculated using Bloomberg’s Forward Curve Analysis function. Indices are unmanaged and cannot be directly invested into and past performance is not indicative of future results. Change in Nonfarm Payrolls revisions data may differ from previous Newsletters as revisions are released by the Bureau of Labor Statistics (BLS) twice following each month’s print and can be revised in the BLS annual benchmarking revision, which targets two years of trailing data. Secure Asset Management does not register as a commodities firm and as such, advisors may not recommend commodities or cryptocurrency outside of packaged products.
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