As we close out 2025, we wanted to reflect on the year and share how the themes we outlined in January played out.

At the start of 2025, we identified three key themes that we believed would shape the investment landscape. Those themes proved durable, even as markets delivered their share of surprises along the way.

2025 Theme Scorecard

Theme 1: U.S. Market Leadership

Our January outlook: We expected the U.S. market to maintain its leadership position, driven by the ongoing AI revolution.

How it played out: U.S. equities delivered strong performance throughout 2025, led by mega-cap technology companies. The AI theme broadened beyond initial leaders, with companies across multiple sectors implementing AI solutions and seeing benefits in their earnings. The technology sector's influence on overall market performance remained substantial.

Theme 2: Navigating Market Volatility

Our January outlook: After two consecutive years of 20%+ returns, we anticipated a "buckle up" year with more market swings as policy changes took effect.

How it played out: Markets delivered increased volatility, particularly during spring when trade policy announcements triggered a sharp April pullback. The swift recovery by May demonstrated the underlying strength of corporate earnings and economic fundamentals. While returns moderated from the previous two years, markets remained resilient and ended positive. Short-term volatility created opportunities for patient investors.

Theme 3:  Risk Management in an Uncertain Environment

Our January outlook: We emphasized quality investments and alternative strategies to maintain portfolio resilience.

How it played out: The Federal Reserve maintained higher rates longer than many expected, which reinforced the value of quality positioning. Trade and policy uncertainties created periods of heightened market sensitivity, making our emphasis on diversification particularly relevant.

How We Positioned Portfolios

Throughout 2025, we made tactical adjustments to align portfolios with our investment thesis:

• We maintained an overweight to equities, capitalizing on U.S. market strength while emphasizing quality large-cap companies. We increased exposure to AI infrastructure and technology leaders, recognizing the structural trend this represents.
  
• We added positions in aerospace and defense, targeting beneficiaries of sustained government modernization spending. This provided both diversification and exposure to areas of fiscal commitment.
  
• Early in the year, we added gold to portfolios as a hedge against policy uncertainty and geopolitical risks. This decision was timely as markets navigated various pressures. We also integrated alternative strategies to improve diversification and help buffer volatility.
  
• In fixed income, we maintained mostly neutral duration while selectively increasing exposure to high-quality bonds in appropriate portfolios, balancing yield opportunities with interest rate risk.

Key Takeaways from 2025

Resilience rewards patience. Despite volatile periods, markets demonstrated their ability to recover and move higher. Investors who maintained discipline through uncertainty were rewarded.

Quality matters in uncertain times. Our emphasis on high-quality investments provided stability when markets faced policy and geopolitical pressures.

Structural trends create lasting opportunities. The AI revolution continued across industries, validating our multi-year perspective on technological transformation.

Diversification still works. Including alternatives and assets like gold provided valuable risk management benefits during volatile periods.

Looking Ahead to 2026

Several themes from 2025 remain relevant. The AI revolution shows no signs of slowing, quality positioning continues to matter, and maintaining long-term perspective amid short-term volatility remains crucial.

We'll share our detailed outlook for 2026 in the new year, but our fundamental approach stays the same: emphasizing quality investments, maintaining thoughtful diversification, and keeping focused on your long-term financial goals.

As always, we welcome any questions about your portfolio or our market outlook. Thank you for your continued trust in our firm.

Warmest wishes for a wonderful holiday season and a prosperous 2026.