Market Recap and Outlook: What 2025 Taught Us and What to Expect in 2026

As we wrap up another strong year in the markets, it’s a good time to step back, reflect on what actually happened in 2025, and talk through what may lie ahead in 2026. In this episode of the iWealth Podcast, Brad sat down with iWealth Advisors Sean Pomeroy and JP Eykyn to break down last year’s market performance, highlight key lessons for investors, and share a grounded outlook for the year ahead.

The goal is simple: help clients and listeners stay informed, confident, and focused on their long-term financial plans—despite the noise.

2025 Market Performance: A Strong Year Across the Board

By nearly every measure, 2025 was a very good year for investors.

• U.S. stock funds averaged a gain of 12.8%
• The S&P 500 finished up approximately 18%, marking the third consecutive year of double-digit gains
• International markets outperformed U.S. stocks, which hasn’t happened in a while:
  • Emerging Markets: +34%
  • Developed International (EAFE): +32%

For many investors, this meant account statements looked especially healthy by year-end.

Bonds Delivered as Expected

Bond investors were also rewarded:

• Taxable bonds returned roughly 7%, right in line with earlier projections
• Municipal bonds returned around 5%, which is particularly attractive given their federal (and sometimes state) tax-free status

After several challenging years for bonds, this was a welcome shift.

Perspective Matters: Volatility Still Happened

Despite strong full-year returns, the journey wasn’t smooth.

In fact, many investors forget that during the year:

• Markets were down nearly 19% at one point
• Tariff announcements and geopolitical concerns caused sharp pullbacks
• Fear dominated headlines—yet markets recovered fully

This is a powerful reminder of a key investing truth:

Every year feels different. Every year feels scary at some point. And every year tests discipline.

Selling during those moments often locks in losses and causes investors to miss the recovery that follows.

Long-Term Investing Still Works

Looking at the bigger picture reinforces why staying invested matters.

• The 10-year rolling average return of the S&P 500 is about 10.6%
• Those returns don’t depend on perfect timing—they depend on patience

As Brad shared during the conversation, what matters most during your working years is average returns over time. However, once you enter retirement, a new risk becomes critical: sequence of returns risk.

Retirement Planning: Why Timing and Structure Matter

One of the most important discussions in the episode centered on retirement.

If markets decline early in retirement and you’re forced to sell investments to fund living expenses, the damage can be long-lasting. A common strategy to reduce this risk is:

• Keeping 2–3 years of short-term or conservative assets available
• This allows retirees to avoid selling stocks during market downturns

It’s not glamorous—but it works.

Notable Asset Class Highlights

A few surprising performers stood out in 2025:

• Gold: +64%
• Silver: +140%
• Bitcoin: –6%, despite significant media hype and political headlines

These results reinforced an important point:

Headlines don’t equal returns. Diversification still matters.

Looking Ahead to 2026: A More Tempered Outlook

So what are we watching as we move into 2026?

Expectations for the Year Ahead

• More modest returns, likely single digits rather than double digits
• Ongoing volatility, driven by:
  • Fed rate decisions (potentially 2–3 cuts)
  • Economic data
• Election-year uncertainty
• Mortgage rates may not fall meaningfully, even if the Fed cuts rates

Economic Fundamentals Still Look Reasonable

• Corporate earnings growth remains solid
• Productivity growth increased significantly in late 2025
• AI adoption may begin to improve efficiency across more sectors—not just tech

AI, Earnings, and Market Leadership

AI has clearly been a major driver of market performance, but much of that optimism is already priced into large tech stocks.

What we’re watching next:

• How AI improves productivity in non-tech sectors
• Whether small-cap and mid-cap companies benefit as rates decline
• How earnings growth spreads across the broader market

This shift could create opportunities beyond the same handful of mega-cap names.

A Renewed Case for International Diversification

After years of underperformance, international stocks are back on the radar.

Some investment managers are increasing international exposure—particularly in:

• Canada
• Australia
• The UK
• Parts of Europe (such as Germany)

These markets often trade at lower valuations than U.S. stocks and may experience stronger relative growth. Active management is especially important here, as not all countries operate under the same economic or political systems.

When Should You Talk to a Financial Advisor?

Beyond major life events like retirement, divorce, or the loss of a loved one, there’s another important signal:

When you feel uneasy or uncertain—reach out.

Questions, nerves, or confusion are often early warning signs. The goal is to avoid emotional decisions and ensure your financial plan still aligns with your life, goals, and risk tolerance.

AI tools can answer basic questions, but they don’t:

• Understand human emotion
• Integrate taxes, estate planning, and family dynamics
• Help navigate the psychology of large financial decisions

That’s where personal advice and a long term relationship with your financial advisor still matters.

Final Thoughts

• 2025 was a strong year
• 2026 is expected to be positive, but more modest
• Volatility is normal—and inevitable
• A well-structured, diversified financial plan remains the best defense

If you have questions or want to review your plan, the iWealth team is always here to help.

Sources and Disclosures

The information presented in this blog and podcast commentary is based on publicly available data from reputable third-party sources. Market performance figures, economic statistics, and investment commentary are provided for educational purposes only and reflect data available at the time of recording and publication.

Sources

U.S. Equity Markets:

• S&P 500 Index Total Returns Source: S&P Dow Jones Indices, S&P Global
  • https://www.spglobal.com/spdji/en/indices/equity/sp-500/

U.S. Stock Fund Performance Averages:

• Investment Company Institute (ICI)
  • https://www.ici.org/research/stats/perf](https://www.ici.org/research/stats/perf
• Morningstar Market Indexes
  • https://www.morningstar.com/market-indexes](https://www.morningstar.com/market-indexes

International & Emerging Markets

• MSCI Emerging Markets Index source: MSCI
  • https://www.msci.com/emerging-markets
• MSCI EAFE (Developed International) Index Source: MSCI
  • https://www.msci.com/eafe

ETF Proxies (for reference only)

• • iShares MSCI Emerging Markets ETF (EEM)
• https://www.ishares.com/us/products/239637
  • iShares MSCI EAFE ETF (
• https://www.ishares.com/us/products/239623

Fixed Income (Bond Markets)

• Bloomberg U.S. Aggregate Bond Index Source: Bloomberg / S&P Global
  • https://www.spglobal.com/spdji/en/indices/fixed-income/bloomberg-us-aggregate-bond-index/
• Bloomberg Municipal Bond Index Source: Bloomberg / S&P Global
  • https://www.spglobal.com/spdji/en/indices/fixed-income/bloomberg-municipal-bond-index
• Municipal Bond ETF Reference is Vanguard Tax-Exempt Bond ETF
  • https://investor.vanguard.com/investment-products/etfs/profile/vteb

Market Volatility & Long-Term Returns

• Historical Market Drawdowns & Volatility Source: J.P. Morgan Asset Management – Guide to the Markets
  • https://am.jpmorgan.com/us/en/asset-management/adv/insights/market-insights/guide-to-the-markets/

Rolling 10-Year Market Returns Sources:

• Aswath Damodaran, NYU Stern School of Business
  • https://pages.stern.nyu.edu/~adamodar/
• Morningstar Rolling Return Analysis
  • https://www.morningstar.com/articles/rolling-returns

Gold Market Performance Sources:

• World Gold Council
  • https://www.gold.org/goldhub/data
• London Bullion Market Association (LBMA)
  • https://www.lbma.org.uk/prices-and-data

Silver Market Performance Sources:

• Silver Institute
  • https://www.silverinstitute.org/silver-market-data/
• LBMA Silver Prices
  • https://www.lbma.org.uk/prices-and-data

Bitcoin Price Data Sources:

• Coin Market Cap
  • https://coinmarketcap.com/currencies/bitcoin/historical-data/
• CoinDesk Bitcoin Price Index
  • https://www.coindesk.com/price/bitcoin/

Federal Reserve Interest Rate Decisions Source:

• Federal Reserve Board (FOMC Statements)
  • https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm

Mortgage Rates Source:

• Freddie Mac – Primary Mortgage Market Survey
  • https://www.freddiemac.com/pmms

U.S. Treasury Yields (10-Year Treasury) Source:

• U.S. Department of the Treasury
  • https://home.treasury.gov/resource-center/data-chart-center/interest-rates

Unemployment Rate Source:

• U.S. Bureau of Labor Statistics (BLS)
  • https://www.bls.gov/cps/

Labor Productivity Data Source:

• U.S. Bureau of Labor Statistics
  • https://www.bls.gov/productivity/

Corporate Earnings & Valuation Data Sources:

• FactSet Earnings Insight
  • https://insight.factset.com/
• S&P Global Market Intelligence
  • https://www.spglobal.com/marketintelligence/]

Artificial Intelligence Investment & Productivity Research Sources:

• McKinsey Global Institute
  • https://www.mckinsey.com/capabilities/quantumblack/our-insights
• Goldman Sachs Global Investment Research
  • https://www.goldmansachs.com/insights/pages/artificial-intelligence.html

International Valuation Comparisons Sources:

• MSCI Valuation Metrics
  • https://www.msci.com/our-solutions/indexes/valuation-metrics
• Vanguard Market Outlook
  • https://investor.vanguard.com/investment-strategy/market-outlook

Sequence of Returns Risk Research Sources:

• Morningstar
  • https://www.morningstar.com/articles/sequence-of-returns-risk
• Wade Pfau, PhD – Retirement Income Research
  • https://retirementresearcher.com/

Disclosures

This content is for informational and educational purposes only and should not be considered individualized investment, tax, or legal advice. All investing involves risk, including the potential loss of principal. Past performance is not indicative of future results.

Diversification and asset allocation do not guarantee a profit or protect against loss in declining markets. Economic and market conditions may change at any time and may affect the accuracy of the information provided.

Clients and prospective clients should consult with a qualified financial professional regarding their specific situation before making investment decisions.

International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. Bonds are subject to availability, change in price, call features and credit risk.

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.

Mid-capitalization companies are subject to higher volatility than those of large-capitalized companies.

The MSCI EM (Emerging Markets) Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of the emerging market countries of the Americas, Europe, the Middle East, Africa and Asia.

The MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada. The MSCI EAFE Index consists of the following developed country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the UK.