It has certainly been an interesting start to the year in the financial markets, and our team has been hard at work ensuring your portfolio is positioned appropriately as we look ahead to the rest of 2026. Recently, we met with strategists from Brown Brothers Harriman, BlackRock, J.P. Morgan, Avantis, and Fidelity Investments. Our firm’s independent structure continues to serve us well, allowing us to collaborate with some of the best thinkers and investors across Wall Street and beyond.

As always, we wanted to share a few takeaways from those discussions. Despite plenty of twists and turns, 2025 was another solid year for investors. As we have mentioned in previous client notes, one notable shift within equity markets was international stocks outperforming their U.S. counterparts for the first time in quite some time, and by a meaningful margin. Growing interest outside the United States is not the only potential change taking place.  

We have written extensively about the concentration risk tied to a small group of large technology companies driving much of the overall market over the past several years. Since October, those stocks have delivered more uneven results, while areas of the market that were previously overlooked have begun to lead.  This broadening of market leadership is healthy for a bull market, even if it remains to be seen how long it will last. 

2025 was also a solid year for other previously unloved areas of the market such as small-cap stocks and commodities. This reinforces the importance of diversification. At the same time, it serves as a reminder that discipline still matters. Many of the small-cap stocks that led the way were largely unprofitable, and in some cases driven by outright speculative behavior. Precious metals like gold and silver produced eye catching returns but also reminded investors of their breathtaking volatility. They also produce no cashflow and are therefore difficult to value. 

While we are always cautious of Wall Street consensus, most economists do remain constructive on the economic outlook for 2026 despite all the negative headlines and historically low consumer confidence. If that view proves correct, it could provide a supportive backdrop for the stock market to continue moving higher.  

When it comes to fixed income, the Federal Reserve’s interest rate cuts in the back half of 2025 were an important development. Lower rates support bond prices, but they also reduced yields available on short term cash and money market vehicles. Credit spreads, or the additional income investors receive for taking on more risk, remain historically tight. Said more simply, taking additional risk in bonds today offers limited reward if economic conditions or credit quality weakens.

We continue to focus on fundamentals over passing fads. Trading ideas driven by algorithms on people’s phones and product sales pushed by the Wall Street marketing machine may capture attention in the short run, but they rarely lead to good outcomes for long term investors. 

From geopolitical tensions and trade disputes to a new chair of the Federal Reserve, the global financial system is incredibly complex with no shortage of variables at play. We must remind ourselves that uncertainty is the only constant in markets and playing the long game provides a meaningful edge in a world increasingly focused only on today.  

As always, thank you for your continued trust and partnership. Please reach out to any member of our team if you have questions or would like to discuss your portfolio in more detail. 

It is important to remember that investments in securities involve risk, including the potential loss of principal invested. Past performance is no guarantee of future results. Diversification does not guarantee a profit or protect against loss in a declining financial market. Alliance also does not make any representations as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party mentioned in this communication and takes no responsibility. This is not intended to be individual tax advice. Please consult your tax professional. Additional disclosures can be found by visiting alliancewealthadvisors.com/legal-disclosures.