U.S. equities ended 2025 near record highs, supported by another quarter of solid earnings and a macro backdrop still shaped by gradual Fed easing, moderating inflation, and resilient labor markets. Importantly, much of this year’s equity performance was driven by earnings growth rather than valuation expansion, particularly in technology and AI-linked sectors.

U.S. equities extended their strong 2025 performance, supported by another quarter of earnings that surpassed expectations and a macro backdrop increasingly shaped by Fed easing and stabilizing inflation. International developed markets lagged, but emerging markets continued to benefit from a weaker dollar and improving growth prospects, a trend highlighted in recent Advisor Outlook data showing EM as one of the few regions gaining consensus support. Bonds resumed their historical role as a source of ballast, with correlations turning positive for diversification and fixed income delivering meaningful gains during equity pullbacks.