In his 1932 novel Brave New World, Aldous Huxley, the English writer and philosopher, wrote that, “…human beings have an almost infinite capacity for taking things for granted.” As we close out 2025, we express gratitude for our clients and the opportunities that have contributed to success and growth during our first full year as Wealth Oklahoma. Investors also have much to be thankful for this year as markets staged a quick recovery after a challenging start, with nearly all asset classes posting solid gains. And while we don’t wish to take anything for granted, we believe there are grounds for continued optimism going into 2026.
The S&P 500 closed on December 31st at 6,846 representing a return of 2.66% for the final quarter of 2025 and an impressive 17.88% for the year. The Dow Jones Industrial Average (DJIA) ended December at 48,063 for a return of 4.03% in the past three months and a robust 14.92% for 2025. Both indices notched double-digit record closing highs this year, with the latest for the S&P 500 of 6,932, and the most recent of 48,731 for the DJIA, both on December 24th.
Elevated volatility precipitated U.S. equity markets’ peak-to-trough decline of 19% in less than two months to April 8th lows as recession fears and trade war uncertainties peaked. But the S&P 500 has since surged 36% in a historic strong run, propelling the index to its third consecutive year of double-digit gains. This rounds out 6 out of the last 7 years with returns of over 15% for the index in price terms—a feat never before achieved.
Tariff impacts have dealt less damage than forecast, and economic growth has remained positive, bolstered by strong corporate earnings and enthusiasm around the game-changing technological leaps of artificial intelligence (AI).
Importantly, market performance has broadened beyond AI and megatech names, with all sectors in positive territory over the past 12 months. Communication Services (+33.6%) led the way, followed by Information Technology (+24.0%) and Industrials (+19.4%). Real Estate (+2.7%) was the poorest performer, joined by Consumer Staples (+3.9%) and Consumer Discretionary (+6.0%) in the bottom three.
The spread between the top and worst performing sectors was only 31%, significantly below the long-term average of 46%. From a style perspective, there was also only a 2% gap for the year between Growth and Value strategies, as measured by broad Russell indices, marking the tightest spread since 2014.
The substantial tech gains have prompted comparisons to the late 1990s, igniting a discussion about whether investors are trapped in an AI-driven bubble. There are some parallels to be drawn, including the top-heaviness of market concentration. The tech sector today accounts for 36% of the S&P 500’s market capitalization, overtaking the 34% dot-com era peak. The index’s valuation multiples are also entering 2026 at lofty levels seen only two times in the last century: the eve of the Great Depression and the peak of the dot-com bubble. Skeptics have also pointed out several circular financing risks embedded in high-profile partnership announcements.
However, while record high markets are vulnerable to pullbacks from any disappointments, higher valuations appear underpinned by solid fundamentals evidenced by consistent earnings beats, stronger profitability, and improved information dissemination. Notably, since the start of this bull market, MAGMAN’s (a group of six megatech companies) earnings have outpaced the rest of the S&P 500 by 115%.
This cycle may therefore come to be viewed through the lens of structural shifts precipitated by AI advances and rapid adoption rates rather than a speculative frenzy.
Here at Wealth Oklahoma, while we have exposure within our managed portfolios to the Information Technology sector, as well as adjacent sectors that have benefited, such as Financials and Industrials, valuation, solid capital structures, and understanding business we own remain our driving principles. We take part in market cycles but are not beholden to momentum trends nor herd thinking.
We further note that economic resilience continues to persist in the U.S. despite ongoing global geopolitical tensions. According to the shutdown-delayed initial estimate released in December by the U.S. Bureau of Economic Analysis, the U.S. economy grew at an annualized rate of 4.3% in the third quarter of 2025.
This represents the fastest growth in two years, exceeding forecasts. The increase in real gross domestic product (GDP) reflected rises in consumer spending, exports, and government spending that were partly offset by a decrease in investment. Imports also decreased.
The Federal Reserve’s timely rate cuts have also spurred growth, lowering Treasury yields, even though the reasoning behind the cuts reveals weaker job market worries. The upcoming tax cuts in the One Big Beautiful Bill Act (OBBBA) could further boost growth going into 2026.
On December 10th, the Fed delivered its third consecutive rate cut of 0.25%. Policymakers lowered the fed funds rate to a target range of 3.5% to 3.75%. The ‘finely balanced’ decision was not unanimous, with three voters dissenting.
Jerome Powell, Fed Chairman, clarified that monetary policy now falls within a broad range considered ‘neutral’, indicating that the Fed will adopt a wait-and-see approach, monitoring how economic conditions unfold. Persistent affordability pressures and a bifurcation in standards of living are structural challenges that a spree of rate cutting cannot solve.
The Fed’s current dot plot—a chart depicting committee members’ expectations for future rates—predicts one cut in 2026 and another in 2027, although individuals’ forecasts range from zero cuts to aggressive easing. Mr. Powell made clear following the December meeting that he believes monthly job gains are likely overstated and suggested tariff-driven inflation may peak in the first quarter of 2026.
President Trump and financial appointees in his administration openly criticize the Fed’s ‘proceed cautiously’ approach. They view low rates as a key building block in solving the housing affordability crisis and igniting higher levels of economic growth. Mr. Powell’s term as the central bank leader will end in May 2026, but his term on the Fed’s Board of Governors doesn’t expire until 2028. Donald Trump has indicated that he has a preferred candidate to be the next chair of the Federal Reserve and Kevin Hassett, the National Economic Council Director, is considered the frontrunner.
As rates have fallen, existing fixed income products have benefited, and 2025 has been a standout year for bond markets, with the Bloomberg USAgg Index (a broad-based flagship benchmark dollar bond index) up 7.3%, its best year since 2020. Meanwhile, the 10-year Treasury yield remains range bound at 4.00% – 4.20%.
The U.S. unemployment rate in November was 4.6%, a four-year high amid a low-hire, low-fire environment and influenced in part by federal worker departures. November also saw a surprise to the downside in inflation, with headline CPI at 2.7% and core CPI (which excludes food and energy) at 2.6% year-over-year. The Bureau of Labor Statistics reported just 0.2% month-over-month CPI growth over October and November combined, bolstering the case for those calling for another rate cut early in 2026.
Despite the sharp contraction in inflation, which peaked near 9% in June 2022, prices across a wide range of goods and services remain significantly higher compared to pre-pandemic levels. As reported by a November Politico poll, 56% of Americans view the high cost of living as the top issue facing the nation.
The four biggest areas where affordability concerns are the greatest are: housing, groceries, utility bills, and healthcare. Healthcare spending makes up 18% of GDP, by far the highest among the G7 nations, and is likely to increase further, compounded by the expiration of Affordable Care Act subsidies as the new year begins, barring any last minute Congressional action.
Consumers are, however, experiencing some relief at the pump as WTI oil prices, at $57/barrel, have dropped to a four-year low, pushing the national average of retail gasoline below $3/gallon. The drop is driven by global supply outpacing demand.
In the commodities markets, a retaliation by China against U.S. tariffs has led to a steep drop in soybean exports, prompting a new U.S. Department of Agriculture (USDA) $12 billion aid package for farmers—the first of its kind since the pandemic era. Soybeans have been America’s top agricultural export, and sales to China, which have accounted for over 50% of exports, are just beginning to recover.
Silver prices topped an all-time high of close to $84/oz on December 28th, after exhibiting a massive rally driven by industrial demand, including from EVs and AI, and speculative buying. Both silver and gold registered the largest annual gains since 1979, with gold rising over 64% to hit an all-time high of $4,500/oz late-December, although handily outpaced by silver’s gain of 145% over the last 12 months.
In politics, the longest government shutdown in U.S. history ended after 43 days in mid-November, with Congress passing a funding package. This deal funds the government to January 30th, with full-year funds for Agriculture, Veterans Affairs, and Military Construction, and guaranteed rehiring and back pay for federal employees. The agreement also funds the Supplemental Nutrition Assistance Program (SNAP) through September 2026. The $901 billion National Defense Authorization Act (NDAA) for fiscal 2026 also cleared both chambers and is headed to the president’s desk.
While November midterms are over 10 months away, there is talk of a ‘blue wave’ as any voter frustration typically disfavors the party in power. This was the Democrats’ experience in 2024, and now that Republicans control Congress and the White House, they are facing similar pressure. As noted, affordability is a crucial voter issue.
Citizens are also looking to President Trump to make good on his election promises to act as a peacemaker in global conflicts. He has made important progress. Led by the United States, the October Gaza peace plan between Israel and Hamas, reached with the involvement of Arab and Muslim countries, is set to progress to a second phase. The path to peace between Ukraine and Russia remains unclear as we approach four years since Russia’s invasion. President Trump and his envoys are talking with both President Putin and President Zelenskyy to cease military operations as a precursor to a wider plan.
Elsewhere abroad, the Bank of England cut its base interest rate by 0.25% in December to 3.75%, the sixth cut in two years. Inflation is at 3.2%, above the 2% target, and UK unemployment is the highest since 2021. With euro zone inflation at 2.2% and industrial output in the region up, the European Central Bank held its deposit rate steady at 2.0%. A Russia/Ukraine peace deal would especially help Germany, the largest euro economy, by restoring cheaper energy and reviving trade.
We go into 2026 with optimism and would like to see the broadening of momentum beyond tech and AI persist. With elevated valuations, earnings will need to come through to underpin equity markets. Through diligence and judicious choices, we will continue to seek the best opportunities that align with our long-term principles.
Finally, today is not only the last day of 2025, but Warren Buffett’s final day as CEO of Berkshire Hathaway, after a nearly six-decade tenure. The value investing legend stepped down at 95 years old, bookmarking the end of an era in American business. He will remain on as Chairman and in his last letter to shareholders, he imparted this timeless wisdom: “Choose your heroes very carefully and then emulate them. You will never be perfect, but you can always be better.” At Wealth Oklahoma, we work to always be better and to better serve you, our valued clients. We want to take this opportunity to extend our wishes to you and your loved ones for a healthy, joyful, and prosperous New Year!
The S&P 500 is an unmanaged index of 500 widely held companies and over 80% of the U.S. equities market. The Dow Jones Industrial Average (DJIA), commonly known as “The Dow”, is an index representing 30 companies maintained and reviewed by the editors of the Wall Street Journal. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of the investment adviser representatives of Wealth Oklahoma and not necessarily those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. Investing involves risk and you can lose principal. There is no assurance any strategy will be successful. There is no guarantee that any forecasts made will come to pass. Past performance may not be indicative of future results. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein. Dividends are not guaranteed and must be authorized by the company’s board of directors.
