December 2025 ended on a relatively calm note, with global equities finishing higher as non-U.S. markets did most of the heavy lifting. U.S. stocks were essentially flat, while foreign developed and emerging markets rose about 3% each. Even with strong full-year results, the path was volatile. The S&P 500 fell over 12% first week of April and then surged 9.5% in one day. John Gullo’s quarterly “Five Financial Highlights” letter provides deeper analysis of 2025 and highlights two defining themes: international market leadership and an increasingly concentrated U.S. market.
Stock Market
Global equities rose 1.1% in December and finished the year up 22.9%. In the U.S., large cap stocks gained 0.1% for the month and ended the year up 17.9%. Mid caps rose 0.1% (7.5% year-to-date) and small caps slipped -0.1% (6.0% year-to-date). By style, value stocks rose 0.7% in December and finished 2025 up 15.7%, while growth stocks declined -0.6% for the month but remained ahead for the year at 18.2%.
Outside the U.S., performance was notably stronger: foreign developed stocks gained 3.0% in December (31.9% year-to-date) and emerging markets rose 3.0% (34.4% year-to-date).
Bonds
The Bloomberg U.S. Aggregate Bond Index was slightly down in December (-0.2%) but finished 2025 up 7.3%. Rates were mixed across the yield curve as short-term yields moved lower while longer-term yields such as the 10-year moved higher, continuing the yield-curve steepening, discussed in John Gullo's quarterly update.
Note that broad benchmarks like the Aggregate Bond Index include longer-dated bonds out to 30 years that can be significantly more volatile. Performance can differ meaningfully between high-quality, shorter-duration holdings and areas with more interest-rate sensitivity or credit exposure. The Five Financial Highlights includes additional detail on the yield curve, credit spreads, and the inflation and employment backdrop.
Fed, Economic Data, and Key Themes
At its December meeting, the Federal Reserve made a third consecutive 25-basis-point cut, bringing the federal funds target range to 3.50%–3.75%. The cut was paired with cautious guidance, and the vote was split (9–3), highlighting differing views within the committee. With inflation still above the Fed’s target and unemployment at 4.6% in November, Chair Powell remarked that tariff-related inflation impacts may be relatively short-lived, while downside risks to employment have become more prominent
Shutdown-related reporting delays continued to linger into year-end as agencies worked through revisions and data gaps. John’s quarterly letter also reviews several year-end fundamentals, including inflation near 2.7%, unemployment around 4.4%, and a “low-hire, low-fire” labor market.
Overall, December capped a strong year for global stocks led by international developed and emerging markets, while volatility and market concentration remained key themes. For a deeper dive on 2025’s themes—including market leadership, concentration, bonds, and the inflation/employment picture—see John Gullo’s “Five Financial Highlights from Q4 2025” letter.
