4Q 2025 Commentary: The “K” Divide

Summary

• Markets ended 2025 on a strong note, with not one major asset class ending the year in the red. U.S. large-cap stocks ended the year up 18%. U.S. small-cap stocks gained 13%, and U.S. intermediate-term bonds ended 2025 up 7%.
• Inflation cooled, with headline CPI easing to 2.7% year-over-year, driven largely by slowing shelter costs. The report surprised economists, with none of the Bloomberg-surveyed forecasts anticipating a reading this low.
• Wage and wealth gaps continue to widen: the top 1% hold nearly one-third of U.S. household wealth and roughly 40% of Americans own neither equities nor property.
• With approval ratings under pressure ahead of the midterm elections, policymakers have increasingly shifted their focus toward the lower-income consumer. The resulting policy mix is likely to remain accommodative, with implications for both the economy and financial markets.

Read and download the commentary here.