As the year winds down, it’s natural to ask what comes next. December is a time when attention shifts toward forecasts for the year ahead—what to expect, what to prepare for, and what might change.
Before looking forward, it’s worth reflecting on what actually happened this year. 2025 did not follow a single, consistent market narrative. Instead, it unfolded as a series of resets—shaped less by one dominant shock and more by an evolving economic backdrop, shifting expectations for monetary policy, and ongoing repricing in areas like large-cap growth, technology, and credit.
This all played out amid heightened political attention and policy debate, adding an extra layer of scrutiny and uncertainty. Markets repeatedly had to reconcile mixed signals—cooling inflation here, resilient demand there—with forward-looking optimism, producing periods of volatility alongside new highs.
From a volatility perspective, 2025 looked fairly typical: periodic pullbacks, rotations, and reversals, but no extreme dislocations. At the same time, returns finished well above historical averages, delivering strong performance.
By the end of the year, the takeaway is straightforward: careful planning, patience, and a long-term perspective can translate into meaningful results. That’s a solid foundation for what comes next.
November: A Strong Finish to a Demanding Year
Through November, the S&P 500 reinforced what had already been a high-performing year, with month-end returns approaching 18%, well above long-term historical averages.
Even with solid year-to-date momentum, November included a brief pullback—roughly 5% from the recent high—before markets regained footing later in the month. The pullback did not reflect broad deterioration in the economic backdrop so much as a shift in market leadership. The S&P 500 finished roughly flat for the month, but sector performance diverged sharply—Health Care gained nearly 9% while Technology fell more than 5%, alongside softness in Consumer Discretionary and Industrials. Strength in several other areas—including Materials, Energy, Staples, and Financials—helped offset that drag, allowing the index to finish the month with a late-month rally.
Returns for the month reinforced the value of diversification across regions, styles, and asset classes. The S&P 500 finished essentially flat (~0.2% for the month), while developed international equities were modestly positive (MSCI World-Ex US +~1%), and value outperformed growth across both U.S. and international markets—supporting the case for maintaining global exposure and style balance rather than relying on any single market segment for returns.
Style and size positioning also mattered. In November, value outperformed growth across both large and small caps—Russell 1000 Value rose about 2.7% while Russell 1000 Growth fell about 1.8%, and Russell 2000 Value gained about 2.8% while Russell 2000 Growth slipped about 0.7%. Even with growth still ahead year-to-date, the month was a reminder that leadership can rotate quickly, and diversified portfolios are less dependent on any single style or segment to deliver results.
Fixed income played its intended role. As equity markets rotated and experienced periods of uncertainty, bonds provided stability, income, and flexibility. Declining short-term yields supported returns, while longer-term yields continued to reflect broader economic expectations. The combination of equity selectivity and steady bond performance underscored the value of maintaining diversified portfolios designed to perform across a range of market conditions, not just during periods of broad equity strength.
What Markets Are Wrestling With
The market swings and shifting economic narratives we saw in November were a defining feature of the environment in 2025, and are likely to remain so as we move into 2026.
Economic growth has slowed from the post-pandemic surge but remains on solid footing. The economy is still expanding, just at a more measured pace, and that uneven slowdown across sectors has kept investors cautious. The labor market shows a similar trend. Conditions remain healthy overall, but job growth has cooled and unemployment has edged higher, signaling moderation rather than stress.
Consumers have felt this shift as well. Confidence has softened at times due to higher prices, interest rate sensitivity, and uncertainty about the near-term outlook, even as spending continues, though at a slower pace. That gap between how households feel and how the economy is actually performing has been one of the tensions markets have had to work through.
Inflation has come down meaningfully from its highs, but progress has been uneven. As a result, markets remain focused on whether inflation can settle at a comfortable level without requiring tighter financial conditions again. This question, more than any single data release, is likely to shape market behavior into the year ahead.
Beyond traditional economic and policy factors, markets are also navigating a range of non-economic pressures — from geopolitical shifts and supply chain risks to cyber vulnerabilities and the election cycle — that can create uncertainty and sudden shocks.
Looking forward, markets are focused on how growth, inflation, and employment influence interest rates. As expectations continue to adjust, periods of volatility and rotation are likely to persist. As investors look ahead, the lessons of 2025 underscore the importance of diversification, disciplined risk management, and maintaining focus on long term fundamentals rather than short term predictions.
The Work Behind the Portfolios
Much of the most important work this year happened away from market headlines. Our focus remained on execution—making sure decisions were carried out carefully, assets moved safely, risks were managed thoughtfully, and plans worked as intended in real life.
At the portfolio level, that meant adjusting exposure deliberately rather than reflexively. In some cases, equity exposure increased; in others, we prioritized income, downside protection, or liquidity aligned with real spending needs. Concentrated stock positions required particular attention, with staggered income strategies, tax-aware trade sequencing, and risk management tools designed to balance participation with protection. Tax planning remained fully integrated across accounts, including Roth conversion analysis, asset location decisions, and coordination with CPAs as income profiles and circumstances evolved.
Beyond portfolios, complexity continued to grow. We supported clients through estate settlements, trust administration, inherited assets, gifting strategies, and cross-border financial coordination. These moments demand precision and judgment, where small errors can have outsized consequences. Operationally, we continued to invest in compliance, cybersecurity, and internal controls — not as back-office functions, but as core responsibilities in an increasingly digital and interconnected financial environment.
Equally important were the decisions not to act. We avoided narrative-driven positioning, resisted unnecessary complexity, and declined structures where costs and conflicts outweighed benefits. In volatile moments, the work often involved slowing things down and helping clients stay aligned with long-term goals rather than short-term noise.
Looking ahead, this kind of disciplined, execution-focused work is even more important. As markets remain uneven and client needs grow more complex, outcomes will depend less on prediction and more on judgment, coordination, and consistency over time.
Closing Reflection
Markets are abstractions. Clients are not. Behind every portfolio is a household making real decisions about spending, saving, giving, and legacy. We don’t have the power to eliminate uncertainty, but we can manage it deliberately and with perspective.
This year reinforced what long experience teaches: discipline outlasts prediction, structure outperforms speed, and process matters more than headlines. These principles guided our work through the tumbles and spikes of 2025, the bulls and bears, and the reds and greens. And they continue to define how we steward capital across market cycles.
We are deeply grateful for the trust our clients place in us. Many of these relationships span years and decades, and they are built on honesty, clear thinking, consistent follow-through, and stewardship—anchored by a disciplined process that has proven effective over time.
As we close out the year, our focus remains on the work ahead — maintaining discipline, staying aligned with long-term goals, and navigating uncertainty deliberately rather than reactively. If we don’t connect before year-end, we wish you and your family a safe and restful holiday season and a healthy start to the new year. We look forward to continuing the conversation in the months ahead.
Regards,
John Gorlow
President
Cardiff Park Advisors
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