2025 Market Lessons: Why Our Global Positioning Paid Off & How We’re Preparing For 2026

 It has come to that time of the year where we look back over 2025 and look forward to 2026. Albert Einstein said: “Learn from yesterday, live for today, hope for tomorrow.” At AP Denver, we learn from the past, plan for the future, and act in the present.  

Apart from the steep market decline in the first week of April, 2025 has yielded strong growth in the equities market. The major U.S. indexes (Dow Jones, S&P 500 & Nasdaq) have all exhibited growth (7.8%, 11.5% & 15.1%, respectively). Additionally, international equities have had strong growth with the MSCI ACWI ex-U.S. (non-U.S. developed and emerging markets) gaining 23% YTD.  

Our long-standing overweight to international equities, particularly developed markets, proved beneficial this year. With international markets outperforming U.S. markets YTD, our global diversification stance delivered important risk-adjusted benefits for client portfolios. This is a place where many firms remain underweight, and 2025 reinforced why global balance continues to matter. 

While current yields are lower as a result of two interest rate cuts in 2025, the Bloomberg U.S. Aggregate Bond Index has returned about 6.7%. While the possibility of additional Federal Reserve rate cuts exists, lack of data as a result of the government shutdown as well as the Fed’s continued dual mandate of low unemployment and low inflation make the rate cut outlook uncertain. 

While the markets continue to perform positively, the LEI (Leading Economic Indicators) portends a slowdown in growth. “In August, the US LEI registered its largest monthly decline since April 2025, signaling more headwinds ahead,” remarked Justyna Zabinska-La Monice, Senior Manager, The Conference Board. “Overall, the LEI suggest that economic activity will continue to slow…while not forecasting recession currently, expects GDP to grow by only 1.6% in 2025, a substantial slowdown from 2.8% in 2024.” 

Most analysts are forecasting continued positive returns for equities, with many predicting U.S. stocks to outperform global peers. They site favorable economic policy under the current administration, strong corporate earnings, and expected AI-driven productivity gains as drivers of growth.  

While there are many reasons to be optimistic about future growth, we are not without headwinds. Continued inflation or employment market weakness could dampen returns. Lack of breadth in growth leaders could be an issue. Much of the growth we have experienced has been concentrated in a relatively small group of mega-cap, AI-focused stocks. If AI spending slows, or if the economic payoff of AI productivity gains is less than expected, that could undermine earnings growth.  

We also continue to keep an eye of valuation risk. The S&P 500 is still trading at a high forward P/E (Price/Earnings) ratio of 22.9x. Such valuations have historically coincided with weak forward-looking returns.   

The key takeaway for investors is this: Markets frequently deliver unexpected leadership, and 2025 was no exception. A globally diversified portfolio, paired with a disciplined, long-term plan, remains the most reliable path toward meeting your financial goals. While headlines will continue to shift in 2026, your strategy is built intentionally to weather these cycles, capture global opportunities, and align with what matters most to you. 

If you’d like to review your allocations, update your plan for 2026, or talk though what these trends mean for your situation, we’re here to help!