Update on 2025 Market Performance

The last four postings contained 20 charts (detailed here: Part One, Part Two and Part Three) and an explanation of why those charts were prepared.

When the stock market is up, everyone who invests in it is happy and very few really care why. However, my charts provide descriptions of what happened, but do not show what will happen. This year, more so than many other years, there is considerable uncertainty about the future.

As I write this, it is possible that the U.S. government will close down once again, amid gridlock in Congress (by the time you read this, hopefully this will be settled). The concern is not the closing but the potential for closing that causes the uncertainty. Rapid and widespread changes in tariffs are creating doubt about future trade levels, the viability of existing supply chains and concerns about inflation. The growing federal debt, which right now is 124% of the Gross Domestic Product (GDP), is up from 59% of GDP in 2000, and there is an absence of any efforts by either party to do anything about it. Perhaps nothing could be done, but the consequences of ignoring the debt growth will hit us and as with all unpleasant things, when we are in a weaker position to deal with it. The so-called Social Security trust fund will be in negative funding in seven years. Inflation has been reduced, but not tamed, and there will be a new Federal Reserve Chairman in April. And in spite of all of this uncertainty, the stock market keeps breaking records, and the long-term interest rates as measured by the 10-year Treasury Bond have held steady.

There are too many moving parts and too many things that appear unsettled to draw conclusions about or use to plan a course of action. However, my mantra is to invest with a long-term focus, and when you do that, certain things become clearer. For instance, I think it would be safe to say the stock market as a whole will be higher in 10 years. If you believe this, then you should invest in a well-diversified portfolio of stocks. I am clear about suggesting a well-diversified portfolio since many individual stocks have not performed well during the past 10 years. Names like Pfizer, Bristol Myers, CVS, Under Armour, Carnival and Verizon were all lower at the end of 2025 than they were 10 years earlier. Selecting individual stocks carries greater risks than investing in a fund of stocks. And that’s why I suggest a well-diversified portfolio.

Getting back to a 10-year view, this deals with trends and momentum of the overall economy and the markets. Now, while we might expect stocks to go up, or, ugh, go down, we should expect bonds to remain steady and retain their face value. Bonds, contrary to stocks, are invested in for the interest payments. Someone buying a 10-year bond does so with the expectation of receiving a fixed rate of interest every six months and the full return of their investment at the end of the term. They make a decision when they invest in bonds to accept the fixed interest amount for the full 10 years (or whatever period they buy the bond for). How they make that decision would vary based on their entire circumstances, but that decision is not made with the expectation of losing or growing the principal.

However, many investment managers and financial advisors recommend bond funds since they are much easier to acquire and sell. What they do not mention is that when it comes time to sell, the investor might not receive the expected return on the amount invested. Rather, they would receive a different amount based on the market value of the fund at that time. That means there is an unexpected risk, and in my opinion, this risk thwarts the purpose of investing in bonds, also referred to as fixed income. One caveat I offer to the buyers of bonds is that they have the full intention to keep those bonds for the entire term of the bonds and the ability to keep them for that period. If there is any expectation that they might need to sell the bonds beforehand, then they should stay away from long-term bonds since they would be subjecting themselves to the market risk inherent in having to sell bonds before maturity.

Investing is not easy and must be done with a deliberateness based on your goals over a longer period. There are some ways to simplify what you do, but it is important that you fully understand what you are doing and the risks and costs. Further investing must be goals-oriented, i.e., based on what you want to accomplish, and that includes determining longer-term objectives. Deciding to invest in the stock market for a “few years” is putting your investment at a serious risk since short-term fluctuations can be quite substantial, and you would be leaving yourself with too little time for the market to recover. My plea is not to invest in the stock market if your goal is to use the funds within seven years, and preferably ten years. If you are a trader or want to trade, that is not a long-term endeavor, and my guidance does not cover this. My focus and attention are on clients who want to invest to achieve long-term goals.

The current situation will change by getting better or worse, but it will not stay as is. Before you start any investment program, determine your long-term goals and the method you will follow to attempt to achieve them.

I will be updating my Stock Market handout in the next few weeks, and if you want a free copy of this 100-page stock market investing guide, send me an email to [email protected] and just put as the subject: “stock market handout.” No messages necessary.