December 29, 2025

Happy New Year!

“If you are not willing to hold a stock for 10 years don’t even thing about owning it for 10 minutes”

Warrren Buffett

Santa Clause delivered! At least so far… here are the numbers The S& P 500 finished the week up 2.2%, The Dow Jones Industrial Average gained 1.53%, the Nasdaq led up 2.04%. Internationally, the FSTE 100 added .99% and the MSCI-EAFE rose 1.20%. The 2 -Year paid 3.391% and the 10 year yield was 4.138%,

So how are things looking? The S&P 500 index is on track to finish 2025 with a nearly 18% advance, potentially achieving a third straight year of 20% returns. Historically, after three consecutive years with gains of 10% or more, the S&P 500’s average return for the following year was 4.6%. Wall Street analysts project an average S&P 500 gain of 15.9% for 2026, while others suggest the potential for a flat year. We are in the Bullish camp! When the tariff revenue, foreign manufacturing investments, and the tax cuts in the “Big Beautiful Bill” take effect look for some great numbers by second quarter next year. This plus the surprise strength in Gross Domestic Product reported last week forecast good things to come. In a few days, investors will wrap up another solid year for the U.S. stock market.

Despite volatility that nearly sent the index skittering into bear-market territory in April, the S&P 500 index was on track to finish 2025 with a respectable advance as of last Friday’s close, before factoring in dividends, FactSet data show.

As Market Watch reports, with three trading sessions left in the year, a third straight year of 20% returns is within reach. For the S&P 500, back-to-back-to-back returns of 20% or greater have happened only once before — during the stretch of strong tech-driven returns that began in 1995, and which culminated in the bursting of the dot-com bubble in early 2000. We also believe stocks in Europe and Japan are poised for more gains in 2026

Even if the index falls short of that milestone, a third straight year of double-digit returns would still make for a remarkable accomplishment. Since 1949, there have been only four instances when the S&P 500 has rallied by 10% or more for at least three consecutive years, according to Dow Jones Market Data.

But this is where history diverges with expectations: As we mentioned, after such a strong stretch, an analysis by Dow Jones Market Data shows that the average return for the following calendar year was just 4.6%. That’s well below 9.5%, the average for all years between 1950 and 2024. S&P 500 4th-Year Returns After 3 Years Of Rising 10% Or More Year  Return 1952   11.78% 1998  26.67% 2015  -0.73% 2022   -19.44% Average 4.57%. so why are we bullish?

Yet analysts across Wall Street expect another year of solid, if slightly less robust, returns in 2026. According to forecasts from analysts collected by FactSet, the average bottom-up S&P 500 price target for year-end 2026 is just shy of 8,000. That means these analysts have penciled in a yearly gain of 15.9%, excluding dividends. The S&P 500 finished at 6,929.94 on Friday, per FactSet data.

To be sure, this bottom-up number is notably more optimistic than the median from investment-bank forecasts collected by MarketWatch, which stands at 7,500. That would represent an advance of about 9% from last Friday’s close of about 6,930 — roughly in line with the S&P 500’s average calendar-year return, between 1950 and 2024, of 9.5%. Of the official forecasts collected by MarketWatch, only the most bullish equity strategists on Wall Street expect the index to finish next year at 8,000. Forgive me getting into the weeds too much but the historical give good perspective and our believe we live in much different times that will support our optimism.

Wall Street analysts often overestimate stock-market returns for the following year, according to FactSet’s John Butters. But after three strong years of gains, some believe the bull market might be due for a breather.

One of the most prevalent arguments for cooler returns in the year ahead is rooted in the notion that the market has become too heavily dependent on popular artificial-intelligence trades. For the past three years, excitement about the potential for AI to transform the global economy has powered much of the gains in the U.S. stock market. Another detail that might give some investors pause: The S&P 500 has risen by more than 80% since the start of 2023, according to Dow Jones Market Data. That puts it on track for its best three-year return since 2021, when it gained 90.1%. In other words, the last time stocks powered higher for three years in a row, investors were forced to confront a punishing bear market in 2022 that resulted in the worst year for the S&P 500 since 2008, according to FactSet data.

The case for another strong year A team of analysts at Fundstrat Global Advisors disagrees with the idea that U.S. stocks look destined to experience a slower pace of appreciation in 2026. In a report shared with MarketWatch, they looked at periods where equity indexes from around the world gained 20% or more for three consecutive years. They found 12 examples — including the Nasdaq-100 from 1995 to 1997, and the S&P 500 during the same period. During five of the 12 instances, the indexes went on to see even stronger performance during the fourth year, helping to lift the average performance in that year to 12%, Fundstrat found. Another thing: During the 12 examples mentioned above, the median three-year return was 155%. The S&P 500’s current run is still well below that, suggesting it may have room to keep powering higher.

“Just because we’ve had three years of extraordinary gains doesn’t mean the fourth year can’t be gangbusters also,” said Hardika Singh, an economic strategist at Fundstrat.

Massive spending on AI data centers is set to continue, which should help boost corporate earnings not just in the technology sector but in other areas as well, like industrials and materials stocks, Singh noted. Lately, healthcare stocks, materials and financials, which struggled earlier in the year, have leapt higher — signaling that the stock-market rally has started to broaden out. This plus the aforementioned administration progress and results will positively affect the markets. And international stocks have also raced ahead this year. Based upon valuations we expect this to continue.

It’s been a big year in every aspect of society, as the second Trump administration has thrown away the playbook on how to operate the bureaucracy. From foreign policy to family policy, America is forging a new path in how we deal with adversaries and strengthen our country. This plus a pending end to the Ukraine /Russian war, all have positive effects on the US economy and markets.

Data driving the moves were mixed. The economy expanded at a robust 4.3% annualized rate in the third quarter, the fastest growth in two years, powered by consumer and government spending. At the same time reports noted inflation remains elevated, tempering the upside for rate-sensitive sectors and investors betting on easy Fed policy. Signs of strain in household sentiment persisted: the Conference Board’s consumer confidence index fell to about 89.1, its lowest since April, even as lower gasoline prices — roughly $2.86 a gallon nationally — offer some relief. Markets are weighing resilient growth against cooling confidence and sticky inflation. We are not concerned because the effects of policy will sufficiently deal with these pressures starting early next year.

And Bonds? The bond market in late December 2025 shows long-term yields relatively stable but elevated compared to earlier expectations of sharper declines. The 10-year U.S. Treasury yield (a key benchmark influencing mortgages) sits around 4.13–4.15% as of late December, little changed recently and up from lows around 3.70% in September 2024. This reflects an “easing paradox” where the Federal Reserve has cut short-term rates (including in December), but bond markets have pushed longer-term yields higher due to persistent inflation concerns, sticky economic growth, and rising term premiums.

Mortgage rates and the housing market? In the real estate market, the picture is mixed with signs of stabilization but ongoing affordability challenges: Home prices have turned slightly negative in some periods (first time in over two years in spots), with year-over-year declines in more metros (up to 32 of the top 100 by late 2025), especially in former boom areas like parts of Florida and Texas.

Inventory is rising (active listings up ~13% year-over-year in some reports), homes taking longer to sell, and some sellers cutting prices—easing pressure but not dramatically boosting sales yet.

Affordability remains tough, though improving modestly with lower rates; experts see potential for more buyer activity in 2026 if rates hold or dip further, plus possible policy shifts (e.g., housing reforms under new administration).

Projections for mortgage rates in 2026 (next year) generally point to modest declines or stability around current levels, with the 30-year fixed-rate mortgage expected to average in the low-to-mid 6% range for most of the year. Significant drops below 6% are not widely anticipated until possibly late 2026 or later, depending on economic factors like Federal Reserve policy, inflation trends, Treasury yields, and potential policy changes. Fannie Mae: In their most recent outlooks (September–December 2025 updates), they forecast rates ending 2026 at around 5.9–6.0%, with a gradual easing from current levels. Earlier projections had year-end 2026 closer to 6.0–6.2%, but the trend is toward modest improvement if economic softening occurs.

Mike