Market Updates

Source: Moore Financial Advisors

Bond Market Current Issues

It is a fact that yields have pushed higher in the US, as well as in other countries, this year.

From a low point of 3.9% in early January 10-Year Treasury yields climbed nearly a percentage point, to 4.78% in early September.

Short-term Treasury Bond and Bill yields are also up by about a percentage point and currently sit at about 4.0%.

It’s also true that for many investors, returns for high quality intermediate and long-term bond funds have fallen short of expectations in 2026.

The benchmark US Bloomberg Aggregate Bond Index, which is made up of thousands of high-quality issues, including US Treasuries, guaranteed mortgage-backed securities, and corporate bonds, has produced a negative return of -0.25% year-to-date as of September 4.

Financial markets experts point to several factors behind the increase in yields, including:

• investors’ concerns that inflation is too high
• central banks around the world aren’t doing enough to contain inflation
• governments are acting in fiscally irresponsible ways by running large, successive deficits – particularly since the pandemic

These are valid concerns and could lead to more upward pressure on bond yields in the future, but do not point to imminent crisis.

Courtesy of Capital Group, the chart below shows a 155-year history of long-term Treasury bond yields going back to 1871. 

Source: Capital Group

Prior to 1962, the data represents the average long-term government bond yield; from 1962 forward, the data represents 10-Year Treasury yields as of December 31 each year within the period.

The data shows that 62% of the time, long-term Treasury bond yields fall within a range of 3% to 6%.

When bond yields move out of this range, it’s a strong possibility that something may be amiss in the economy or the financial markets.

In the 1970s and 1980s, the US economy was stressed by energy shocks, rolling recessions, and elevated inflation, which pushed interest rates well above the normal band to record high levels.

In the 15 years following 2006, the US economy was challenged by fallout from a global financial crisis (2008-2009) and a pandemic (2020) which pulled interest rates well below the normal band to record low levels.

Today’s interest rates, when viewed through a long-term historical lens, sit comfortably in the middle of the normal band.

According to analysis done by JP Morgan asset management, 10-year Treasury yields have averaged 5.7% since 1958. A 10-year yield approaching 4.8% is hardly indicative of “crisis”, “shock”, or “havoc”.

To some extent, modestly higher yields can be considered good news for bondholders.

With stock markets at record highs, the rise in yields reflects a resilient global economy that can absorb higher borrowing costs. And higher yields mean investing in bonds today will deliver more income over time.

Why Hold Bonds in Your Portfolio?

Even though the environment for bond investors has been challenging for most of 2026, the main reasons for owning high-quality bonds, including US Treasuries, remain intact:

• Bonds provide recurring, dependable income
• Investment-grade bonds with near- to intermediate-term maturities are less volatile than stocks, and can help stabilize a portfolio when financial markets become unsettled
• Shorter-maturity bonds and bond funds are typically a good source of “liquidity” and convert easily to cash when money must be withdrawn from a portfolio

The bottom line: the sky is not falling in bond-land.

The unsatisfactory returns many investors have experienced in their bond allocations year to date likely have been counterbalanced by satisfactory returns from their stock allocations.

Also, sub-par bond returns this year are coming on the heels of above-average returns for bonds last year.

This return experience is normal and indicative of a generally healthy economic and financial market environment.

For most individual investors, an allocation to bonds is, and will continue to be, an important component of a well-diversified portfolio.

-RK

This month’s financial market commentary has been kept purposefully brief. We’ve provided a separate article entitled Is the Sky Falling in Bond-land? that goes into more depth about developments in the bond market. (You will see that article in our next blog post.)

Resilient corporate earnings were the main development that supported the stock market in August.

Earnings reports for the second quarter ended June 30 in aggregate turned out to be much better than anticipated and far better than last year.

For example, Nvidia, the maker of chips used in AI data centers (and currently the largest company in the US when measured by stock market value) announced stellar results in late August.

But what really caught the attention of investors was Nvidia’s forecast that strong sales growth would continue well into next year.

With most large, publicly traded companies having released their results for second quarter, 76% exceeded analysts’ expectations.

Sales in the second quarter of 2026 were up 15% compared to the same period last year, and earnings were up by 32%.

The month of August was generally positive for both stocks and bonds, reversing the weak performance experienced by most market segments in July.

US Technology stocks led the way with a 5.6% increase. Large company US stocks did well, rising by 2.7%, and foreign company stocks weren’t far behind, with an increase of 1.8%. Small company US stocks struggled to keep pace but still generated positive performance of 0.9%.

Gains in the US bond market were more muted, but still generally positive, with high-quality bonds returning 0.4%, and US Treasury bills up 0.3%. Foreign bonds were the laggard, declining by a modest 0.1%.

Here are results for August and 2026 Year-to-Date, compared to longer-term annualized returns (10-Year Trailing):

Source: Morningstar

-RK

In July, I visited Old Orchard Beach, Maine. The cottage where I stayed with extended family is a short walk from Palace Playland, an amusement park, which first opened in 1902.

My style of ride is the Merry-Go-Round: old-fashioned, somewhat whimsical – and most importantly, one directional. My 12-year-old niece has a different vibe.

Attempting to curry favor, I accompanied her on HyperJump, which Palace Playland’s website describes as: “feel your heart race as you spin around and defy gravity with bursts of speed that send you soaring up and down.”

The HyperJump description is accurate; I may have scored a point with my niece; and two minutes of terror reaffirmed my amusement park ride preferences.

July’s market activity encompassed elements of both Carousel and HyperJump.

Performance for a good portion of the stock and bond markets was Carousel-like. Foreign stocks (+1.6%), US Treasury Bills (+0.3%) and US Large Company Stocks (+0.1%) all recorded modest positive performance in July.

Other segments of the financial markets, including US Bonds (-1.3%) and Foreign Bonds (-1.7%), registered modest negative performance. Small company stocks declined a bit more (-3.1%), but results were far from stomach-turning.

HyperJump activity was concentrated mainly in the technology sector (-5.6%), and the gyrations were more obvious by looking at individual stock performance for the month.

As the chart below indicates, stock prices of major tech companies ranged from +25% to -35%. Several companies involved in cloud computing and data management soared, while semiconductor manufacturers, which had done very well in the first half of 2027, fell particularly hard.

Source: Morningstar

Away from technology sector, oil prices increased by more than 20% in July, pushed higher by increased hostilities in the Middle East, which helped boost Energy sector stocks by 12%.

In sum, I concur with sentiment shared recently in a note by Jeremy Siegel, Emeritus Professor of Finance at Wharton and Senior Economist at WisdomTree: “The recent rotation away from the market’s most speculative leadership, while uncomfortable for some investors, strengthens rather than weakens the foundation of this bull market.”

Another way of framing this: prices for some technology stocks had come too far, too fast. The downward adjustment in their share prices in July, without a broad-based stock sell-off, is a healthy sign for the market as a whole.

Here are results for July and 2026 Year-to-Date, compared to longer-term annualized returns (10-Year Trailing):

Note: YTD 2026 as of July 31; Source: Morningstar

-RK

To my gridiron-wired mind, aspects of the “other football” are curious and bemusing.

For example:

• The clock counts up, not down, and keeps running during stoppages, resulting in time mysteriously tacked on at the end of the game
• Ties are allowed, considered normal – and often celebrated
• Flopping appears to be a legitimate tactic
• Offside: a player can be offside without touching the ball: simply interfering with an opponent’s ability to play – blocking their line of sight, for example – while in an offside position can be deemed a violation
• Cards: penalty cards accumulate across games: get two yellow cards in separate matches and a player can be suspended for the next match
• Advantage Rule: a referee can see a clear foul happen and simply not blow the whistle, waving play on because the fouled team already has the ball in a good position
• Substituted players can’t return: once you’re subbed off, you’re done for the match

Fortunately, World Cup games include a break that allows for reflection, discussion with more soccer-savvy acquaintances, and, if necessary, online search to figure out what transpired during the past 45 minutes of play.

Thank goodness for halftime.

Since we’ve reached the halfway point of the calendar year, it’s appropriate to reflect on some of the key developments in the financial markets so far in 2026:

• AI: Enthusiasm for Artificial Intelligence (AI) and the ecosystem that supports its development has been a driving force behind demand for technology stocks
• Earnings: Strong first-quarter earnings reports from large US companies, along with upward revisions to earnings forecasts, have also helped to buoy stocks
• War: US-Iran conflict caused severe dislocation in the oil trade, but the geopolitical shock was short-lived for US investors
• Inflation: It has remained sticker than hoped – well above the Federal Reserve’s 2% target – keeping bond yields elevated
• The Fed: Leadership change at the Federal Reserve has shifted the interest rate policy outlook – new Fed Chair Kevin Warsh has signaled a firm commitment to bringing inflation back to 2%, raising the odds of Fed rate hikes later in the year
• SpaceX: The company’s Initial Public Offering (IPO) created a major market event – it was the biggest IPO in history. The rocket-satellite-AI company became the sixth largest firm globally and it demonstrated investor interest for new, tech focused companies.
• Stock market leadership is broadening beyond technology: after years of tech stock dominance, industrials, financial institutions, healthcare, and small-company stocks began participating more meaningfully in June, a sign often associated with a healthier bull market.

The phenomenon mentioned in the last bullet point has been labelled “The Great Rotation” by some Wall Street commentators.

For more than a decade, a highly concentrated group of very large technology-oriented

companies has driven positive stock market performance.

However, the massive amounts of spending tech companies are now undertaking to actualize their AI-related plans is coming under greater scrutiny by investors.

If the pundits are correct in their characterization of this emerging “rotation” situation, investors have started pulling money out of the “expensive” tech stocks and redeploying that cash into less expensive areas of the market.

The result of a typical rotation is that money stays in the stock market, leadership changes, and positive overall stock market performance continues.

Thus far in 2026, stocks of all shapes and stripes are having another good year, as the middle column in the table below indicates.

But take a closer look at the June data in the left-hand column. US Industrial stocks top the list in performance of the Asset Class Returns table.

The Industrials index, made up mostly of “old economy stocks” – companies such as Caterpillar, Boeing, Union Pacific (railroads), and Eaton (electrical equipment) – outpaced the Technology index (which includes Nvidia, Broadcom, and Meta) by more than 10 percentage points last month.

Note: YTD 2026 as of 6/30/2026; Source: Morningstar

And two other non-tech sectors, Healthcare (+11.5%) and Financials (+9.7%) had even stronger performance in June than Industrials.

One month of old economy stocks outperforming new economy stocks fails to indicate a true “Great Rotation”.

But the shifting of preferences and performance displayed in June are noteworthy and may be a positive sign for the stock market as a whole – and for investors who maintain broadly diversified portfolios.

-RK

ASteve Sosnick, the chief market strategist at Interactive Brokers, referred to financial market activity in May as “the Everything Rally.” That’s not a bad way to frame what happened last month.

At the start of the month, investors were confronted with an unsigned Iran peace deal, oil above $100, inflation at a three-year high, a brand-new Federal Reserve chair, and a 30-year Treasury yield touching its highest level since 2007.

May closed with Technology sector posting another double-digit monthly gain. The S&P 500 index of large company US stocks rose 5.3% and closed at record highs on 11 days during the month. Foreign stocks gained more than 2.4%, and bond indices (despite large intra-month swings in yields) registered modest positive returns.

May was defined by three themes: the Iran war and its economic consequences; AI delivering broad-based, positive revenue trends in the technology sector; and a bond market that tested investor nerves.

The Iran War — Deal Always “Just Around the Corner”

The U.S.-Iran conflict is now in its fourth month. The Strait of Hormuz remained largely closed to commercial traffic, with only a handful of ships transiting daily versus 120 before the war.

Oil prices swung dramatically on diplomatic signals: Brent crude peaked near $126 in late April, fell toward $87 by month-end, then traded at various points in between as headlines shifted from hope to frustration and back again.

The month’s diplomatic arc was a recurring pattern: a constructive signal would arrive, sending oil sharply lower and stocks higher — only to be followed by a complication. By month-end, the memorandum of understanding between the US and Iran remained unsigned, and June opened with the same central question May had posed: when will a deal be signed?

The economic consequences of the conflict were visible throughout the month. Inflation hit 3.8% year-over-year — its highest since 2023 — driven heavily by energy. National average gas prices remained above $4.50 per gallon for most of the month.

And Goldman Sachs and Barclays both cautioned that even if the Strait fully reopened tomorrow, global oil inventories are so depleted that prices likely would normalize only gradually, not immediately.

Artificial Intelligence Delivers Positive Revenue Trends

April validated that AI is driving positive financial results for chip makers. May confirmed that AI demand is broadening into other areas of the technology ecosystem.

Some examples of how AI-driven demand is benefiting tech companies:

• Dell Technologies, which many folks associate with personal computers, reported AI server revenue up 757% year-over-year, a record $51.3 billion AI order backlog, and raised its full-year revenue forecast by roughly $27 billion.
• Cisco, another “old-line” technology-focused company, known for its networking gear that supports internet activity, raised its full-year AI order guidance to $9 billion — nearly double what it had guided just one quarter earlier.
• Nvidia, the new tech standard bearer that designs chips, and also hardware networks to power data centers as well as specialized software, reported $81.6 billion in quarterly revenue — up 85% year-over-year — and guided its next quarter to $91 billion.
• Cerebras Systems, which delivers supercomputer systems and cloud-based services, listed its shares through the largest tech initial public offering (IPO) since Uber went public in 2019, saw its shares surge 68% on the first day of trading.

The broader AI narrative for the month was captured well by one market analyst: “We started with chips and memory, but it’s really now about the broad AI infrastructure stack.”

And more AI-related activity is in store for investors in the months ahead, with SpaceX, Anthropic (maker of Claude) and OpenAI (maker of ChatGPT) all expecting to list their shares through IPOs and being trading on stock market exchanges later this year.

The Bond Market’s Warning

Not everything pointed straight up in May.

The bond market delivered a warning mid-month that temporarily interrupted the equity rally. The 30-year Treasury yield approached 5.2% in mid-May – its highest level since 2007, before the financial crisis – and the 10-year Treasury yield approached 4.7% (though bond yields did decline in the back half of May).

The main driver of higher yields was the Iran war’s inflationary impact on energy prices globally. The practical consequence for US households: 30-year fixed mortgage rates climbed back to 6.68%, putting further pressure on an already-stalled housing market.

Adding to the complexity, Kevin Warsh took over as Federal Reserve Chair on May 15, inheriting a divided institution with inflation running well above its 2% target.

The probability of a Fed rate hike in 2026, which was essentially zero a month ago, climbed as high as 45% during the month. Warsh’s first formal interest rate policy decision comes June 16.

Despite the swings in yields, benchmark US bond indices delivered positive returns in May. High quality bonds returned 0.3% for the month, and low quality bonds rose 0.5%.

As June begins, the questions that defined May remain open. The Iran deal is unsigned. Inflation remains elevated. The new Fed chair faces his first policy decision with rate-hike odds that would have seemed unthinkable a few months ago.

And yet the stock market enters June at all-time highs, with US Large Company Stocks up 11.2% for the year and Foreign Stocks up 9.1%. Whether the optimism that has driven the fourth consecutive year of stock market gains (so far) proves durable is the central question for the months ahead.

Here are results for May and 2026 Year-to-Date, compared to longer-term annualized returns (10-Year Trailing):

Note: YTD 2026 as of 5/31/2026; Source: Morningstar

-RK

April proved to be an exceptionally strong month for the stock market.

The month opened against the backdrop of an active shooting war, a nearly closed Strait of Hormuz, record oil prices, and a consumer confidence reading at an all-time low. Despite these concerns, stocks powered forward setting new all-time highs.

April was defined by three themes: diplomacy; an earnings season that delivered; and artificial intelligence producing revenue results for big technology companies.

The first theme was diplomacy — messy, uncertain, but seeming to trend in the right direction, from a financial markets standpoint.

April’s arc ran from President Trump threatening to knock out “every power plant and every bridge” in Iran, to a Pakistan-brokered ceasefire, to Iran briefly opening the Strait and then closing it again, to a revised Iranian proposal arriving through mediators on the final day of the month.

None of it was clean, and no permanent deal was reached. But markets are forward-looking, and as each week passed, the probability of catastrophic escalation fell while the probability of an eventual resolution rose. That directional shift — even without a final outcome — was enough to send stocks marching to new all-time highs.

The second theme was an earnings season that delivered, broadly and convincingly.

By month’s end, roughly 87% of S&P 500 companies that reported had beaten Wall Street analysts’ earnings estimates, with first-quarter profit growth tracking above 13% year-over-year.

A few of the standouts:

• Intel posted the largest earnings surprise — as a percentage — ever recorded for a major index component, sending the stock up 23% in a single session
• Caterpillar stock jumped 10% on a blowout quarter and raised full-year guidance
• Apple closed the season with record iPhone and Services revenue, announcing a $100 billion stock buyback, and Q3 guidance more than double what analysts had expected

The message from corporate America was consistent and clear: revenue and profits are generally on an upward trend and business is resilient.

The third theme was artificial intelligence — not as a concept, but as a revenue reality.

Several of the largest technology companies in the world showed impressive financial results related to AI infrastructure: Google Cloud grew 63% year-over-year, Microsoft’s Azure accelerated to 40% growth, and Amazon Web Services posted its fastest growth rate in 15 quarters. These were not promises about future potential — they were current-quarter revenue numbers from businesses already running at tens of billions of dollars in annual revenue.

Here are results for April and 2026 Year-to-Date, compared to longer-term annualized returns (10-Year Trailing):

Note: YTD 2026 as of 4/30/2026; Source: Morningstar

The war in Iran that began in late February continued throughout March. This put downward pressure on stock and bond prices, as investors worried about how long hostilities would last.

The main concern in March was the inflationary impact of significantly higher oil prices.

The price of oil rose between 50 – 65% in March (depending upon which benchmark oil price is referenced). Many Americans are now paying $4 per gallon of gas.

If the war shows no signs of letting up soon, investors’ concerns will shift to the broader impact on the economy, the likelihood of slower growth, the impending hit to company profits, and the possibility of recession.

We are not at an economic crossroads yet.

The US economy has proven resilient in the face of stress in the energy markets in the recent past.

For example, there was no recession in 2022 when oil prices spiked after war broke out in Ukraine. It’s reasonable to expect that this also will be the case in 2026.

Currently, most forecasters still expect the US economy to expand in 2026 (see the following article) and for company profits to rise.

But if hostilities extend well into the spring, US economic resiliency may be tested further, which would likely mean continued challenges for the financial markets.

The month of March closed with a positive tone with stocks rising 3% on the last day of the month as the US administration signaled its willingness to end the military campaign in Iran.

Investors need to keep in mind that the political and military situation is fluid and volatile; that stocks could decline significantly from today’s levels; and that developments in the Middle East will have a strong impact on the financial markets in the months ahead.

Here are results for March and 2026 Year-to-Date, compared to longer-term annualized returns (10-Year Trailing):

Note: YTD 2026 as of 3/31/2026; Source: Morningstar

The big market story for the year through February has been foreign stock market leadership. Foreign stocks almost matched their excellent January performance (4.9%) in February (4.6%). Currency was not a significant driver of dollar-based returns in either period.

In February, US large company stocks slipped, declining by 0.9%, compared to January’s positive return of 1.5%.

Within US equities, the rotation out of large company US technology stocks has shifted from January’s move into small company stocks to February’s preference for non-technology large company US stocks.

The bond markets continued to show positive results. Intermediate- and long-term Treasury bond yields declined over the course of February. The 10-Year Treasury bond yield actually fell below 4% for the first time in several months. The benchmark for US Investment Grade Bonds returned 1.6% in February.

Here are results for February and 2026 Year-to-Date, compared to longer-term annualized returns (10-Year Trailing):

Note: YTD 2026 as of 2/28/2026; Source: Morningstar

For the past three years, developments related to Artificial Intelligence (AI) have captivated investors. Stocks of large technology companies associated with AI have done very well, and the biggest of the bunch have generally performed best.

Recently, however, stock market sentiment has shifted from AI excitement to AI anxiety.

The source of this anxiety is twofold, stemming from:

1. Costs of Building AI: Developing AI infrastructure is costly; it will crimp the near-term profits of the companies building it; and it raises questions about profit margins for the AI infrastructure builders over the long term
2. Results from Deploying AI: Expanded AI usage may be disruptive for jobs, companies, and the stock market

The Costs of Building AI

The term “hyperscalers” is being used to refer to the tech company giants that are building and operating massive cloud-based computing infrastructure that supports the training and deployment of Artificial Intelligence models.

In the United States, the hyperscalers are Alphabet (Google), Amazon, Meta Platforms (Facebook), Microsoft, and Oracle. Collectively, these five companies account for 17% of the S&P 500 index of large company US stocks.

In 2023, the year after ChatGPT emerged on the scene, hyperscalers’ capital expenditures (money spent for acquiring long-lived assets) was about $150 billion. In 2026, it’s expected to be about $650 billion.

For comparison, US federal government defense spending in 2026 is expected to come in at about $900 billion. And, $600 billion is about the size of the economies of Singapore and Sweden (measured by Gross Domestic Product, or GDP).

The sums being spent on AI infrastructure are enormous, and the acceleration of the spending is breathtaking. So, investors are questioning whether the capital commitments will be worth it.

Profitability has been high for the hyperscalers in recent years, but large-scale AI investment is expected to pull down profit margins in the near term. Investors understandably do not like seeing margins decline, even for companies with long-term track records of operational success.

Perhaps AI investment will pay off and returns will start trending higher next year and beyond. Or, perhaps the anticipated demand for the compute capacity will be less than expected, and profit margins will be lower for longer.

Here’s how hyperscaler stock prices have performed over the past three years, and so far in 2026, compared to the broad market for US large company stocks as represented by the S&P 500:

Note: YTD 2026 as of 2/20/2026; Source: Morningstar

The hyperscaler stock price stall is telling us that investors are less sure that today’s spending will translate to outsized profits in the future.

The Results from Deploying AI

It really is far too early to know what the effects of AI availability and AI usage will be.

But predictions affected stock prices in various areas of the market in the first part of February. Here are some examples:

• AI developer Anthropic announced it was adding new legal tools to its Cowork assistant to help automate some legal drafting and research tasks. On February 3, shares of companies that provide legal tools and research databases dropped, as did other “software as a service” companies: Examples: Legalzoom dropped 20%; Thomson Reuters declined by 16%; Salesforce fell 7%.
• OpenAI (maker of ChatGPT) said it was adding an app for homeowner insurance quotes. Shares of insurance brokers proceeded to decline. Example: Marsh & McLennan dropped 8% on February 9.
• Financial custodian Altruist said its AI assistant could handle some tax-related tasks. Shares of brokers and financial custodians dropped. Example: Charles Schwab lost 7% on February 10.
• A Florida-based firm said it could use AI to improve efficiency in the trucking business. Shares of airlines, railroads, and trucking firms slid. Example: C.H. Robinson shares lost 15% on February 12.
• The CEO of Anthropic recently claimed that AI would wipe out half of all entry level white-collar jobs in the next one to five years, and Microsoft’s head of AI said that “most if not all” professional tasks would be automated within 18 months.

Some investors are inclined to shoot first before asking questions and seeing the results of AI deployment and utilization.

Other investors who hear about new technologies and see wild price swings in some stocks of established companies may be unsettled.

In his recent Weekly Commentary from February 17, professor and long-time market practitioner Jeremy Siegel offered these observations:

• Technological change will continue to disrupt industries, and some business models will be impaired
• Productivity growth is ultimately deflationary and wealth-enhancing
• We may even see the long-discussed four-day workweek become viable over time as output per hour accelerates; that is not a recessionary signal, that is a prosperity signal
• Anxiety is part of every technological transition
• Today’s data tell us the economy is stabilizing, inflation is receding, and real incomes are rising
• This is not a backdrop for derailing a bull market; it is a backdrop for its expansion

While it is worth having some perspective on what’s going on underneath the surface of a stock market, trying to pick winners and avoid losers as new technologies emerge is unadvisable.

A better, time-tested approach to investing is to maintain a diversified portfolio with exposure across sectors and markets, and to enjoy a rising tide that lifts many boats over the long term.

The financial markets got off to a satisfactory start for the first month of 2026. Here are results for January:

Source: Morningstar

Often from Christmas through year end, investors are treated to a “Santa Claus Rally”, where stock prices rise. But 2025 followed the atypical pattern from 2024: stock prices fell during the final days of the year.

The waning-days-of-2025 drop marks the 13th time the benchmark S&P 500 index fell by more than 1% over that span since 1952.

As catalogued in our Review last year at this time, a “Santa Slump” does not necessarily foreshadow poor returns for the year ahead.

Bespoke Investment Group found that, in the twelve months following a year-end decline of more than 1%, stocks tended to do better. Large company stocks’ median performance after Santa Slum years, in fact, has been a gain of about 12%.

For 2025 as a whole, it was another strong year for U.S. stocks. In 2025, the S&P 500 index of large-company stocks rose nearly 18% and hit 39 new all-time highs along the way. This follows annual returns of 25% in 2024 and 26% in 2023.

Once again, the technology sector was a major contributor to these more-than-satisfactory gains. Tech was the top-performing sector in the S&P 500 during 2025, gaining nearly 25%.

Furthermore, the seven largest tech companies (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla), often referred to as the “Magnificent 7”, contributed about half of the S&P 500’s price return in 2025.

Outside of the US, stock returns were even more impressive. The MSCI EAFE (Europe, Australasia, and the Far East) index of foreign stocks rose by 31.6%.

One reason why foreign stock returns bested US stocks is that the US dollar fell by about 7.5% compared to other major foreign currencies. Dollar weakness boosts foreign stock returns, when those returns are measured in US dollars.

Even though bond returns lagged behind stock returns, bonds had a good year, too.

A key driver of the positive performance for bonds has been declining interest rates, which helped to push up bond prices. Over the course of 2025, 3-Month Treasury bill yields dropped by 0.7 percentage points, and 5-Year and 10-Year Treasury bond yields declined by 0.6 and 0.5 percentage points, respectively.

For 2025, high quality intermediate-term bonds, measured by the benchmark Bloomberg US Aggregate Bond Index, returned 7.2%. For short-term bond funds, where prices are much less influenced by changes in interest rates, results were less impressive, with returns landing in the 4-6% range.

Here’s a snapshot of US stock and bond performance in 2025; the 5-year average annual return for each asset class is included for comparison purposes.

Source: Moore Financial Advisors & Morningstar

-RK