December 2025 and Year-End Market Insights Report

December is in the books! We hope you had an enjoyable holiday season, and we are back at it here at Innovative Asset Advisors Group. Our asset growth has been significant, and we continue to add new advisors. If you have not visited our website in a while, we encourage you to take a look and see our growing team.

Global Markets: Strong Returns Amid Volatility

Global markets in 2025 delivered strong absolute returns but were marked by tariff-driven volatility, AI‑led equity dispersion, and renewed stress in global fixed income. Despite geopolitical and policy shocks, risk assets ended the year higher, with the S&P 500 up 16%, the Nasdaq up 19%, and the Dow up 13%. Global equities broadly outperformed, with the MSCI ACWI rising over 21%.

At the same time, gold surged nearly 70%, its strongest year since 1979, reflecting hedging demand amid tariff uncertainty and rising risk premium.

Economic Backdrop and Policy Environment

The global economy showed resilience early in the year but slowed in the second half as tariff impacts accumulated and labor markets softened. The IMF projected global growth at 3.2% for 2025, down from 3.3% in 2024. In the U.S., GDP growth decelerated to approximately 2% by year‑end, compared to 2.8% in 2024.

Tariffs were the dominant macro driver throughout the year. U.S. tariff shocks in April triggered sharp equity selloffs and Treasury market dislocations. After the initial “Tariff Tantrum”, a 90‑day tariff pause in April restored stability and fueled a global market rally.

Geopolitical Landscape

Looking outside the U.S., geopolitical risks remain significant. China continues to saber-rattle, with recent military exercises serving as a show of force encircling Taiwan. A ceasefire in Ukraine appears feasible, but we continue to believe that Putin will look for a “win” to save face domestically, and that win may be more than the Ukrainians can stomach. This remains a fluid situation, with likely developments still ahead. Tensions with Iran remain as high as ever, and the situation in Gaza remains tense.

Public Equity Markets

2025 was another solid year for public equities in the stock market.

United States Equity Performance

• S&P 500: +16%

• Nasdaq: +19%

• Dow Jones: +13%

U.S. markets were driven by AI-related equities, with companies such as NVIDIA and Microsoft among the strongest global performers. After the initial downdraft, markets overcame tariff fears and a government shutdown to reach record highs. Toward the end of December, markets retraced some of their upward momentum, which we view as profit-taking and growing concerns around AI valuations.

Sector Performance

• Technology: Strongest contributor, driven by AI infrastructure spending.

• Energy: Weighed down by lower oil prices.

• Health Care: Pressured by U.S. drug‑pricing proposals.

International Markets

Outside of the U.S., developed markets outpaced U.S. equities during key parts of the year, supported by a weaker U.S. dollar and domestic stimulus in major economies. European equities surged, particularly bank‑heavy indices, though valuation resets raised concerns heading into 2026. The Emerging Markets posted strong gains, though performance was uneven across Asia, with India being particularly weak.

Precious Metals and Real Assets

Precious metals were not only shiny, they delivered significant results in 2025. Gold was up nearly +70% and had its best year since 1979. Silver also reached all‑time highs during December. Precious metals performed well for several reasons. Investors were hedging their portfolios amid tariff uncertainty. The generally rising inflation concerns caused people to turn back to precious metals, and there was growing industrial demand for both silver and copper.

Fixed Income Markets

The bond markets experienced renewed volatility as long‑term yields and risk premiums rose. Investors remained focused on earning additional yield for extending duration along the yield curve. The U.S. 10‑year Treasury fluctuated within a roughly 4% range, ending mid‑December at 4.2%. Treasury market dislocations followed the April tariff shock, though conditions stabilized after the tariff pause. Credit spreads widened modestly as growth slowed late in the year.

Alternative Investments and Capital Markets

Within alternative investments, private credit continued to be a bright spot in the market. There is continued structural growth in this segment as banks remained largely on the sidelines with lending. Assets under management in private credit are projected to rise from here, though diversification and careful fund selection will remain important as we move forward.

In the broader capital markets, M&A and capital‑raising activity appeared positioned for resurgence, supported by lower rates, moderate inflation, and corporate AI spending needs.

Portfolio Implications

From an investment perspective, diversification remained key. Global diversification paid off, with the MSCI ACWI’s 21%+ return outpacing U.S. large caps. Gold and natural capital strategies provided effective diversification and inflation hedging, while private credit remained a core return driver.

Overall, 2025 was a year defined by tariff shocks, AI‑driven equity leadership, commodity strength, and bond‑market volatility. Despite these crosscurrents, portfolios generally benefited from broad‑based asset appreciation, with global equities and real assets delivering standout performance.

The labor market remains a mixed bag with the most recent unemployment rate at 4.6%, up from 4.4% in the last reading. We have not seen unemployment this high since the end of COVID. While we do not view this as an emergency situation, it is important to monitor the inflation rate given the critical role of consumer spending on our broader economy. We see that the labor market was clearly cooling, with hiring demand is slowing. Many companies have cited the growth of artificial intelligence as a factor influencing entry-level hiring decisions. There is more wood to chop on this issue because a slowdown for new hires will continue to challenge the 4-year college model.

Political Developments and Outlook

On the political front, the U.S. avoided a government shutdown, while political transitions in Europe added uncertainty. New York swore in a democratic socialist mayor, and wealth disparities are likely to remain a headline issue moving forward.

Final Thoughts

Ultimately, we believe that December’s pullback was driven by rate expectations, not deteriorating fundamentals. Full-year returns remained exceptionally strong, especially in U.S. large‑cap growth. The elevated bond yields and central bank caution suggest continued volatility early in 2026.

As always, we continue to preach diversification across quality equities, shorter-duration bonds, and maintaining exposure to non-U.S. markets.

From all of us at Innovative Asset Advisors Group, we wish you a healthy and prosperous 2026!

Disclaimer: Investment advisory services offered through Innovative Asset Advisors Group, LLC, (“IAAG”), a Registered Investment Advisor with the U.S. Securities and Exchange Commission. Registration does not imply any level of skill or training. The content provided is for informational purposes only and does not constitute investment, legal, or tax advice. Investments, including equities, bonds, commodities, real estate, and alternative assets, carry risks, including the potential loss of principal. Past performance is not indicative of future results. Before making any financial decisions, you should consult with your personal financial, legal, or tax advisor to evaluate your individual circumstances. IAAG does not guarantee the accuracy, completeness, or timeliness of the information presented, and it may be subject to change without notice. This material, or any portion thereof, may not be reprinted, sold, or redistributed without the written consent of Innovative Asset Advisors Group, LLC.