December Market Recap
US stocks defended their gains in December to finish the year firmly positive for the third year in a row. Two of the three major equity benchmarks ended the month lower, but just barely, and not nearly enough to spoil yet another strong year overall.
Six of the 11 sectors in the S&P 500 recorded losses last month. Utilities (-5.3%) and Real Estate (-2.8%) performed the worst. Five sectors delivered gains, led by Financials (+2.9%) and Materials (+2.0%). Technology, which took a bit of a breather in December, finished middle of the pack.
Zooming out a bit, 2025 continued what has been an incredibly durable run for US equities. The S&P 500 has been positive in six of the last seven calendar years, and 15 of the last 17 dating back to 2009. 2018 and 2022 were the only exceptions.
Benchmark Returns: December 2025 | YTD 2025
|
Dow Jones
|
S&P 500
|
NASDAQ
|
+0.73% | +12.97%
|
-0.05% | +16.39%
|
-0.53% | +20.36%
|
|---|
There are always a multitude of factors driving market movements, but two trends fueled stocks more than any others in the second half of last year: Fed cuts and A.I spending. Those storylines remain front-and-center as we turn the page to a new year.
The Federal Reserve cut interest rates by 0.25% on December 10, the third cut in 2025. The policy decision was entirely expected as data had pointed toward slowing economic growth and some weakness in the labor market. It’s notable, however, that three of the 12 Fed governors voted against the cut.
It underscores the ongoing debate as to whether unemployment or inflation poses the greater economic risk. For what’s it’s worth, the Fed’s “dot plot” suggests only one additional cut in 2026, but those projections are perennially subject to change.
The willingness of Corporate America to spend billions in the Artificial Intelligence arms race can also be credited for much of the recent optimism. The seven largest stocks in the S&P 500 spent an estimated $300 billion last year on A.I. infrastructure build-outs. A huge portion of the recent gains in those stocks is based on the belief that those dollars will ultimately lead to massive profits. Time will tell. For now, it’s fair to say the market is a believer that the spending will pay off.
International stocks outperformed US equities last month and in 2025 overall. Non-US Developed Markets gained 0.9% in December and roughly 27% for the calendar year. Emerging Markets increased 0.7% last month and 31% last year. Global trade uncertainty triggered by tariffs earlier in 2025 probably helped foreign stocks more than it hurt. Many of those countries reconfigured trade agreements and supply chains to be less reliant on American products.
International stocks also benefitted from a weakening US dollar, which fell nearly 10% last year versus a basket of global currencies. That trend could continue if the Fed cuts keep coming.
Another trend that remained in place last year: Cap-weighted benchmarks outperforming equal-weights. The S&P 500 outperformed its equal-weight equivalent by 6.5% in 2025. This after a +12% gap in 2024 and a +12.4% gap in 2023 (+34% total over three years). The prior extreme for 3-year outperformance was 32% from 1997-99, which was followed by a sharp reversal and seven years of Equal Weight outperforming, per Creative Planning’s Chief Market Strategist Charlie Bilello.
Intermediate and longer-term bond yields actually increased in December despite the Fed’s rate cut. The yield on 10-year US Treasuries rose to 4.16% (up from 4.02% a month earlier), which demonstrates some growing inflation fears. Money market yields continued to fall, however.
Best wishes for a happy and prosperous 2026 from our Marks Group family to yours.
Ben Marks
Chief Investment Officer
Brett Angel
Senior Wealth Advisor
Investment Advice offered through Marks Group Wealth Management, a Registered Investment Advisor.
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