Quarterly Update: Q4 2025 (Ending 2025 Strong)

As we close the book on 2025, the stock market gave investors a solid, if not euphoric, finish. The final three months of the year were characterized by steady gains rather than an explosive rally, pushing the total returns for 2025 to respectable double-digit levels. The S&P 500 (a good measure of the overall U.S. stock market) rose 2.7% in the fourth quarter, bringing its total gain for the year to 17.9%.

Back in October, there was a measurable amount of nervousness—concerns about the election, sticky inflation, and the pace of interest rate cuts. As the quarter progressed, the market didn't skyrocket, but it held its ground. Once the election results were finalized and the Federal Reserve continued its rate-cutting cycle in both October and December, investors found enough stability to keep prices elevated. Perhaps most importantly,

American shoppers defied the gloomier forecasts, with online holiday spending hitting record highs, proving the economy remains on solid footing.

Below is a breakdown of what happened, why it matters, and what we are looking at as we head into 2026.

How the Major Markets Performed

In the third quarter, the story was dominated by big Technology. In the fourth quarter, investors hoped for a massive "broadening out" of the rally. Instead, we saw a divergence: large, established companies continued to perform reliably, while smaller, riskier companies struggled to keep up.

Nasdaq Composite (Tech & Growth Stocks):

• Up 2.1% for the quarter.

After a massive run earlier in the year, technology stocks took a bit of a breather in Q4 but held onto their gains. The excitement around Artificial Intelligence (AI) continued to support valuations, but the explosive growth seen in Q1 and Q2 moderated as investors waited for earnings to catch up to stock prices.

S&P 500 (Large U.S. Companies):

• Up 2.7% for the quarter.

This index hit new highs in late December. The gains were driven largely by strength in Consumer Discretionary stocks (thanks to holiday spending) and Industrials, which benefited from ongoing spending on defense and data center infrastructure.

Dow Jones Industrial Average (Blue Chip Companies):

• Up 3.3% for the quarter.

The "Blue Chips" were the steady winners of the quarter. Investors gravitated toward these well-established, profit-generating companies as a safe harbor against lingering economic uncertainty.

Russell 2000 (Small Companies):

• Up 1.6% for the quarter.

This was the area that lagged. Smaller companies, which rely heavily on loans to grow, did not see the massive surge investors hoped for. Despite interest rate cuts, borrowing costs remained relatively high for smaller firms, keeping a lid on their stock prices compared to their larger peers.

The Big Picture: Three Things That Mattered

Three main themes drove the stock market's resilience at the end of the year:

1. The "Relief" After the Election

Regardless of politics, the stock market hates uncertainty. Before the November election, many businesses paused capital expenditures. Once the election was decided, that uncertainty vanished. While it didn't trigger a massive boom, it removed a major headwind, allowing companies to refocus on operations for 2026.

2. The Fed Stays the Course (Sept, Oct, Dec Cuts)

The Federal Reserve delivered on its promise to support the economy, lowering interest rates in September, October, and again in December. The target rate now sits between 3.50% and 3.75%. This steady cadence of cuts signaled to the market that the Fed is committed to preventing a recession, even if inflation remains slightly sticky.

3. The Resilient Digital Shopper

Economists warned for months that the consumer might crack. Instead, they just changed how they spent. Online holiday spending rose 6.8% year-over-year, beating forecasts. While overall foot traffic in malls was mixed, the strength in e-commerce kept the consumer economy humming.

Sector Breakdown: Where the Returns Came From

In Q4, performance was driven by specific themes rather than a rising tide lifting all boats.

Sector	Trend	What Drove Performance?
Consumer Discretionary	Leader	Strong online holiday sales boosted retailers like Amazon.
Industrials	Strong	Defense spending and data center construction fueled growth.
Communication Services	Steady	Major internet and media companies held onto strong YTD gains.
Financials	Mixed	Banks benefited from activity, but falling net interest margins were a drag.
Technology	Moderate	A "digestive" quarter after leading the market for most of 2025.
Real Estate	Weak	Despite Fed cuts, long-term bond yields rose, hurting property stocks.
Energy	Lagging	Oil prices softened to the $68–$70 range, weighing on energy profits.

*Index performance is shown for illustrative purposes only. Past performance is not indicative of future results.

Conclusion: What to Expect in 2026

2025 was a year of recovery and resilience, delivering an almost 18% return for the S&P 500. As we enter 2026, valuations are relatively high, meaning companies must deliver strong profit growth to justify higher stock prices.

We are seeing a market that rewards "quality"—companies with cash cash flow and established markets—over speculative growth. The volatility seen in small caps during Q4 is a reminder that not all risks are rewarded equally.

Our Approach:

We remain optimistic but disciplined. The "easy money" from the initial bounce off the lows has been made. We recommend a balanced approach: maintaining core exposure to long-term growth themes like Tech/AI, but balancing it with high-quality "Blue Chip" companies and dividend payers that performed well in Q4.

It was a strong year. Let’s stick to the plan and make 2026 another good one.

---

About Rigden Capital Strategies

Rigden Capital Strategies was founded on a simple belief: financial advice should be personal, transparent, and centered around your goals—not built on generic models or product-driven sales. With decades of combined industry experience, we’ve developed a process grounded in three core values: value, integrity, and progress.

As a fee-only fiduciary, we provide personalized, goals-based wealth planning services designed to adapt with your life. Our services include investment management, retirement and tax planning, and estate coordination. We use a mix of active and passive strategies to help clients navigate market changes with clarity and confidence.

We believe in building real relationships and delivering clear, actionable strategies—focused on long-term planning and aligned with your objectives.

Your goals, our strategies. Together, let’s make your goals happen.

Disclosure: This commentary is for informational and educational purposes only and should not be construed as individualized investment advice. Past performance is not indicative of future results. All investing involves risk, including the possible loss of principal.