Market Insights - 12/30/25
Observations & Insights – December 30, 2025
Hope you all have a great 2026!!
Markets at Record Highs
The S&P 500 surpassed a record high on Tuesday, and the Dow followed suit on Wednesday, pushing above their previous peaks set less than two weeks earlier. The S&P 500, the Dow, and the NASDAQ all posted gains of more than 1% in a holiday-shortened trading week.
Key Points
- The S&P 500 made new highs last week, up over 19% for 2025.
- The US Economy grew 4.3% annualized in the 3rd quarter.
- Wall Streets’ consensus target for the S&P 500 is $7500 for 2026.
- Earnings estimates range between $280 to $320 per share for the S&P 500.
Observations: GDP Accelerates
The government’s long-delayed initial estimate of third-quarter U.S. economic growth showed a much bigger gain than most economists had forecast. GDP expanded at an annualized rate of 4.3% in the July-through-September period versus the consensus forecast for 3.2%. The result follows a 3.8% GDP growth rate in this year’s second quarter and a -0.6% contraction in the first quarter.
Precious metals prices pushed their record levels higher, with silver surpassing $77 per ounce for the first time and gold and platinum also setting new record highs. Silver is up around 155% year to date based on Friday afternoon’s price and gold is up about 70%.
An index that tracks investors’ expectations of short-term U.S. stock market volatility fell on Wednesday to the lowest level in more than 12 months. The CBOE Volatility Index closed at 13.6, down from a recent high of 26.4 on November 20. The year-to-date high came in early April, when the VIX surged above 50 amid uncertainty over tariffs.
The price of oil rebounded modestly last week, although it remained on pace for the steepest full-year decline since 2020. U.S. crude was trading around $57 per barrel on Friday afternoon, well below its year-end 2024 level of about $72, a 21% decline year to date.
After three interest rate cuts in 2025, bond market trading continued to support prospects for two further reductions in 2026. As of Friday’s market, close, prices in the rate futures market implied a roughly 74% probability that the Fed would implement at least two quarter-point cuts over the course of the year, according to CME FedWatch. The probability of just a single cut was 21%, with a 5% probability for no cut at all.
Although the U.S. stock market is on pace for a solid overall gain in 2025, a key U.S. benchmark was lagging behind the year-to-date performance of two international indexes. At Friday's close, the S&P 500’s total return for the year was more than 19% versus returns of nearly 32% and 34%, respectively, for an ex-U.S. developed-markets index and an emerging-markets index.
Companies in the S&P 500 are projected to post double-digit growth in 2026 for the third year in a row. FactSet reported that analysts expect full year 2026 earnings to grow by an average of 15% over 2025’s results. All 11 sectors are forecast to post earnings gains, led by information technology. Real estate is forecast to deliver the slowest growth.
Insights: Investing Through Structural Change
Markets have staged an impressive rally, returning to all-time high territory and continuing a pattern of resilience that has defined much of this cycle. What makes this advance particularly notable, however, is that several of the former technology leaders remain below their prior peaks. Beneath the surface, leadership is shifting. The S&P 500 is making new highs, but it is doing so with broader participation and a quiet rotation rather than narrow, speculative excess.
Against that backdrop, most major Wall Street firms have now published their 2026 targets for the S&P 500, and expectations are generally positive. Of the 21 forecasts compiled by Bloomberg, only six sit at or below our target range of 7,300–7,400. Our outlook is based on a valuation of roughly 23 times projected 2027 earnings per share, a level that reflects continued earnings growth while acknowledging a more mature phase of the market cycle. We may be overly conservative here, but we believe there will be a further period of digestion after recent market gains. We also continue to see a healthy amount of skepticism and speculation over the potential changes associated with the widespread adoption of AI into business applications.
The median strategist target stands at a target of 7,500 for the S&P 500, with an average forecast of 7,555 and a wide range stretching from 7,000 to 8,100. A move to 7,500 would imply roughly 10% price appreciation from recent levels. Our more measured target points to approximately 8% upside through year-end 2026, translating into a total return of about 9% to 10% once dividends are included.
Earnings expectations for 2026 remain dispersed. S&P 500 EPS forecasts range from $280 to $320, with a median estimate near $308. Our $290 forecast is intentionally conservative, allowing for potential execution challenges as artificial intelligence adoption progresses and for modest margin pressure tied to tariffs or supply-chain adjustments early in 2026.
One potential tailwind for the economy in 2026, that we feel is not being given its due, is the full-year effects of the so-called “One Big Beautiful Bill,” which, is designed to encourage domestic investment, improve business confidence, and reinforce long-term growth incentives. By prioritizing policies that lower effective tax burdens on investment, promote onshoring, and reduce friction around capital deployment, the legislation could help extend the current capital expenditure cycle rather than bring it forward at the expense of future growth. The cumulative effect would likely be stronger corporate cash flows, improved visibility for long-term planning, and a greater willingness among businesses to commit to multi-year projects.
Despite the positives, history argues for restraint in our forecasting. Since 1951, the S&P 500 has delivered four consecutive years of double-digit gains only once, during the late-1990s technology boom. A gain exceeding 10% in 2026 would repeat that rare outcome. More recent attempts at a fourth straight double-digit year ended less favorably, with a modest decline in 2014 and a sharp pullback in 2021. Strong returns remain possible, but history suggests they should not be assumed.
Still, focusing too narrowly on historical averages risks missing the larger structural story. The fundamental economic backdrop offers little evidence of an imminent downturn. Capital expenditures have emerged as the most durable and defining theme across corporate America, with investment plans extending well beyond the next business cycle. What we are witnessing is not a short-term surge, but a multi-year and potentially a multi-decade, buildout of infrastructure, technology, and productive capacity. In that context, traditional recession fears appear increasingly academic.
If even a portion of announced domestic investment commitments materialize over the next two years, the probability of a conventional recession diminishes meaningfully. Despite persistent skepticism in financial media, the U.S. economy appears to be in the early stages of a broad productivity and infrastructure expansion.
Much of today’s bearish narrative centers on the strong performance of artificial intelligence-related stocks, often concluding that rapid price appreciation alone signals a bubble. History suggests this is a common mistake during periods of genuine technological transformation. Every generation experiences a defining innovation, and those shifts rarely look comfortable or obvious in real time.
Artificial intelligence and robotics represent more than a cyclical growth trend, they are becoming economic necessities. Demographics make this unavoidable. Millennials, the largest generation in modern history, will transition into retirement over the next 30 to 40 years, shifting from contributors to beneficiaries of social systems. They are followed by Generation Z, a significantly smaller cohort. This demographic imbalance creates a productivity challenge that cannot be solved through policy alone.
The implications extend well beyond the United States. China, for example, faces one of the most severe demographic contractions in recorded history, with population declines potentially reaching hundreds of millions over coming decades. In that environment, investments in automation, AI, and advanced manufacturing are not speculative excesses, they are essential adaptations to a shrinking workforce.
Importantly, this transition need not be viewed negatively. While automation will displace certain roles, it will also reshape how work is done and create new opportunities across the economy. We may already be seeing early signs of this evolution in employment data. Rather than signaling economic fragility, these changes may reflect the early stages of a broader shift toward higher productivity, improved efficiency, and more durable long-term growth.
Final Thoughts
Markets have returned to all-time highs amid improving breadth and leadership rotation, suggesting a healthier advance beneath the surface rather than speculative excess. While Wall Street targets point to continued upside through 2026, history argues for measured expectations after several strong years.
Importantly, the broader economic foundation remains constructive, supported by a sustained wave of capital investment in infrastructure, technology, and productivity. The adoption of artificial intelligence and automation is not merely a growth trend but a necessary response to long-term demographic challenges, both in the U.S. and globally. Taken together, these dynamics support a disciplined but optimistic outlook, one that favors staying invested while recognizing that returns are likely to be more moderate and driven by fundamentals rather than valuation expansion.
It is our aim at Asbury Wealth Partners that you find the market commentary we provide informative and useful. As our success grows mainly through referrals from our clients, we encourage you to share this weekly newsletter with your friends, family, and colleagues. If you are a client, we thank you for your business and your confidence. If you are not yet a client, we encourage you to contact us today and explore how our team may be able to add value to your unique financial situation.
Thank You,
Jeff
~~~~~~~~~~~~~~~~~~~~~~~
Jeffrey S. Markewich
Wealth Advisor
Off – 719-548-8103
Cell - 719-357-7747
Text – 702-493-9678
TF - 888-328-7655
~~~~~~~~~~~~~~~~~~~~~~~
An Introduction to Your Friends & Family
is the Greatest Compliment You Can Give
Jeffrey Markewich is a Registered Representative with, and securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC.
The information contained in this email message is being transmitted to and is intended for the use of only the individual(s) to whom it is addressed. If the reader
of this message is not the intended recipient, you are hereby advised that any dissemination, distribution or copying of this message is strictly prohibited. If you have received this message in error, please reply and you will be removed.
These views are those of the author, not of the broker-dealer or its affiliates. This material contains an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. All investments involve risk, including loss of principal. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources.
The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.
S&P 500 – A capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.
The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell 3000 index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.
The CBOE Volatility Index® (VIX®) is meant to be forward looking, showing the market's expectation of 30-day volatility in either direction, and is considered by many to be a barometer of investor sentiment and market volatility, commonly referred to as “Investor Fear Gauge”.
International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.
All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. You cannot invest directly in an index. Consult your financial professional before making any investment decision.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
Asset allocation does not ensure a profit or protect against a loss.
The Consumer Price Indexes (CPI) program produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services (Source: U.S. Department of Labor).
The Gross Domestic Product (GDP) is a comprehensive measure of U.S. economic activity. GDP measures the value of the final goods and services produced in the United States (without double counting the intermediate goods and services used up to produce them). Changes in GDP are the most popular indicator of the nation's overall economic health.
Government bonds and Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.
LPL Tracking # 841926-1
