| The question I am asked more than any other is, “What’s going on in the markets or economy?” So, occasionally, I like to share some charts/graphics, along with some brief commentary, to help answer this question. This week, I have a handful of great charts that remind us of the value of diversification, explore how the companies we own are deploying excess cash, and provide a brief update on the housing market. And in our last chart, we’ll share an illustration of the market’s long-standing ability to climb walls of worry. I hope you find these charts and notes offer valuable perspective as we work together toward your financial goals. ********** THE CASE FOR DIVERSIFICATION—NEW HIGHS IN NEW HIGHS: International markets handily outperformed the U.S. in 2025, and they don’t appear to be slowing down. In fact, of the 70 countries tracked by Topdown Charts, 47 have recently attained new all-time highs, which is the largest concurrent number on record. I highlight this because the last decade has been filled with persistent commentary suggesting that U.S. stocks are all investors need to own. While the U.S. has delivered excellent returns over that time, there was no way to know how long that trend would last, but the shift finally seems to have happened. This unpredictable rotation is why we believe it’s wise to stay diversified. (Sources: 2025 Market Performance: Novel Investor; Chart & Other Data: Topdown Charts) |
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| SOMETIMES, MARKETS ARE IRRATIONAL: Here’s a counterintuitive piece of market data: since “Liberation Day,” small-cap companies with negative earnings have significantly outperformed those with positive earnings. Why this has happened is anyone’s guess, but this kind of result is a useful reminder of why we don’t try to outsmart the market. Short-term outcomes are often driven by forces that are difficult, if not impossible, to predict. Again, by choosing to own a diversified market-like portfolio, we give ourselves the opportunity to benefit from returns that can, and often do, come from unexpected places. (Source: Apollo) |
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| BUYBACKS AND DIVIDENDS ARE STEADY AS THEY GO: Good news for long-term shareholders like us: it’s estimated that companies repurchased a record $1 trillion in shares in 2025. As a reminder, buybacks are generally beneficial for investors because they increase our ownership stake in businesses without requiring any action on our part. And fewer shares outstanding means our claim on future earnings grows over time as well. Dividends tell a similar story. While dividend yields remain historically low, total dividend payments continue their historically-dependable growth trajectory. For diversified investors like us, that means our quarterly paychecks have grown considerably over the last few years with remarkably little fanfare. And again, with no effort required on our end. (Source: S&P Global) |
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| LOOK AT WHAT’S HAPPENED WITH EARNINGS AND PROFIT MARGINS: If you’re looking for an explanation for the market’s performance over the past few years, you don’t need to look much further than earnings and profit margins. Both have been moving steadily higher, with profit margins especially continuing to defy most expectations. As long as this trend persists—and it’s worth remembering that it will end at some point—it’s reasonable to expect the market to continue doing fairly well. (Source: Carson Group—pages 21-22) Earnings: |
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| HOME SALES ARE FINALLY PICKING UP AGAIN: Real estate affects nearly everyone, so a properly functioning real estate market is important. As shown in the chart below, the housing market has been pretty lethargic for a while now, so it’s exciting to see that there may be signs of life again. Most recently, December home sales were the strongest in nearly three years, rising by 5.1%, suggesting that lower mortgage rates may be starting to make an impact, as I’ll share more about in the next chart. It’s early, and one month doesn’t make a trend, but this is at least a step in the right direction for a market that has been slow for quite some time. (Sources: Home Sales Data: National Association of Realtors; Chart: National Association of Realtors) |
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| MORTGAGE RATES ARE FINALLY COMING DOWN: After peaking near 8% in 2023, 30-year mortgage rates have thankfully drifted back toward 6%, the lowest level in more than three years. These lower rates should improve housing affordability at the payment level and encourage activity in what has been a relatively stagnant housing market. As we shared above, early signs suggest that the market may be starting to pick back up, but it will ultimately need both rates and supply to normalize for this to be a sustained market improvement. (Source: Freddie Mac) |
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| NOT MARKET-RELATED, BUT THERE’S REASON FOR OPTIMISM IN THE MEDICAL WORLD: Thanks to the development of better pre-screening and treatment options, the five-year survival rate for U.S. cancer patients has now reached 70%. As shown in the chart below, the incredible result of these developments is that there have been nearly 5 million deaths ‘averted’ since 1990! To put that number in perspective, 5 million lives are roughly equivalent to the entire Boston Metropolitan area. Unfortunately, deaths that didn’t occur don’t make headlines, so this incredible progress against cancer has largely gone unnoticed, which is why I wanted to share it with you here. The world is getting better all the time. (Source: American Cancer Society via HumanProgress.org; Boston Population: Wikipedia) |
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| MARKETS CLIMB WALLS OF WORRY: You may have noticed that 2025 was a fairly eventful year with plenty of worrisome headlines. Yet, despite all the noise, the market went on to reach 46 new all-time highs. I point this out because what dominates the news doesn’t always show up in market prices as we might expect. Following the April pullback, very few people anticipated the strength or pace of the rebound. This response serves as a great illustration of the fact that the unexpected happens all the time in the stock market, which is why we believe so strongly in staying the course through every type of market environment. It remains the only way to ensure that we capture all the returns our portfolios have to offer. (Source: Avantis Investors) |
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| As I hope the charts above make evident, there are many reasons for optimism as we look to the future. The companies we own are thriving, the housing market appears to be loosening up, and by many measures, the world continues to get better.That said, as encouraging as these developments are, none of them can assure us of what lies ahead. The future remains uncertain, and it always will be, but successful investing has never required knowledge of the future (if that was even possible).Historically speaking, successful investing has simply required prudent diversification, patience, and the discipline to stay invested through market environments that feel uncomfortable in real time. For that reason, we will continue to advocate for exactly that approach.I hope these charts and commentary have been helpful in providing much-needed perspective. As always, please don’t hesitate to reach out with any questions. And most importantly, stay the course. |
This material was prepared by Money Visuals.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
All investing involves risk including loss of principal. No strategy assures success or protects against loss.
Any economic forecasts set forth in this material may not develop as predicted.
