Financial Forum January 2026
Market Commentary – A Third Consecutive Year of Strong Returns
U.S. equity markets delivered another robust performance in 2025, driven largely by strong gains in technology and AI-related sectors. Per Barron’s, the S&P 500 rose 16.4% for the year, marking its third consecutive year of double-digit returns, while the Nasdaq Composite outpaced other benchmarks with a roughly 20% gain, reflecting heavy investor interest in tech and AI growth companies. The Dow Jones Industrial Average also posted a respectable 13.4% return, contributing to a generally positive year for equities. Major indexes often traded near all-time highs, and at points the S&P 500 recorded new closing records late in the year. International stocks also performed well in 2025, with several non-U.S. markets outpacing U.S. benchmarks thanks to improving economic fundamentals and sector-specific momentum, such as semiconductor and defense industries in Asia and Europe. Some indices, like the United Kingdom’s FTSE 100, posted their best returns in over a decade, driven in part by commodity and precious metals company rallies.
Sector Themes and Underlying Market Drivers
Technology and Growth Leadership
Tech and AI-driven companies dominated market headlines and performance, a continuation of trends from prior years. Major tech names, especially in AI software, semiconductor production, and cloud computing, were key contributors to gains in the Nasdaq and S&P 500. Their performance often offset weaker returns in more cyclical or defensive sectors, leading to market breadth concentration around large-cap tech stocks.
Interest Rates, Monetary Policy, and Investor Behavior
Throughout 2025 investors closely monitored the Federal Reserve’s interest rate stance. Anticipation of rate cuts boosted risk assets and precious metals alike. At several points, markets rallied after data indicated cooling inflation or slowing job growth, fueling expectations that monetary policy would remain accommodative. Conversely, periods of stronger economic data sometimes resulted in brief market pullbacks as traders reassessed interest rate probabilities.
Geopolitical and Economic Risks
Global geopolitical tensions—spanning trade disputes, sanctions, and conflicts—reinforced volatility in 2025. Equities rallied and sold off in response to shifting perceptions of risk and stability. Such developments also bolstered demand for safe-haven assets, including precious metals, as investors sought diversification away from traditional equities.
Precious Metals – Historic Rally and Strapping Returns
Gold and Silver
Gold experienced one of its most powerful rallies in decades. At one point, spot prices climbed above $4,500 per ounce, marking the highest annual percentage gain (+64%) since 1979. This surge reflected a powerful combination of safe-haven demand, expectations of lower real yields due to anticipated rate cuts, and central bank purchases. Geopolitical risk, inflation concerns, and U.S. dollar weakness (down 9.4%) further supported bullion’s ascent to record levels. Silver dramatically outperformed gold. Prices more than doubled (+142%) year-over-year, at times topping $75 per ounce. Silver’s meteoric rise was driven by both investment demand and robust industrial consumption. Its use in solar, electronics, and AI-related technologies contributed to its historical performance, making it one of the top-performing financial assets of the year. Per Sprott, silver has been in a supply deficit for six straight years, with analysts predicting another shortage in 2026.
2026 Outlook:
The strong market rally of 2025 was based on four pillars: (1) AI Enthusiasm, (2) Expected stable economic growth, (3) Ongoing rate cuts, and (4) General tariff stability. If the market can continue its bull run in 2026, these pillars need to remain solid. Let’s briefly discuss each:
AI Enthusiasm: This remains a significant driver for the market, with strong earnings from major tech stocks. However, concerns about overinvestment and competition in AI technologies may lead to a more selective market in 2026.
Stable Economic Growth: Economic indicators show solid growth, with stable metrics in PMIs, retail sales, and durable goods. However, rising unemployment (4.6%) could pose risks if it exceeds 5%.
Ongoing Rate Cuts: While expectations for Fed rate cuts have been a bullish factor, the Fed's recent guidance suggests a more cautious approach moving into 2026. The anticipated dovish stance of the new Fed chair may still support market optimism.
Tariff Clarity: Potential uncertainty surrounding tariffs, particularly with an upcoming Supreme Court decision, could impact market stability. A rise in the 10-year Treasury yield above 4.50% and towards 5% would be a negative signal.
Bottom Line: The bullish case for stocks in 2026 has somewhat diminished as the market needs to see a positive return on investment on all this massive A.I. cap-ex spending. So far it hasn’t. Turning to the Fed, its support for the market has also diminished, stating that they only expect one more rate cut in 2026. Yes, a new Fed chair could be more dovish, but that also comes with its own set of risks. Cutting rates into a strong economy could reignite already “stubborn” inflation. Given this, I believe that the case for the “rest of the market” finally taking leadership from tech is the strongest it’s been in over two years. I would urge you to review your exposure to ensure you’re not overallocated to the fortunes of the tech sector. That’s what we will be doing for our clients in January.
Quarterly thought…Happy New Year
"Be at war with your vices, at peace with your neighbors, and let every new year find you a better man."
― Benjamin Franklin
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Work Cited
“Market Data Center.” Barron's, https://www.barrons.com/market-data?mod=BOL_TOPNAV. Accessed 5 January 2026.
Essaye, Tom. Taking Stock of the Four Pillars of the Rally Ahead of 2026, https://sevensreport.com/taking-stock-of-the-four-pillars-of-the-rally-ahead-of-2026/.
“Market Data Center.” Barron's, https://www.barrons.com/market-data?mod=BOL_TOPNAV. Accessed 5 January 2026.
Securities offered through Private Client Services, Member FINRA/SIPC. Advisory products and services offered through Pinnacle Wealth Management Group, Inc., a Registered Investment Advisor. Private Client Services and Pinnacle Wealth Management Group, Inc., are unaffiliated entities. The opinions contained herein are not necessarily that of Private Clients Services LLC.
*The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
* The economic forecasts set forth in the presentation may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
