MARKETPOINT
Earnings Expansion and Market Breadth Return
As we close the books on 2025 and look ahead to 2026, we reflect on a year that tested investor discipline while ultimately rewarding those who maintained their focus on long-term fundamentals. Global stock indices delivered their third consecutive year of double-digit gains.[1] Yet beneath these headline numbers lies a more nuanced story—one of broadening market leadership and an economic environment that has defied widespread recession predictions.
Markets: Quality Over Hype
Perhaps the most encouraging development of 2025 was the shift in the drivers of market returns. Unlike 2023 and 2024, when multiple expansion accounted for the bulk of gains, this year’s performance was built on a sturdier foundation: corporate earnings growth contributed 79% of the S&P 500’s return, compared with just 27% in 2023.[2] This represents a fundamental improvement in the quality of returns and suggests the rally has been underpinned by genuine business performance rather than speculative enthusiasm.
Market leadership also broadened meaningfully. While the “Magnificent 7” technology stocks drove 63% of U.S. market returns in 2023, that contribution fell to 43% in 2025—not far from their collective weight in the index. More importantly, profit growth became less concentrated, with sectors including financials, industrials, utilities, and materials all posting double-digit year-over-year earnings growth in the third quarter.[3] This dispersion created meaningful opportunities for active security selection and rewarded investors who looked beyond the handful of mega-cap names that dominated previous years.
Fixed-income markets also delivered. Core bond benchmarks posted returns in the mid-single digits as yields eased from their peaks. After several difficult years, bonds reasserted their traditional role as portfolio diversifiers, benefiting from both declining yields and attractive income generation.
International markets presented compelling opportunities throughout the year, aided by dollar weakness and attractive valuations. The greenback recorded its worst annual performance since 2017, amplifying returns for U.S. investors holding international assets and underscoring the value of global diversification.
Economy: Slower but Steady
The U.S. economy confounded recession expectations in 2025, delivering expected growth of around 2% despite pronounced crosscurrents.[1] The third quarter saw the economy expand at its fastest pace in two years, supported by resilient consumer spending and robust business investment. This growth occurred even as the Federal Reserve maintained elevated interest rates for much of the year before beginning a modest easing cycle in the fall.
The labor market told a more complicated story. Unemployment rose to 4.6% in November, marking the highest level since 2021 and sitting above the Federal Reserve’s year-end forecast.[2] Job creation was tepid overall, with gains concentrated almost entirely in healthcare and social assistance. Outside that sector, employment actually declined. Manufacturing shed jobs for seven consecutive months, and wage growth cooled to its slowest pace since May 2021.
However, context matters. Much of the labor market softness reflected structural factors rather than cyclical weakness. Immigration restrictions reduced labor supply, and businesses appeared to pause hiring while assessing the impact of trade policy changes on their operating models. Initial jobless claims remained near their lowest levels of the year, suggesting employers were reluctant to lay off workers even as hiring slowed.
Inflation moderated but remained above the Federal Reserve’s 2% target. November’s Consumer Price Index registered 2.7%, though data collection issues related to the government shutdown may have obscured the true trend. The Fed responded with three quarter-point rate cuts between September and December, bringing the policy rate to a range of 3.5% to 3.75%. Looking ahead, the median Fed rate path projection implies just one additional cut in 2026, reflecting both progress on inflation and uncertainty about the economy’s trajectory.[3]
Looking Ahead: Balancing Opportunity and Vigilance
As we enter 2026, we maintain a constructive outlook while remaining mindful of the nuances in today’s economic environment. We expect modest but positive global growth, supported by fiscal stimulus from tax legislation, continued artificial-intelligence-driven capital investment, and the delayed effects of monetary policy easing.
The artificial intelligence buildout remains a significant driver of both investment and productivity. Contrary to bubble concerns, the technology sector’s capital expenditure ratio stands at 24%—well below the dot-com peak of over 35%—and has been accompanied by strong cash flows and profitability.[1] This suggests the AI investment cycle has room to run while creating opportunities across multiple sectors.
While concerns persist about artificial intelligence displacing workers, the evidence suggests AI is changing how people work rather than whether they work, with AI cited as a factor in less than 5% of announced layoffs in 2025. More significantly, AI-related capital expenditures contributed 1.1% to GDP growth in the first half of 2025, outpacing the U.S. consumer as an engine of expansion and adding resilience to the economy at a time when consumption has softened.[2]
Several themes will likely shape market dynamics in 2026. Market leadership should continue to broaden as earnings growth becomes more evenly distributed across sectors. The gap between winners and laggards—across and within sectors—will reward disciplined security selection over index-hugging. International markets may continue to offer compelling value after years of underperformance relative to U.S. peers.
In fixed income, starting yields remain attractive from a historical perspective. Core bonds should deliver attractive returns while providing genuine portfolio diversification. Forecasts for the 10-year Treasury yield expect the lending benchmark to trade in a range of 3.75% to 4.50%, offering both income and potential appreciation if economic growth moderates as anticipated.
Navigating What’s Ahead
As the economic expansion matures, we remain focused on quality companies with strong balance sheets, pricing power, and the ability to self-fund growth. We’re broadening diversification across sectors and geographies while maintaining exposure to secular growth themes, including artificial intelligence, automation, and infrastructure modernization.
2025 reminded us that staying invested through volatility pays dividends. Markets declined 19% in April following policy announcements, yet those who maintained discipline were rewarded as equities rebounded to new highs. This reinforces our conviction that long-term wealth creation comes from owning excellent businesses at reasonable valuations, not from attempting to time short-term market movements.
Your trust and confidence remain the foundation of our work. As always, please reach out to your relationship manager to discuss your portfolio positioning or any changes in your financial circumstances.
Thank you for your continued partnership, and we wish you and your families a prosperous 2026.
[1] Bloomberg Data
[2] JP Morgan Asset Management, “What’s driving stock market returns,” December 18, 2025
[3] JP Morgan Asset Management, “What’s driving stock market returns,” December 18, 2025
[4] International Monetary Fund (IMF) Data
[5] Bureau of Labor Statistics, “The Employment Situation – November 2025,” December 16, 2025
[6] The Federal Reserve, “Summary of Economic Projections,” December 10, 2025
[7] JP Morgan Global Research, “2026 market outlook: A multidimensional polarization,” December 9, 2025
[8] JP Morgan Asset Management, “Is AI really driving an increase in layoffs?” December 5, 2025
FINANCIAL PLANNING
Tax Law Updates: Planning Opportunities Under the One Big Beautiful Bill
Congress passed the “One Big Beautiful Bill” in July 2025, creating timely planning opportunities for high-net-worth individuals. Key changes include:
SALT Deduction Expansion: The cap increases from $10,000 to $40,000 for joint filers through 2030—particularly beneficial for clients in high-tax states like New York, California, and Connecticut. This deduction is subject to income phaseouts and may be limited or unavailable for high-income earners.
Updated Tax Brackets and Deductions: The Tax Cuts and Jobs Act (TCJA) rates are now permanent. Taxpayers 65+ can claim an additional $6,000 deduction through 2028 (subject to income phase-outs), and the standard deduction has been increased to $15,750 for individuals and $31,500 for joint filers in 2025.
Charitable Giving Floor: Starting this year, only charitable contributions exceeding 0.5% of AGI are deductible. Consider “bunching” multiple years of charitable gifts into single tax years during the SALT expansion period to exceed itemization thresholds and maximize deductions before the SALT cap reverts to $10,000 in 2031.
Given these changes to the individual tax code, now may be an appropriate time to review your tax strategy with your CPA or tax advisor. Topics to discuss might include:
- Whether itemizing makes sense under the new SALT and deduction thresholds
- Timing of charitable contributions and state tax payments to optimize deductions
- For clients age 65+, eligibility for the new senior deduction and tax-efficient distribution strategies
- Proactive planning around sunset provisions: Several key provisions expire after 2028 or 2030, making the next few years a critical planning window
As always, Obermeyer Wealth is not providing tax advice, and we strongly recommend consulting with your tax professional to understand how these changes apply to your specific situation.
RECOMMENDED READING
We are honored to review Wally Obermeyer’s book, Lift, which he wrote with his wife, Helen, in the final year of his life. Through reflections on his experiences growing up in Aspen and throughout his remarkable journey, he offers insights and principles that informed his approach to business and life. The book begins with Wally’s unique upbringing in the Roaring Fork Valley, where an appreciation for hard work, perseverance, and entrepreneurialism was fostered. This foundation helped him reach for the highest levels of education, eventually finding his way to Harvard via a circuitous path, where his initial feeling of being a fish-out-of-water became a story of seizing opportunity and forging his own way. The final third of the book focuses on Wally’s entrepreneurial endeavors, including Obermeyer Wealth Partners and his passion for hydroelectric energy in Colorado, and weaves in life lessons learned along the way. Wally crafted this book to help future generations at Obermeyer Wealth—and the clients and community we serve—understand our firm’s foundations and purpose.
We have limited quantities in our offices for clients, but the book will be on Amazon in early 2026 – please let us know if you would like us to send you a link once it is available.
FIRM UPDATE
New Team Members
We are delighted to introduce three new team members based in our Denver and Aspen offices.
Simone Augspurger, Associate, Corporate Concierge and Marketing (Aspen): Simone is the first point of contact for our clients in the Aspen office, where she ensures our day-to-day operations run smoothly, supports our advisory team, and provides clients with concierge services. She supports the firm’s marketing team with digital marketing initiatives, social media platform management, events and sponsorships, and special projects. Simone earned her B.S. in Hospitality Management from Colorado State University.
Kineo Gorman, Associate, Client Services (Denver): Kineo works closely with our relationship managers to support onboarding for new relationships and address our clients’ ongoing service needs. Before joining Obermeyer Wealth, he worked as an implementation consultant at an operations consulting firm and at a Washington, D.C.-based cybersecurity firm. Kineo is a graduate of Wake Forest University, where he earned a bachelor’s degree in Business and Enterprise Management.
Michelle Poirier, Senior Associate, Client Services (Denver): Michelle works closely with our relationship managers to onboard new clients and address their ongoing financial needs. She built her career in financial services at Charles Schwab, where she held roles in client service, trading, and project and meeting management. She is a graduate of Norwich University, where she majored in Architecture and minored in Business Management.
Awards
CNBC: Financial Advisor 100
Obermeyer Wealth Partners is ranked No. 13 on CNBC’s Financial Advisor 100 list for 2025. CNBC launched its prestigious ranking in 2019 with the aim of recognizing the best financial advisors and top financial advisory firms in the United States. This year, CNBC used a thorough combination of data analysis and editorial review to rank 40,563 registered investment advisor (RIA) firms, reduce that number to 1,015 finalists that met its strict requirements, then identify the 100 firms that earned a place on its list.
Forbes: America’s Top RIA Firms
Obermeyer Wealth Partners claimed the No. 22 spot on Forbes SHOOK’s 2025 America’s Top RIA Firms list. The fourth annual ranking, which “highlights firms with proven records of safeguarding and growing client wealth,” uses an algorithm of qualitative criteria and quantitative data to narrow 50,063 nominations to the 250 firms that make its list.
To view complete rankings for each award, visit the respective publication’s website. For information on ranking methodology, visit our website.
Promotions
We are delighted to announce the well-deserved promotions of three outstanding individuals on our team.
Nick Barnes, CFA, Vice President, Investments: Nick has played a crucial role in managing our investment portfolios, consistently delivering solid results for our clients through his exceptional analytical work and his commitment to rigorous research and disciplined execution. Beyond his investment expertise, Nick has stepped up as a leader, collaborating closely with our relationship managers and strengthening client relationships across the firm. He is always striving to elevate his colleagues and deliver exceptional outcomes for our clients.
Kimbo Brown-Schirato, WMCP®, Vice President: Kimbo has built and nurtured strong relationships that have deepened trust in our firm and opened doors for clients and colleagues alike. She leads with confidence, bringing new team members along, encouraging new ideas, and always acting in the best interest of our clients. She has been a leader in expanding our Family Office services, designing thoughtful solutions, coordinating service providers, and elevating the experience for the families we serve.
Hayden Porter, CFP®, Vice President: Hayden maintains the highest levels of care and professionalism in working with clients, and he has taken a leadership role in the firm’s strategic priorities. His persistence, clarity of thought, and ability to collaborate across teams have helped set the stage for Obermeyer’s continued growth and excellence. He brings people together, leads by example, and is deeply committed to our culture.
Please join us in congratulating Nick, Kimbo, and Hayden on these exciting and well-earned milestones. Their dedication, hard work, and embodiment of our core values are commendable and inspirational.
