A Little Context for 2025 and Beyond

Prices, Performance, Policy and Pundits

Photo by Mathieu Stern on Unsplash

December 31^st is a marvelous day to celebrate the success of all the resolutions that were set into motion on January 1^st. That explains the multitude of New Year’s Eve parties around the world. Not really, but in the tradition of looking back on the calendar year known as 2025, I will summarize the performance of the primary market indexes that are used by The Moneyball Method.

These are the broad-market indexes of US equities, international stocks, 10-year Treasuries, and to that I will add the largest single asset by market value holdings – gold. And there are many I will not address: real estate, high yield and international debt, energy and other commodities, venture capital and private equity, and digital assets or collectibles. They can be important, but this will be brief.

So, to kick things off, I’ll begin with gold. It did nothing. Gold just sits there. It held its own. Gold has no internal rate of return. It is the one constant against which the performance of all other forms of money can and should be compared.

Relative to the US dollar, the price of gold closed at $4,397 on December 29th - and increase of 67% in 2025. In other words, it was a big year for the decline of the US dollar. But relative to the Euro and the Yen, gold did not rope-a-dope them so badly. And that helps explain the outperformance of international equities relative to US stocks in 2025. Not surprisingly, the Dollar was also weak against other major currencies, particularly in the first half of the year.

Of course, the greatest wealth creating engine in the history of the world continues to be America. The capital available to drive up the dollar price of gold and the stock prices of foreign companies is because of the existence of America.

In 2025, the US stock market – as measured by the Russell 3000 index - grew about 17%. That is roughly the same as the S&P 500 - and both include the dominating size and strength of the Magnificent Seven (Nvidia, Amazon, Alphabet, Apple, Meta, Microsoft, Tesla)

As of the end of the third quarter, First Trust Economics reported those companies represented almost one-third of the market capitalization of the S&P 500 and almost 42% of the total return. But as is the case with market leadership, it rotates over time, and Broadcom replaced Tesla at the seven spot. Coincidentally, the number of companies outperforming the index increased to 37% for the first three quarters of 2025 compared to 27% in 2023. And in the Russell 3000, the Mag 7’s impact is closer to 25% of market capitalization.

But to the objective investor, making predictions about market leadership, earnings growth, price targets, valuation trends, interest rates, and GDP reports may be appropriate for the sober hours of New Year’s Eve parties and TV broadcasts, but Notre Dame’s exclusion from the CFB playoff is more pertinent. And a reasonable allocation to international equities is appropriate because no President or Fed Chair agrees with me that the only defensible US monetary policy is a stable currency.

In an anomaly, the MSCI EAFE (Europe, Australia, Far East) grew 28% in US dollars and outperformed US Equities by 11%. But a far more reliable hedge against US stock market risk was also up sharply in 2025 - the yield on the constant 10-year maturity of US Treasury bonds is 4.14%, up from 4.58% at the beginning of the year. Yes, in bond pricing terms, a lower yield is a higher price, and this is an increase of about 10%.

Think about that. At the end of 2024, the US government debt load was about $35 trillion and has since grown by more than $3 trillion since. And analysts of all American political parties and their economic gurus are incandescent about federal debt levels and the massive deficits fueling the growth.

In July, Reason Foundation reported that US debt surpassed 120% of GDP. That has not happened since World War II, and by that analysis, America is a debtor nation. But the demand for Treasury bonds grew even faster in 2025 - as evidenced by the lower yields. How? And why?

First, GDP is a fraudulent number. It shrinks when imports are rising, yet only a healthy economy creates the wealth needed to import goods from overseas. GDP rises when exports rise, which incentivizes political power over economic freedom. Second, federal tax revenue are far too high and GDP doesn’t count the inflow of capital to US markets. If American companies are efficient, exports will take care of themselves. If not, markets will take care of that.

Therein lies your resolution for 2025. Ignore the policy makers. Ignore the analysts who sanction the policy makers. And control what you can control - defined values, cash flow expectations, and risk capacity. After all, the ultimate payoff for your investment strategy decisions is time.