Patience, not prediction, continues to win.
The market, as measured by the S&P 500, finished 2025 up 17.8%. That is almost unthinkable considering how much the market had already run in 2024. Not a single analyst at a major Wall Street bank predicted a return that large.
In fact, no one was even close except for one analyst at Deutsche Bank who predicted the S&P500 would reach 7,000 (it got as high as 6,945). Unfortunately, he chickened out and cut his forecast to 6,150 during the spring tariff selloff. Oops!
Speaking of the tariff selloff, if you didn’t begin the year thinking the market would return nearly 18%, you REALLY weren’t thinking it on “Liberation Day.” The market declined 4% before the Liberation Day tariff package was announced. After the announcement, the market dropped another 10%.
But that was the end of it. The market shrugged off any tariff news for the rest of the year and enjoyed a steady increase in price. Once again patience, and not prediction, proved to be the best investment strategy.
Speaking of patience, after being a drag on portfolios for several years, international stocks finally shined…
International outperformance
A couple of years ago, our summer intern quipped “why do we own international stocks? They haven’t outperformed U.S. stocks for as long as I have been alive!” (His statement wasn’t entirely correct, but he was VERY young when international last outperformed the U.S.)
It is true that U.S. stocks have dramatically outperformed international stocks for quite some time, but that changed in 2025. This past year, international provided a stellar 32.4% return vs the S&P 500’s return of 17.8%.
It’s worth pointing out that the opposite happened in 2024. The S&P 500 dramatically outperformed with a 25% return vs. 5% for international stocks. By smoothing the data out with a rolling 3-year return, it is revealed that international has not meaningfully outperformed US stocks in 15 years.
So that brings us back to the original question. Aside from 2025, why own international stocks at all?
For one, international stocks tend to do better when the U.S. dollar weakens. Many factors can influence the US dollar’s strength compared to other currencies (interest rates, inflation, economic growth, risk, trade balance, government debt, government confidence, foreign USD reserves, geopolitical stability, etc.) Over the past year, the US dollar has weakened which could signal a period of continued international stock outperformance.
Secondly, let’s not forget what happened in Japan! Imagine, for a moment, that you reside in Japan. You bought Japanese stocks 30 years ago anticipating a nice retirement off their earnings. It would likely disappoint you to find out they provided a very meager 2.3% annualized return over 30 years.
If you can think back to the 80s, it seemed like Japan was economically taking over the world, but it didn’t quite pan out. Point being, a Japanese citizen that did NOT globally diversify found themselves in a much more difficult situation than someone who did.
While the United States has numerous structural advantages over Japan, it is still a relevant cautionary tale against betting your retirement completely on your home country. Even though international stocks haven’t historically grown as fast as US stocks, they still can provide long-term growth potential and meaningful diversification (and it certainly worked well for the markets last year!).
Digital Gold vs Real Gold
If you didn’t hear much buzz about Bitcoin last year, don’t worry, you aren’t out of the loop. The digital currency largely went nowhere and finished the year down 4.4%.
Bitcoin is often touted as “digital gold,” sharing some characteristics with physical gold: scarcity, relative independence from governments (sort of), and use as a store of value. Bitcoin enthusiasts sometimes argue that gold is “for boomers” and that the future is Bitcoin.
That wasn’t the story in 2025. Old-fashioned rocks dramatically outperformed Bitcoin. Gold rose more than 66%, and silver had an astonishing return of 146%. More surprisingly, the return for silver is roughly tied with that of Bitcoin over the last 5 years, and it got there with far less volatility.
*This is intended strictly for educational purposes as is not a recommendation for or against cryptocurrency*
Outlook for 2026?
What’s the outlook for 2026? Well, not a single major Wall Street forecaster was even close for 2025, so we should treat their 2026 predictions with healthy skepticism.
There will likely be some interest rate cuts. There will certainly be a few surprises. And although markets can’t be predicted, a patient, plan-based approach has historically been a prudent way to pursue long-term objectives.