Closing the books on 2025: Gratitude, perspective, and the lessons learned

Good morning and Happy New Year – it’s hard to imagine another year has come and gone – but it has and it is what it is…..Stocks did a whole lot of nothing yesterday but ended just a bit lower, the Russell taking it the hardest – down 19 pts or 0.8%. – The Dow down 95 pts, the S&P lost 10 pts, the Nasdaq lost 55 pts, the Transports down 88 pts, the Equal Weight S&P down 13 pts, while the Mag 7 gave up 13 pts.

The headline—or at least THE headline—was the release of the December Fed minutes. And as expected, we didn’t really learn anything new. What we did get was confirmation of what we already knew: the committee was at a crossroads and could have gone either way. The fact that we got a cut suggests that JJ ultimately pushed it through. Stevey Miran voted for a 50 bp cut, while Austan Goolsbee and Jeffrey Schmid dissented—voting for no cut at all.

Looking ahead, the majority of the committee does see additional cuts in 2026 as long as inflation does not re-accelerate. That said, they remain divided on both the timing and the number of cuts needed. What is clear: no one should expect a January cut (which we already assumed), and my gut says a March cut is also unlikely—although that could change depending on the data. And remember – I am in the camp that they should NOT cut any further at all, unless the data significantly weakens.

Bottom line: the minutes offered no surprises, no new signals, and nothing for the algos to get excited about. Stocks responded accordingly—with a shrug.

Ok – so the year is basically over and here is what it looked like for the 11 major S&P sectors. Overall – if you had a well-diversified portfolio – you won!

Communications took the prize up 32.9%, Tech up 24.3%, Industrials gained 18.7%, Financials were up 14.2%, Utilities rose 13.4%, Healthcare gained 13.2% (so much of that happened in the last 2 months), Basic Materials up 9.4%, Consumer Discretionary added 6.2%, Energy up 5.5%, Consumer Staples added 1.9% while Real Estate gained 0.7%

Further down the chain – Retail gained 8.7%, Homebuilder lost 0.5%, Airlines up 10.8%, Disruptive Tech up 37%, the Value Trade gained 11% while the Growth Trade added 22.3%, Emerging Markets were a star performer up 31%, Metals & Miners stole the show gaining 85% (think precious metal performance), Cybersecurity added 13%, Semi’s up 41%, Robotics added 14.5%, the Equal Weighted S&P traded gave you 10.3%, Aerospace & Defense jumped 49%, Oil Exploration and Production took 3.7% out of you, Big Pharma added 20%.

Bonds did nothing dramatic – the TLT gained 0.6%, the TLH is up 2.7% while the AGG added 3.3%. Yields were all over the place – the 10 yr began the year yielding 4.5% and ended at 4.1% - a decline of 8% - but did trade as high as 4.8% (Jan) and as low as 3.85% (April). Mortgage Rates began the year at 7% and are now 6.18% - that’s an 11% decline in the cost of owning a home. Gov’t Money Markets were paying you 4.5% in January and are now paying you 3.75% - a 16% decline in gov’t money mkt rates.

Oil – began the year at $68 – traded as high as $70 (June) and as low as $54.90 (December). This morning it is trading at $58.10 – and that would represent a 14% decline in the cost of energy.

Now gold and other precious metals — WOW. Now there’s a story.

You could have bought gold at $2,600 on January 1st, and if you did, you were rewarded with a 74% gain during the year. Even after a modest pullback this week, gold is trading around $4,305 this morning, still up roughly 66% year-to-date.

And silver? That one was a sleeper… until it wasn’t.

Silver barely moved from January through September - then the chatter started, the narrative shifted, and the momo guys piled in. Silver surged, pulled back, and then exploded in the final month of the year. By Monday it was up 190%, and even after a small pullback, it’s trading around $71.90 — still up 146%.

Other precious metals? Palladium up 69% (after trading up 125%), Copper up 36%.

The message from precious metals is loud and clear. Confidence in paper money is eroding. The market does not believe inflation has been fully defeated. Precious metals are telling you inflation is sticky, structural, and policy driven. The Fed can pause, cut, or talk tough — but the market is saying the real cost of money is still rising.

The message is that central banks cannot keep rates “higher for longer” without breaking something. (Thus, the push for lower rates). The surge in metals says policy credibility is fragile and that future rate suppression is inevitable.

Silver confirms this wasn’t “fear buying.” Silver doesn’t move on fear — it moves on liquidity and momentum. Once silver exploded, it validated that this was capital rotation, not a hedge trade. That’s why the move was swift and violent to the upside.

Bottom line: Precious metals are telling you that debt matters again, currency credibility is being questioned, central banks are trapped, and real diversification still matters.

And how can I forget Bitcoin? I can’t – It started the year at $96k – traded as high as $126k and collapsed in the past 3 months – trading down to $80k ….and is now trading at $89k…..down 7% ytd. I’m not sure what else to say, other than strap in.

And so—we’re just 18 hours away from ringing in the New Year.

U.S. futures are lower again, and I’ll admit—I’m a bit surprised by the algos. I really thought they’d make one last run and push the S&P to a new millennium. There’s still hope—we have 6½ hours of trading left today—but judging by the futures, it looks like more churn than charge. Dow futures are down 56, the S&P is lower by 15, the Nasdaq off 84, and the Russell down 6.

There is no economic data today—and even if there were, do you really think it would matter?

European markets ended yesterday higher, and this morning only a handful are open. France, the UK, and the EuroStoxx are trading, and they’re all down about 0.3%. But zoom out, because the year tells a very different story:

Spain stole the show, up 49%, Italy gained 31.5%, Germany rose 23%, The UK finished up 21%, The EuroStoxx added 18%, France lagged but still finished up 10%. Once again, this reinforces a simple truth: international exposure matters - it’s about real diversification, and this year Europe (and the emerging markets) helped deliver it.

The S&P closed at 6,896 – down 10 pts. Recall, that I have been saying that I thought the year would end somewhere in the 6800 range, but not before kissing 7000. Ok, I’m good on one and I missed the other – it is what it is. Let’s prepare for the new year – because it is sure to be exciting.

New years eve

Ricotta Coffee Cream for dessert. This is one of my favorites – and I give it to you again.

Simple to make - If it takes you longer than 1 min - you did something wrong!

This is a combination of Ricotta cheese, rum and espresso coffee.

You need: 1 1/2 lbs. of Ricotta Cheese, 2/3 cup of sugar, 5 tablespoons of dark rum, 2/3 cup of espresso.

Get out the food processor (or blender) - add the ingredients. Blend until you have a nice creamy consistency.

Pour the mixture into individual glasses or small desert cups/bowls. You can use white wine glasses for a more dramatic effect. Place in the fridge and allow it to cool overnight. After your dinner party - remove from the fridge - adorn with fresh coffee beans and serve.