Fortis Wealth Management

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January 2026
Market Update
(all values as of 12.31.2025)

Stock Indices:

Dow Jones 48,063
S&P 500 6,845
Nasdaq 23,241

Bond Sector Yields:

2 Yr Treasury 3.47%
10 Yr Treasury 4.18%
10 Yr Municipal 2.73%
High Yield 6.48%

YTD Market Returns:

Dow Jones 13.07%
S&P 500 16.46%
Nasdaq 20.36%
MSCI-EAFE 27.89%
MSCI-Europe 31.95%
MSCI-Pacific 29.87%
MSCI-Emg Mkt 30.58%
 
US Agg Bond 7.30%
US Corp Bond 7.77%
US Gov’t Bond 6.88%

Commodity Prices:

Gold 4,325
Silver 70.34
Oil (WTI) 57.42

Currencies:

Dollar / Euro 1.17
Dollar / Pound 1.34
Yen / Dollar 156.18
Canadian /Dollar 0.73

Macro Overview

Pronounced uncertainty throughout 2025 fueled volatile trading sessions as labor market concerns and persistent inflation kept the Fed from cutting rates as much as expected. Still, both equity and fixed-income markets advanced during the year, supported by steady earnings and optimism over massive investment and capital spending tied to Artificial Intelligence (AI).

Tariffs became a central point of contention in 2025, as economists debated their impact on consumers and U.S. companies. A Federal Reserve Bank of San Francisco study found that tariffs imposed in April 2025 actually led to lower inflation and higher unemployment, driven largely by uncertainty surrounding trade policy.

Geopolitical tensions in Europe, the Middle East, and Asia stoked skepticism about global trade and commodity prices. By year-end, an ounce of silver cost more than a barrel of oil—the first time this disparity occurred since 1980, when the Hunt brothers famously cornered the silver market. Silver hit $70 per ounce, while oil closed just above $57 per barrel.

The U.S. dollar weakened in 2025 amid mounting concerns over federal debt and uncertainty about fiscal initiatives. A softer dollar raises import costs for consumers but benefits U.S. exporters by making American goods more competitive abroad.

Cryptocurrencies retreated late in 2025 as leveraged positions unraveled. Speculation among traders fueled sharp volatility throughout the year, with early gains giving way to a steep correction. Regulatory clarity and institutional adoption remain key concerns for digital assets.

The President proposed that the federal government purchase roughly $200 billion in mortgage bonds through Fannie Mae and Freddie Mac to push mortgage rates lower and improve affordability. Buying bonds in the open market reduces supply, which can help drive rates down.

Sources: U.S. Treasury, Federal Reserve, Fannie Mae

 
California currently has the highest income tax rate at 13.3%

Bond Prices Edge Higher in 2025 – Fixed Income Markets Overview

Fixed-income markets across sectors posted a strong year, with bond prices climbing in 2025. U.S. Treasuries, investment-grade corporates, and high-yield bonds all gained as the Fed hovered on the brink of easing rates, confirming a downward trend late in the year.

The Fed’s path, coupled with still-attractive yields, sustained demand throughout 2025. Equity-market uncertainty further boosted appetite for bonds as volatility steered investors toward safer assets.

The 10-year Treasury yield ended the year at 4.18%, down from its October 2023 peak of 5%. Bonds delivered their best performance since 2020, when pandemic-driven turmoil sent investors seeking stability and safe havens.

Sources: U.S. Treasury, Federal Reserve

Equities Advance in 2025 – Domestic Equity Market Overview

Equities proved resilient in 2025 as uncertainty over tariffs, geopolitical tensions, and Fed rate cuts triggered volatile trading sessions. The Dow Jones, S&P 500, and Nasdaq all delivered strong annual gains, surpassing most analysts’ expectations.

Massive capital infusions by technology firms into AI fueled broad sector appreciation. Spillover from AI investment lifted companies with indirect ties to the technology, echoing trends seen in the late 1990s and early 2000s during the internet boom.

Sources: Dow Jones, S&P, Nasdaq, Bloomberg

Nine States Reduce Their State Income Tax Rates for 2026 – Fiscal Tax Policy

For tax year 2026, nine states—Georgia, Indiana, Kentucky, Mississippi, Montana, Nebraska, North Carolina, Ohio, and Oklahoma—are reducing individual income tax rates. The cuts apply to taxpayers residing in each respective state.

Most of these states have outlined gradual rate reductions over the next few years, aiming to ease burdens on current residents and attract newcomers. Nine states currently impose no income tax, some of which previously levied higher rates before eliminating them. California holds the highest rate at 13.3%, followed by Hawaii at 11% and New York at 10.9%.

Source: Tax Policy Center

 
AI helped propel the S&P 500 index in 2025

How AI Is Affecting the Economy – Technology & The Economy

Artificial intelligence (AI) is fueling U.S. economic growth and market valuations while introducing risks tied to valuations, labor disruption, and energy demand.

AI-related investment in software, semiconductor chips, data centers, power infrastructure, and networking has already added hundreds of billions of dollars to U.S. GDP since late 2022, with one estimate pegging the contribution at roughly $250 billion. Economists expect AI to boost productivity, though unevenly across industries as companies integrate it into manufacturing, production, and services.

So far, AI appears to be a minor factor in the 2025 labor-market slowdown, but economists anticipate broader adoption could displace some jobs even as it creates new roles and demand elsewhere.

Policymakers and researchers note that the near-term macro risk is not mass unemployment but retraining needs, regional dislocation, and pressure on lower-skilled occupations.

AI has been a dominant equity theme, propelling S&P 500 gains in 2025, with returns concentrated in AI-linked megacap tech, data-center, chip, and cloud firms. Regulators and analysts are weighing whether AI-driven optimism is fueling excessive leverage or speculative behavior in equity and credit markets, which could magnify any downturn. At the same time, diversified AI adoption across sectors is viewed as a potential buffer against shocks, making the U.S. economy more resilient if productivity gains materialize as expected. (Sources: RPS, Current Population Survey, Bureau of Labor Statistics, St. Louis Fed)

What Happened To Consumer Confidence in 2025 – Consumer Behavior

The start of 2025 showed consumers optimistic amid low unemployment, steady job growth, and stable inflation. By year-end, sentiment had sharply deteriorated, with more households expressing caution as inflation, job scarcity, and rising living costs fueled concern.

The University of Michigan consumer sentiment index stood at 64.7 in January, fell to 51.0 by November, and edged up to 52.9 in December—well below historical norms.

Spending patterns in 2025 reflected a shift toward cheaper goods and essentials, with many households cutting discretionary purchases and major outlays.

By the fourth quarter, net sentiment was 30% below its late-2024 peak, underscoring consumer unease heading into 2026. (Source: University of Michigan Consumer Sentiment Index; FRED)

 
the u.s. dollar fell roughly 9.5% in 2025

Dollar’s Decline in 2025 Was Largest Since 2017 – Currency Overview

In 2025, the U.S. dollar posted a notably weak year, underperforming most major currencies, with broad indexes showing its largest annual drop since 2017 and one of the steepest declines in decades.

The U.S. Dollar Index, which tracks the dollar against six major currencies—the euro, yen, pound, Canadian dollar, Swiss franc, and Swedish krona—fell roughly 9.5% in 2025, its biggest decline since 2017. Earlier in the year, the dollar was down about 11%, marking the largest first-half loss since the 1970s.
Factors weighing on the dollar included slower U.S. growth expectations, high fiscal deficits, tariff-policy uncertainty, political tensions, and shifting global capital flows away from U.S. assets. Easing U.S. interest rates also eroded the yield advantage of dollar holdings, making them less attractive relative to other major currencies.

Source: Federal Reserve Bank of St. Louis

Rare Earth Materials – Commodities Review

Rare earth materials are minerals or compounds containing one or more rare earth elements, a group of 17 metallic elements widely used in modern technologies. These materials are critical because they offer unique magnetic, optical, and catalytic properties that are difficult to substitute in high-tech applications.

Although these elements are relatively abundant in the Earth’s crust, they rarely occur in concentrated deposits, making mining and separation challenging. The term “rare earth” stems from their early discovery in unusual mineral “earths” and the scarcity of economically viable deposits, not from true rarity in nature.

Rare earth materials are essential for magnets in wind turbines and electric vehicles, smartphone components, and computer hard drives. They are also used in glass polishing powders, catalysts for oil refining and emissions treatment, phosphors in LED and fluorescent lighting, and components for lasers and fiber-optic communication. Their unique magnetic and optical properties enable smaller, more efficient, and energy-saving devices across advanced electronics and specialized lighting.

Sources: U.S. Department of the Interior, CIA World Factbook

 

Market Returns: All data is indicative of total return which includes capital gain/loss and reinvested dividends for noted period. Index data sources; MSCI, DJ-UBSCI, WTI, IDC, S&P. The information provided is believed to be reliable, but its accuracy or completeness is not warranted. This material is not intended as an offer or solicitation for the purchase or sale of any stock, bond, mutual fund, or any other financial instrument. The views and strategies discussed herein may not be appropriate and/or suitable for all investors. This material is meant solely for informational purposes, and is not intended to suffice as any type of accounting, legal, tax, or estate planning advice. Any and all forecasts mentioned are for illustrative purposes only and should not be interpreted as investment recommendations.