Bond Prices Edge Higher in 2025 – Fixed Income Markets Overview

Fixed income markets across various sectors had a favorable year, with bond prices advancing in 2025. U.S. Treasuries, investment grade corporates and high yield bonds all elevated in price as the Fed teetered on easing rates throughout the year, with affirmation of a lower rate trend towards the end of 2025.

The Fed’s trajectory, along with still attractive bond yields in 2025, drove demand throughout the year. Uncertainty in the equity markets added to demand for bonds as volatility led to greater bond demand.

The 10-year Treasury bond yield finished the year at 4.18%, down from its peak of 5% in October of 2023. Bonds had their best year since 2020, when the pandemic drove funds toward bonds as a safe haven and for stability.

Sources: U.S. Treasury, Federal Reserve

Equities Advance in 2025 – Domestic Equity Market Overview

Equities were resilient throughout 2025 as uncertainty surrounding tariffs, geopolitical tensions and Fed rate cuts induced volatile trading sessions. The Dow Jones, S&P 500 Index, and the Nasdaq all posted strong performance results for the year, exceeding most analysts expectations.

Massive capital injections by numerous technology companies in AI led to broad appreciation in sectors and industries associated with AI expansion. The spillover from AI investment benefited companies with indirect ties to AI, similar to what occurred in the late 1990s and early 2000s as the internet expanded.

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 are reducing their individual state income tax rates, Georgia, Indiana, Kentucky, Mississippi, Montana, Nebraska, North Carolina, Ohio, and Oklahoma. The tax cuts apply to individual taxpayers living in each respective state.

Most of these nine states have established a planned decrease of tax rates over the next few years, hoping to ease tax strains on current state taxpayers and incoming residents. There are currently nine states with a zero state income tax rate, some of which had taxes or higher tax rates in place before eliminating them. California currently has the highest tax rate at 13.3%, followed by Hawaii at 11%, and New York at 10.9%.

Source: Tax Policy Center

New Trump Accounts

Trump Accounts are a new type of tax‑favored accounts for minors created in the 2025 “One Big Beautiful Bill” tax legislation. These accounts are funded with after‑tax dollars, seeded by the US government with $1,000 for eligible newborns, and intended to convert into a traditional‑IRA–like account once the child turns 18. They effectively create an extra child-focused retirement/long‑term savings bucket alongside existing IRA and 529 options, with special contribution and withdrawal rules.​

Eligibility and automatic seeding

Any minor younger than 18 can have a Trump Account opened on their behalf, except those who turn 18 in that same calendar year.  In addition, U.S. citizens born between January 1, 2025 and December 31, 2028 qualify for a one‑time $1,000 federal “seed” contribution once an account is established, effectively auto‑enrolling a birth cohort into long‑term saving.​

Contributions and limits

Annual contributions are capped at $5,000 per child, indexed for inflation after 2027 or 2028. Contributions must be after‑tax, with up to $2,500 of the $5,000 limit allowed from employers on a tax‑favored basis, while the remainder can come from parents, relatives, or other taxable entities. Contributions that parents, relatives, or other individuals make to Trump Accounts are not tax deductible at the federal level; they are made with after‑tax dollars, similar to non‑deductible IRA contributions. The main tax benefit is tax‑deferred growth inside the account, not an up‑front deduction, although employer contributions (up to the statutory limit) can be excluded from the employee’s taxable income and still count toward the child’s annual Trump Account cap.

Investment and growth rules

Assets are to be held in low‑cost, broadly diversified index funds (for example, S&P 500‑style U.S. equity index funds) prohibiting individual stocks, crypto, or other speculative assets. Parents or guardians can select from this approved menu of index-based options when opening the account, but they cannot direct funds into customized portfolios or non-compliant investments. Earnings grow tax‑deferred, and once the child turns 18, pre‑18 contributions and their earnings become fully subject to traditional IRA rules, including potential Roth conversion and required minimum distributions later in life.​

Withdrawals and tax treatment

Withdrawals are effectively locked out until age 18, subject to limited statutory exceptions. After 18, distributions follow traditional IRA taxation: nondeductible basis (post‑tax contributions) come out tax‑free, but earnings and any deductible amounts are taxed as ordinary income, with a 10% additional tax on early, non‑qualified withdrawals before age 59½, while certain uses (higher education, first‑home purchase, specified hardships, etc.) receive penalty relief under the cross‑referenced IRA exception rules.​

Accounts cannot accept contributions or investments until July 4, 2026, when the program fully launches for funding. Until then, eligible families can only complete initial setup steps like filing IRS Form 4547 for account request any applicable federal seed contribution (such as the $1,000 for newborns born 2025–2028).  This form can be submitted anytime starting early 2026 (potentially with your 2025 tax return or online via trumpaccounts.gov by mid-2026), after which the Treasury sends activation instructions around May 2026 for identity verification and final setup with an approved custodian.​Accounts must be held at qualified financial institutions offering compliant index funds. The child needs a Social Security number (U.S. citizenship required for the seed money), but no parental income limits apply.