2025 was a solid year for investors with diversified portfolios.
Markets delivered another year of strong headline returns, but the deeper story of 2025 wasn’t about chasing the latest winner or making bold tactical bets. It was about something far more enduring: the quiet, compounding value of global diversification.
For Aurelius Family Office clients, this discipline mattered more than ever. While headlines shifted from artificial intelligence to inflation to geopolitics—and back again—globally diversified portfolios did what they are designed to do: participate broadly in growth, manage risk thoughtfully, and stay resilient through uncertainty.
Perhaps the biggest surprise of the year underscored that lesson perfectly.
The Big Surprise of 2025: International Markets Take the Lead
For the first time in more than a decade, international equity markets decisively outperformed U.S. stocks.
Markets entered 2026 with solid momentum following another broadly positive quarter. U.S. large-cap equities posted a 2.3% gain in Q4 2025 and finished the year up 17.3%. Respectable results by any measure.
Yet the defining story of 2025 was the resurgence of international assets.
Aided by a weakening U.S. dollar, developed international stocks returned 32.0%, while emerging markets surged 34.3%—nearly double the total return of the S&P 500.
For years, global diversification tested investor patience as U.S. equities dominated returns. In 2025, that patience was rewarded.
This reversal serves as a powerful reminder: market leadership rotates, often when least expected. Portfolios built solely around what has worked most recently can leave investors exposed just when the market regime changes.
Other Market Highlights from 2025
According to Fidelity Investments, stocks continued a multi-year streak of strong gains. U.S. equities rose roughly 17% on a price-return basis, following increases of 23% in 2024 and 24% in 2023. Many asset classes reached or approached record highs.
Some notable milestones:
- The S&P 500 approached 7,000
- The Dow Jones Industrial Average surpassed 48,000
- Gold climbed above $4,500 per ounce
- Bitcoin briefly rose above $120,000 before settling closer to $88,000
Several forces contributed to these outcomes:
Energy costs declined. Oil prices fell from peaks above $80 per barrel earlier in the year to post-pandemic lows below $56, easing pressure on consumers and businesses alike.
Interest rates moved lower. For the second consecutive year, borrowing costs declined as the U.S. central bank continued stepping back from multi-year highs.
Inflation moderated. While prices continued to rise, the pace slowed meaningfully, bringing greater stability to the economic outlook.
Artificial intelligence supported earnings growth. Corporate profits reached record levels, driven in large part by ongoing investment in AI infrastructure and productivity tools.
Against this backdrop, diversified investors benefited not from predicting which factor would dominate next—but from having exposure to all of them.
Four Key Investment Themes from 2025: Insights from DFA
Our colleagues at Dimensional Fund Advisors (DFA) shared insights throughout the year that closely aligned with these themes. As we enter 2026, four topics stand out.
1. AI and Investing
The rapid adoption of artificial intelligence raised understandable questions: Will AI change how markets function? Can it help identify winning stocks? How should investors participate?
Dimensional emphasized that AI is already embedded across industries and business models. Predicting which individual companies will ultimately dominate remains extremely difficult.
Bottom line: Investors can gain exposure to AI through a globally diversified portfolio—without the added risk of concentrating too heavily in a narrow set of stocks or sectors.
2. Outlook on Tariffs
Trade policy and tariffs re-entered the spotlight in 2025, creating waves of speculation about economic and market impacts.
Dimensional reminded investors that markets are forward-looking. Much of the known information around policy changes is typically reflected in prices well before headlines peak.
Bottom line: Ongoing policy uncertainty doesn’t automatically translate into poor investment outcomes. Markets continuously digest new information.
3. Going for Gold
With gold prices surging, many investors revisited its role as a hedge against inflation or economic stress.
Dimensional cautioned against viewing gold as a cure-all. While it can play a role, gold remains volatile and behaves differently across market environments.
Bottom line: Any allocation to gold should be evaluated in context—alongside other assets and within a diversified strategy.
4. Staying Disciplined During Volatility
Despite strong annual returns, 2025 included sharp market swings that tempted some investors to act on fear.
Dimensional consistently reinforced a familiar lesson: markets have weathered every past crisis and ultimately recovered. Missing even short periods of market participation can materially impact long-term results.
Bottom line: Distinguish between thoughtful portfolio adjustments tied to personal circumstances and reactive decisions driven by headlines. One is planning; the other is speculation.
A Word of Caution as We Enter 2026
While the long-term outlook remains constructive, several risks deserve attention:
- Declining consumer sentiment, weighed down by persistent cost pressures
- Labor market uncertainty, including concerns about AI-driven disruption
- Rising consumer debt, with credit card balances and delinquencies reaching multi-year highs
Inflation, in particular, became deeply personal in 2025. Even as headline CPI moderated, the categories retirees spend most on—housing, utilities, healthcare, transportation services, and food away from home—continued rising faster than average.
It’s natural for investors to ask difficult questions:
Are we overdue for a correction? Is a recession coming? Will geopolitical events in Latin America or elsewhere disrupt markets in 2026?
These questions reinforce—not undermine—the value of diversification.
Looking Ahead to 2026: Taxes, Refunds, and Planning Opportunities
Another topic gaining attention is the potential for larger tax refunds in 2026. According to a story in Newsweek, US Treasury Secretary Scott Bessent says adjustments to withholding tables and recent tax legislation could result in $100–$150 billion in refunds flowing back to households.
If realized, those dollars could support:
- Increased consumer spending
- Higher savings rates
- Additional investment inflows
Or, most likely, some combination of all three.
For Aurelius clients, this presents a planning opportunity. Rather than letting refunds drift into unallocated cash, families can proactively decide how those dollars support their broader financial goals—whether that means rebalancing portfolios, funding philanthropy, reducing debt, or reinforcing liquidity.
Your Aurelius advisor can help you map those decisions intentionally.
A View from Wall Street
The outlook for 2026 is broadly constructive, though accompanied by meaningful uncertainties that reinforce the value of diversification.
Goldman Sachs expects earnings growth to reaccelerate, forecasting approximately 12% growth in S&P 500 earnings per share in 2026. Importantly, their outlook points to opportunities extending beyond large technology companies to include cyclical areas such as small-cap stocks, non-residential construction, and consumer businesses tied to the middle-income household.
From a global perspective, Goldman projects 2.8% global GDP growth—above consensus expectations—with the U.S. economy continuing to outperform many peers and modest improvement expected in China. Together, these dynamics support a broader foundation for global equity demand.
At the same time, Morgan Stanley offers a more measured view, suggesting U.S. equities may regain leadership over international markets in 2026, with the S&P 500 projected to approach 7,800.
Risks remain. If inflation proves more persistent or labor-market data becomes uneven, the Federal Reserve could delay or scale back anticipated rate cuts. A less accommodative policy stance would likely tighten financial conditions and increase market volatility.
Taken together, these crosscurrents highlight why diversified portfolios—rather than narrow positioning—remain central to long-term investment strategy.
Client Callout: What This Means for Your Portfolio
✔ Broader opportunity set
Earnings growth may come from a wider range of sectors and regions—not just U.S. mega-cap stocks.
✔ Continued role for global diversification
With market leadership potentially rotating again in 2026, diversified exposure helps manage the risk of over-concentration.
✔ Discipline over prediction
Markets may reward patience more than precision as growth, inflation, and policy expectations evolve.
✔ Planning matters
Regular portfolio reviews can help ensure allocations remain aligned with your goals, risk tolerance, and tax considerations as conditions change.
Summary: The Enduring Value of Diversification
The defining lesson of 2025 wasn’t about timing markets or forecasting headlines. It was about structure.
Diversification worked—not dramatically, not noisily, but effectively.
By maintaining exposure across global markets, asset classes, and risk factors, Aurelius clients were positioned to benefit from unexpected market shifts, manage volatility, and remain aligned with long-term goals.
Working with Aurelius Family Office makes this easier. Your advisor serves as an impartial advocate for your family’s financial success—free from the emotional bias that naturally comes with managing your own wealth.
As we head into 2026, now is an ideal time to schedule an Investment Review Meeting. Together, you can assess concentration risks, tax exposure, and how realized gains might be redeployed to support the life you want to lead.
Short-term discomfort, thoughtfully managed, often buys long-term freedom. Diversification remains one of the most reliable tools for getting there.
Disclosures
Aurelius Family Office, LLC (“AFO”) is an SEC-registered investment adviser. Registration does not imply a certain level of skill or expertise. This communication is for informational purposes only and is not intended to provide specific investment, legal, tax, or other professional advice. Investments involve risk of loss. AFO is neither an attorney nor an accountant, and no portion of this content should be interpreted as legal, accounting or tax advice. For information regarding AFO’s services, fees, conflicts of interest, and related matters, please review our Form ADV at https://adviserinfo.sec.gov/firm/summary/323016. Visit us at https://aurelius.net/.
