Current market environment performance of dynamic, risk-managed investment solutions.
Momentum pauses as markets digest a strong year
The fourth quarter of 2025 closed out the year with stocks near record highs. But with much of the year’s gains already in place, volatility reemerged after a relatively calm third quarter. Stocks entered October with substantial year-to-date gains that already reflected the high degree of optimism for new technologies and their potential to drive revenue and profits. As a result, markets spent much of the fourth quarter fluctuating within a narrow range, struggling to push meaningfully higher following the strong gains of the third quarter.
Communication Services and Health Care outpaced the broader market, while Utilities and Real Estate lagged, both delivering negative returns for the quarter. International equities outperformed domestic equities.
While the bond market posted small gains overall for the quarter, longer-dated bonds fell slightly in value. The Federal Reserve delivered two rate cuts, though investors are uncertain about how much additional monetary stimulus might come in 2026.
Gold once again stood out, substantially outperforming both stocks and bonds. Many of our strategies invest in gold and benefited from its strong performance in 2025.
Recognizing the market gains this quarter, most of our actively managed strategies were positioned with large non-defensive holdings at quarter-end. Among our QFC, ETF, and Axos platform strategies:
• 90% of our equity strategies had over 90% in non-defensive asset exposures
• 69% of our bond strategies had over 50% in non-defensive asset exposures
• 95% of our core strategies had over 50% in non-defensive asset exposures
• 100% of our alternative strategies had over 50% in non-defensive asset exposures
As the year drew to a close, markets shifted from steady momentum to a more selective environment—one that rewarded discipline and flexibility. That is why our strategies are designed to adjust as conditions change—maintaining exposure when opportunities are present and emphasizing risk management when momentum pauses. In markets, as in any competitive environment, long-term success depends less on any single quarter and more on executing a disciplined process through changing conditions.