A Look Back at 2025 and a Thoughtful Step into the New Year

As we close out 2025, I think it’s fair to say the markets gave us plenty to talk about this year – and, thankfully, more than a few reasons to smile.

By the end of November, the S&P/TSX was up an impressive 29%, while the S&P 500 gained 16%. Strong numbers by any measure, though I’d gently remind everyone (including myself) that markets rarely hand out returns without also testing our patience along the way.

In Canada, communication services and consumer discretionary led the charge, with energy and financials also delivering solid performance. South of the border, an interesting surprise emerged: Utilities was the top-performing sector in the S&P 500 on a total return basis.

That may raise an eyebrow, especially given how much airtime the so-called “Magnificent Seven” received this year. None of those stocks sit in Utilities – a good reminder that markets are often broader (and more interesting) than the headlines suggest. It’s also a quiet endorsement of diversification, something we talk about often for good reason.

Looking Beyond North America

As easy as it is to stay North American-centric, Canada and the U.S. were not the world’s top performers in 2025. That honour belonged to Europe, which turned in a surprisingly strong year.

Greece led global markets, up roughly 60% year-to-date, followed by Poland (+56%) and the Czech Republic (+52%). These results were driven by a mix of economic reforms, geopolitical developments, and shifting investor sentiment – again reinforcing that opportunity can appear in unexpected places.

A Reminder: Markets Don’t Move in Straight Lines

Despite the strong year overall, it certainly wasn’t a smooth ride. The S&P 500 fell nearly 19% from its February 19 peak, largely in response to tariff announcements on April 2. Markets bottomed just a few days later on April 8 before regaining their footing.

This is usually the point where I hear familiar (and very reasonable) comments from clients as the year winds down:

“Surely markets can’t keep going up.”

“This feels a bit like 1999 all over again.”

Those concerns are understandable. Which is why context, and a little history, matters.

Some Perspective from Market History

October 12, 2025 marked the three-year anniversary of this bull market, which has risen more than 89% since the lows of 2022. If 2022 still feels fresh in your memory, you’re not alone. That year was tough: the S&P 500 fell 25%, and even bonds declined about 13%, a helpful reminder that “safe” doesn’t always mean immune.

Historically, reaching the three-year mark is meaningful. Since World War II, bull markets that made it this far lasted an average of 6.5 years and delivered gains of roughly 213%. Compared to those figures, today’s rally may still have room to run – though I’ll resist the temptation to make bold predictions and stick with cautious optimism.

Looking ahead, year four of a bull market has historically delivered an average return of 12.7%, though results vary widely. Some years were exceptional; others far more modest. The takeaway? Even in rising markets, volatility is part of the journey.

What’s Driving This Rally?

Several forces continue to support markets:

• Artificial Intelligence has been a genuine game-changer, with massive capital investment in data centres and infrastructure by companies like Meta, Amazon, and Alphabet. This has had ripple effects across industries – from energy generation to heating and ventilation.
• The Federal Reserve has shifted from tightening to easing, making borrowing cheaper and supporting economic activity.
• Corporate earnings have proven resilient, even in the face of tariffs, higher costs, and supply-chain challenges.

Importantly, many of the traditional warning signs simply aren’t flashing red right now. Employment remains strong, earnings are growing, and interest rates are lower. While nothing is guaranteed, these conditions suggest markets could carry momentum into 2026.

Risks Worth Watching

Of course, no outlook would be complete without acknowledging risks:

• AI bubble concerns — is the data-centre buildout too much, too fast?
• Trade tariffs and geopolitical tensions
• Inflation and government deficits

Still, bull markets have a habit of climbing what’s often called a “wall of worry.” This one already has – and history suggests it may continue, albeit with a few bumps along the way.

Staying Grounded

Our recommendation remains unchanged: maintain a well-diversified portfolio, across asset classes, sectors, and geographies. Diversification isn’t exciting – until it is. It’s what helps portfolios remain resilient through both strong markets and inevitable periods of uncertainty.

We always welcome the opportunity to review how your portfolio is positioned today and how it’s designed to support you in the years ahead.

On behalf of the Mah Investment Group – Marissa, John, Louise, Yvonne, Sharon, Chu, and myself – we wish you and your family a very happy holiday season, along with good health and prosperity in 2026.

Warm wishes,

Edward