Columbus Wealth Management Quarterly Update – 2025 Q4

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Market Update & Investment Commentary

Data as of 12/31/2025 (unless stated otherwise)

US Markets

2025 delivered phenomenal returns across all asset classes, with U.S. Large Caps (S&P 500) posting a 17.9% total return, Small Caps (Russell 2000) up 12.8%, and a 7.3% return for bonds (Bloomberg U.S. Aggregate). The chart from J.P. Morgan above shows the return of each asset class in 2025, and for the 14 years prior. The chart demonstrates that while individual asset class returns tend to vary greatly from year to year, the “Asset Allocation” portfolio—comprising a diversified mix of asset classes—generally delivers more consistent performance and volatility. This approach is a foundational element of our investment philosophy at CWM.

Equity returns were generally driven by Artificial Intelligence (AI) momentum, solid corporate earnings, and gradual monetary policy easing. Bond returns are benefiting from an increased income component, as newly issued bonds feature higher coupon rates following recent interest rate hikes. However, 2025 was not without some bumps in the road. We’ve included a chart below from J.P. Morgan showing the final return of the S&P 500 each year, along with the maximum drawdown for each year. For example, in 2025, the S&P 500 returned 16% (excluding dividends), but at one point the index had fallen 19% (in April). Further, the chart notes at the top that the average intra-year drop is 14.2%, but annual returns are positive 76% of the time.

International Markets

International developed equities (MSCI EAFE) delivered a 31.9% return last year, which was the highest calendar year return since 2009. Emerging Markets (MSCI EME) returned 34.4%. If the Federal Reserve implements further interest rate cuts, it is likely to lead to additional depreciation of the U.S. Dollar. This occurs because lower interest rates generally diminish the returns on investments in U.S. assets, such as Treasury securities. As our interest rates move closer to those of other central banks, a declining dollar will also boost international equity returns for U.S. Investors. The chart below shows current policy rates for major central banks around the world, with the US in orange.

Additionally, International equities performed quite well in local currency terms due to AI investment, fiscal stimulus, and some valuation expansion (see left side of the chart from J.P. Morgan below).

Economy

It is noteworthy that there is a divergence between consumer sentiment and objective economic indicators, including unemployment and inflation rates. In the next chart, we see the most recent Unemployment Rate came in at 4.6%, Inflation (measured by the 1-year change in the Consumer Price Index) was 2.68%, and the US Equity market is steadily posting new highs. Despite all this, Consumer Sentiment is at the lowest point since July 2022, highlighting an important distinction between perception and reality. Although news cycles and social media can be disheartening, it is important not to allow these influences to affect investment strategies. Market performance, especially over the long term, is driven by objective data rather than emotional responses.

We see some additional tailwinds for the economy in the first part of 2026, particularly increased tax refunds as a result of the OBBB Act passed last summer which should bolster consumer spending, and continued investment in AI, which should help corporate profits. However, with the labor market softening somewhat (64,000 Nonfarm Payroll additions in November) and Federal Reserve policy still uncertain, volatility could be on the horizon.

There is some mild relief in the housing market for potential buyers, with 30-year mortgage rates down to 6.15% and the potential introduction of 50-year mortgages. Additionally, existing home inventories rose 21% last year, with prices remaining essentially flat. The chart below shows these metrics, resulting in about a 4.5% increase in the Housing Affordability Index last year.

Sources: University of Michigan, Bureau of Labor Statistics, Freddie Mac, National Association of Realtors

Summary

Looking ahead to 2026, it's impossible to predict which company or asset class will lead the market. However, maintaining a diversified and balanced portfolio remains the most effective strategy for achieving strong, risk-adjusted returns. Below, a chart from J.P. Morgan shows how the top companies (as measured by market capitalization) have shifted over the past 5 decades. It’s also amazing to see the growth in value over time: The current market capitalization of AAPL (~$3.85T) is now over three times that of the entire S&P 500 back in 1985 (~$1.25T). Bottom line, stay invested! Your CWM advisor remains available to review any questions or concerns.

Important Disclosure Information:

Past performance is no guarantee of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Columbus Wealth Management, [“CWM”]), or any non-investment related content, made reference to directly or indirectly in this commentary will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this commentary serves as the receipt of, or as a substitute for, personalized investment advice from CWM. CWM is neither a law firm, nor a certified public accounting firm, and no portion of the commentary content should be construed as legal or accounting advice. A copy of our current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request or at www.cbuswm.com. Please Remember: If you are a CWM client, please contact CWM, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our advisory services.  Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. Please also remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

Historical performance results for investment indices, benchmarks, and/or categories have been provided for general informational/comparison purposes only, and generally do not reflect the deduction of transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results.  It should not be assumed that your CWM account holdings correspond directly to any comparative indices or categories. Please Also Note: (1) performance results do not reflect the impact of taxes; (2) comparative benchmarks/indices may be more or less volatile than your CWM accounts; and, (3) a description of each comparative benchmark/index is available upon request.