INVESTMENT MANAGEMENT

While investors maintained a healthy degree of skepticism during the back half of 2025 despite stocks’ continual rise, bullish sentiment reached its highest level of the year in December, suggesting that this bull market still has legs heading into 2026. As such, our Momentum Dial remains in a Positive position.

While initial data from the holiday shopping season suggests buying was up over last year, the vast majority of holiday buying was concentrated in either wholesale clubs or discount stores, suggesting a value-conscious consumer in the midst of economic uncertainty. As job growth has stagnated and unemployment ticks up, we leave our Fundamental Dial in a Negative position at year-end.

Unsurprisingly, equity returns for 2025 were concentrated in the technology and communication services sectors, two of the more expensive parts of the S&P. As we turn the page to 2026, investors are likely to scrutinize the profitability of these hyper-scalers, which could put pressure on elevated price-to-earnings ratios. As such, our Valuation Dial remains Negative.

On balance, our composite positioning remains somewhat defensive, with one dial in a Positive position but two dials remaining Negative heading into the New Year.