As 2025 winds down, we reflect on family traditions, market optimism and the balance between honoring the past and embracing the future.
A few consecutive days of hosting family and friends always puts me in a nostalgic mood, especially during the holidays. For me, 2025 marks the year when my oldest son Jack graduated high school and headed off to college. The 18-year-old sitting next to me as I write this letter hardly seems like the same one who was a ball of nervous excitement in August packing the car, or the same young man who still needed help with his tie on graduation day. It seems so close and yet so far away that we were opening a new set of LEGOs that Santa brought or reading him the Polar Express while he carefully arranged his trains next to me. It was nearly 19 years ago when I was still carrying him that I spent my last Christmas with my beloved grandmother who died a few days later, and a day before he was born. My grandmother loved this time of year, and her home was the place we all congregated for decades as generations of family and friends passed through her doors enjoying the good friendship, drink and warm welcome she always offered. All the generations and branches, friends old and new, even when marriages changed, and even when her own health changed and she could barely sit upright in a chair for a few hours, we all still came. It was tradition.
I wonder if Jack will someday be the one baking lasagna and meatballs, filling up coolers with drinks and setting out trays of desserts. I hope that the torch will be passed and like me, he won’t find it a burden but an honor. So much of our work centers on the technical parts of legacy planning including taxes and financial accounting. But in reflective moments like this I am reminded that there are other parts of legacy to consider, encouraging new traditions while honoring the best of the old.
It is a quiet but positive week for the financial markets, which are trading at new highs and appear to be fulfilling the promise of another so-called “Santa Claus Rally.” In the Stock Trader’s Almanac in 1972, Yale Hirsh observed a persistent seasonal pattern in the stock market where the S&P 500 tended to post gains during this specific seven-day window: the last five trading days of the year plus the first two trading days of the new year. Since 1950, the S&P 500 has averaged a 1.3% return during this period, with positive results occurring 78% of the time. For comparison, the market’s typical seven-day average return is just 0.3%, with a positivity rate of 58%.
That said, seasonal trends reflect historical tendencies, not guarantees. They don’t account for fundamentals like earnings, monetary and fiscal policy changes, economic conditions, or geopolitical risk like Christmas-day bombings of Nigeria or ongoing negotiations over the war in Ukraine. In fact, the last two years of negative Santa Claus Rally returns are a reminder that past performance is never a promise of future results, as markets nonetheless soared to higher heights. Still, we hope for financial markets to continue their streak of delivering terrific returns to investors in the new year, and despite always-present risks, see the potential for them to do so based on fundamentals, albeit perhaps at a little less steamy pace.
In this busy time of holiday celebrations, you may have missed the release of the delayed third quarter gross domestic product (GDP) report showing the U.S. economy grew at a rapid 4.3% rate, marking the best quarter of growth for the U.S. in two years. For the year, the economy is on pace for a 2.5% growth rate, having declined -0.5% in the first quarter, and growing 3.8% in the second. Consumer spending stole the show in Q3, with the health care and international travel categories accounting for most of the gains. Notably, credit card balances rose by $24 billion in the third quarter, 5.75% higher than a year ago. Despite data center mania, investment in non-residential real estate actually declined by -6.3% in the quarter, another signal that beyond AI, there are still challenging dynamics in commercial real estate. Exports were up +8.8%, as was government spending which reflected defense investments as well as federal worker buyouts. The latter will surely reverse in the next GDP release given the longest government shutdown in U.S. history occurring in Q4.
President Trump naturally attributed the strong GDP report to the success of his tariff program, which is under review with the U.S. Supreme Court to determine if he usurped Congress’ taxing powers by imposing tariffs under the International Emergency Economic Powers Act (IEEPA) of 1977. About one-third of U.S. imports are subject to tariffs by President Trump under the IEEPA. While Trump has other tariff mechanisms, he has described them as “slow and cumbersome” and would prefer not to have to deal with Congress on his agenda. As such, most recently the White House has taken to pressuring the Supreme Court for a speedy and supportive decision, saying the “economic and national security consequences of a failure to uphold President Trump’s lawful tariffs are enormous.” Talks continue to swirl about a tariff rebate of $2,000 for some segment of Americans in 2026, and on December 18, the president announced he was sending $1,776 checks, which he called “warrior dividends,” to the nation’s 1.45 million service members before Christmas.
When talk turned to politics at my holiday party, as it inevitably does despite my best efforts, I was reminded that the continuing resolution for government funding runs out on January 30, 2026. Lawmakers still need to pass full-year budgets, and key disagreements persist, especially over Affordable Care Act (ACA) subsidies. It could mean we are setting up for a volatile January with that drama combined with the President’s foreign policy actions heating up. This is also why we are seeing gold and silver prices hit new records, with gold achieving its best return year in four decades in 2025.
However, until then, I am going to bask in the glow of the twinkling lights of my decorations, survive on party leftovers for a few more days, and hold close to my heart my memories of holidays past and present to sustain me. I hope you will do the same, as there will be time enough to consider risks and opportunities in markets, but seemingly never enough to relish those special moments and memories that only our families and friends can bring. Cheers to you and yours as we ring in a new year in the coming days, and best wishes for a wonderful finish to 2025 in all respects.
Written by a human.