Quarterly Update – January 2026

2025 Year in Review

As we close out 2025, it's been a year of resilience amid ongoing uncertainties. Markets climbed a wall of worry, navigating challenges like tariff reimpositions, a U.S. government shutdown, and Moody's downgrade of the United States' credit rating. Despite these headwinds, enthusiasm around artificial intelligence (AI) propelled equities higher, with mega-cap technology stocks leading the charge. The S&P 500 Index returned 17.9% for the full year. International stocks outperformed, with the MSCI EAFE Index up 31.9% driven by strong recoveries in Asia and Europe. Emerging markets fared even better with the MSCI EME Index up 34.4% for the year. Fixed income provided stability, with the Bloomberg U.S. Aggregate Index returning 7.3% as the Federal Reserve cut rates three times in the second half of the year to support the labor market amid rising unemployment concerns. Gold had its best year since 1979 as investors sought safe havens, reflecting nerves that something could go wrong in the economy or the markets.

Key headlines driving market moves included the reimposition of tariffs in July after a 90-day negotiation pause failed to yield major deals, sparking volatility in trade-sensitive sectors. AI innovations, such as advancements in generative tools like ChatGPT, fueled massive investments in tech infrastructure. The Fed's shift toward easing, with 25 basis point cuts in September, October, and December, helped offset inflation risks and supported bond yields. Geopolitical tensions, including ongoing wars, added to the mix, but consumer strength and labor market resilience kept the economy on track. Diversification proved essential, as we've emphasized in rebalancing client portfolios to maintain target allocations and manage risk.

What to Expect in 2026

Looking ahead to 2026, we anticipate continued market volatility as the global economy adjusts to trade shifts and technological disruptions. The Federal Reserve, which will have a new Chairman soon, may pursue additional rate cuts if inflation continues to moderate. That could support fixed income returns, while potentially pressuring equities should economic growth slow.

On the legislative front, Congress is expected to focus on Budget Reconciliation 2.0. This effort could introduce tax reforms affecting capital gains, estate planning, and retirement accounts, areas we will monitor closely for portfolio implications. In parallel, the GENIUS Act, scheduled for implementation by July 2026, will establish a regulatory framework for stablecoins and digital assets. Finally, mid-term elections will take place on November 3, 2026, adding another layer of uncertainty and potential headwinds for markets to navigate.

The S&P 500 just completed its third year of stellar gains and the question on everyone’s mind is “Can it continue?”. Wall Street prognosticators widely expect the good times to keep rolling in 2026, albeit with mixed views on how much stocks will rally. According to data from a poll on 1/1/26, Wall Street has varied expectations for the year-end price of the S&P 500 and are forecasting anywhere from a 3.7% gain to an 18% gain:

These rosy targets are likely built on the expectations for further Fed rates cuts in 2026 and resilient earnings from Corporate America largely fueled by the ongoing AI supercycle and broadening technological adoption. That said, it’s important to remember that the track record of these predictions has a shaky past and potential risks such as sticky inflation near 3%, a chance of recession due to labor market softening, and heightened valuations could lead to increased volatility. Not to mention the geopolitical concerns that are front and center which just pushed gold to have its best year in the last four decades. As capital allocators, we'll continue to emphasize diversified portfolios that blend growth opportunities with risk management to help you navigate these dynamics.

Warren Buffett Retires

The investment world marked a historic milestone with the retirement of legendary investor Warren Buffett, the Oracle of Omaha, effective December 31, 2025. At 95 years old, Buffett has stepped down after an extraordinary career spanning over six decades. Born in 1930, he took control of Berkshire Hathaway in 1965, transforming it from a struggling textile company into one of the world's largest conglomerates with a market value exceeding $900 billion. His value investing philosophy - buying undervalued companies with strong fundamentals and holding them long-term - delivered compounded annual returns of about 20% for shareholders, far outpacing the market. Buffett's achievements include amassing a personal fortune of over $120 billion, much of which he's pledged to philanthropy through the Giving Pledge, and inspiring generations with his straightforward wisdom on business and life.

With Buffett's retirement, Berkshire Hathaway's succession plan goes into effect. Greg Abel, who has overseen non-insurance operations since 2018, will assume the CEO role and will handle capital allocation and operations. Buffett has expressed confidence in the team, stating in a past shareholder letter, "Berkshire is built to last." He reiterated this in his final remarks: "The company is in good hands; we've prepared for this day." For more insights, we recommend reading his most recent Thanksgiving letter at https://fortune.com/2025/11/27/read-warren-buffett-final-thanksgiving-annual-letter-shareholders-2025/. As Buffett often advised, "Someone is sitting in the shade today because someone planted a tree a long time ago" - a nod to the enduring foundation he's laid.

Buffett's timeless wisdom continues to guide us. Here are a few of our favorite Buffett quotes:

• Contrarianism: "Be fearful when others are greedy and greedy when others are fearful."

• Simplicity: "Never invest in a business you cannot understand."

• The Patience Advantage: "The stock market is a device for transferring money from the impatient to the patient."

• Temperament: "The most important quality for an investor is temperament, not intellect."

• Reputation: "It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently."

• Kindness: "Kindness is costless but also priceless."

• Habit: "Chains of habit are too light to be felt until they are too heavy to be broken."

• Change: "The most important thing to do if you find yourself in a hole is to stop digging”

• Persistence: "No matter how great the talent or efforts, some things just take time. You can't produce a baby in one month by getting nine women pregnant."

• Integrity: "In looking for people to hire, you look for three qualities: integrity, intelligence, and energy. And if they don't have the first, the other two will kill you."

Firm News

For the first time this past December, we entered an Arena Wealth Christmas tree in the Fort Wayne Embassy’s “Festival of Trees”. Founded in 1984, the Festival of Trees is the largest fundraising event, supporting the ongoing operational and restoration efforts of the historic Embassy Theatre. Our tree’s theme was the board game Monopoly and we are proud to be recognized with one of the top awards, the “Best DIY Award”. We look forward to participating in the event again next year.

The content provided by Arena Wealth Management LLC is for informational purposes only and should not be construed as personalized investment advice. Investing involves risk, and there is no guarantee that any strategy or historical trend will result in future profits. Any opinions expressed are those of the authors and are subject to change at any time. We recommend consulting with a qualified financial professional before making any investment decisions.