Fourth Quarter Newsletter

Responsible Guidance:  Fourth Quarter 2025 Newsletter, January 2026

Resolution Season: Sticking to What Works

The new year is often when we revisit goals and reflect on what worked, or didn’t work, last year. When it comes to investing, a powerful “resolution” can simply be to stay disciplined. In 2025, that approach was rewarded. Markets delivered solid results in the fourth quarter and finished the year with broad gains across stocks and bonds. While headlines tested our patience, the fundamentals proved more durable. Sticking to a diversified, long-term strategy once again made the difference.

At Baron Financial Group, we believe your personal financial plan should serve as a calm center of gravity, what we call Your Personal Economy℠.  It’s a personal framework designed to help you tune out noise and stay focused on what matters most: achieving your goals.  In the pages that follow, we will review what happened in the fourth quarter and for all of 2025, as we help you plan for what comes next. With Your Personal Economy℠ at the center of the process, we aim to help you answer the most important financial question: “Am I going to be okay?”

A Global Perspective

A core objective for our customized Baron Financial Group investment strategies is global diversification, meaning strategies can include investments based both in the U.S., as well as internationally in developed and developing or emerging countries. There are popular benchmark indexes that provide perspectives about the performance of global investments.

Global diversification was a key driver of success in 2025.  The MSCI ACWI All Cap Index represents stock investments across 23 developed and 24 emerging markets. The index was up 3.2% in the fourth quarter, finishing 2025 up 22.1%. This was the third quarter in a row of positive performance.  Outperformance of equities in countries outside the US, especially in those considered emerging market countries, were the main drivers for the positive year. 

The FTSE World Government Bond Index tracks sovereign debt from 20 countries, denominated in their respective currencies. The index posted a modest 0.1% gain for the fourth quarter, ending up 7.6% for 2025. Rates have been coming down in many countries across the globe, as central banks try to stimulate more growth, and have been positive overall for this index in 2025.

U.S. Economy

The U.S. economy continued to grow, and The Atlanta Federal Reserve’s forecast suggests growth could accelerate.  Jobs continue to be added, but the unemployment rate increased and remains above 4%. The Federal Reserve continued to lower interest rates throughout the fourth quarter. 

According to the Bureau of Economic Analysis (BEA) the U.S. economy grew by 4.3%, based on the initial read for the third quarter. You may recall the economy contracted 0.5% in the first quarter but growth has returned now for two consecutive quarters (2nd quarter GDP was 3.8%).  The initial report for the third quarter replaces the advanced estimate, originally scheduled for October 30th, and the second estimate originally scheduled for November 26th, due to the government shutdown.  The primary drivers for growth were increases in consumer spending, exports, and government spending (the full press release can be found at https://www.bea.gov).

Due to the normal delay in receiving growth data from the BEA, the Federal Reserve Bank of Atlanta publishes a “nowcast” by estimating GDP growth for the most recent quarter (in this case the fourth quarter of 2025) using an approach like the BEA. On January 14, 2026, the estimate for fourth quarter GDP from the Federal Reserve Bank of Atlanta suggests growth may not only continue but may accelerate to 5.3%. Please note that this estimate updates regularly and is subject to change. The “nowcast,” along with the methodology, and additional information can be found at: https://www.atlantafed.org/cqer/research/gdpnow

Jobs are being added to the economy, but the unemployment rate remains above 4.0%. According to the Bureau of Labor Statistics (BLS), the U.S. gained 50,000 jobs for the month of December, and the unemployment rate increased to 4.4%. BLS indicated job growth was notable for food services and drinking places, health care, and social assistance (full press release can be found at: https://www.bls.gov).

U.S. Stocks

The S&P 500, an index consisting of roughly 500 of the largest U.S. domestic stocks, remained strong. The index was up 2.7% for the quarter and 17.9% for the year. The communication services and technology sectors were some of the best performing in 2025.

For technical analysts and trend followers, the index dipped below the 50-day moving average during mid-to-late November, as well as a brief period in mid-December, but finished the year above the average.  The index remained above the 200-day moving average for the entire quarter.

Dividing index components into growth and value, value-focused stocks outperformed in the fourth quarter, but still trailed growth-focused stocks for 2025.  Growth stocks have mostly dominated over the last decade. Value last outperformed on a calendar-year basis in 2022, when most equity indexes were struggling.

International Stocks

International-developed-country stocks (such as those in the European Union and Japan), measured by the MSCI EAFE index, continued their positive momentum, up 4.9% in the fourth quarter, bringing performance to 31.2% for the year. Non-developed, or emerging-country stocks (such as those located in Brazil, India, and China), measured by the MSCI EM index, were also strong, gaining 4.7% in the fourth quarter and 33.6% in 2025. This was the best performing index that we cover for 2025.    

After struggling in 2024, relative to U.S. stocks, international stocks outperformed in 2025, helped by attractive valuations on a relative basis, and a weaker dollar, along with other factors. The last time international stocks outperformed U.S stocks on a calendar-year basis was 2022, and then 2017 prior to that.

Bonds

U.S. Domestic Fixed Income (bonds), as measured by the Barclays U.S. Aggregate Bond Index (gauges performance of investment-grade intermediate bonds), was up 1.1% in the fourth quarter and up 7.3% for the year. The Federal Reserve restarted its rate-cutting cycle in September after pausing in January. Bonds have rallied in price as investors adjust to lower interest rate expectations. As demand for bonds increases, typically prices rise and interest rates fall, possibly resulting in gains for existing bond holders. However, the opposite can occur when there are more bond sellers than buyers.

The 10-year U.S. Treasury bond yield finished the fourth quarter at 4.18%, below the 2024 year-end rate of 4.58%.

A yield curve plots interest rates against the time-to-maturity to earn those rates. We continue to monitor the changing shape of the yield curve for U.S. debt issues, and what that may signal. Using the U.S. Government 2-year bond rate as a proxy for short-term rates and the 10-year U.S. Government bond rate as a proxy for long-term rates, we calculate the difference between the rates, which provides a possible indicator for the future direction of the economy. A steep spread (long-term rates higher than short-term rates) indicates potential future economic expansion, and fixed-income investors are compensated for taking longer-term risks. A flat spread (long-term rates match short-term rates) is a possible indicator of economic uncertainty, and longer-term investors are not being compensated for investing in longer-dated securities. An inverted spread (short-term rates are higher than long-term rates) possibly indicates future economic contraction.

At the end of the second quarter, the 2-year rate was 3.47% (and 10-year, 4.18% per above), keeping the shape of the yield curve positive, at 71 basis points (a basis point represents 1/100 of 1%). The yield curve was positive by 33 basis points to start the year. Although rates are lower overall, the shape of the curve became steeper compared to the start of the year.  If the economy continues to grow and if inflation slows, the curve could be indicating continued growth opportunities for the economy with long-term rates possibly remaining higher than short-term rates.

The yield curve was inverted (short-term rates higher than long-term rates) from the fourth quarter of 2022 to the fourth quarter of 2024. As a reminder, the Fed started raising rates in March 2022 to fight inflation and then began cutting rates in September 2024, with inflation reducing.

Housing and Real Estate

Commercial real estate, as measured by the FTSE NAREIT All Equity REIT (Real Estate Investment Trust) Index, struggled in the fourth quarter and was down 2.2% but was able to finish the year in positive territory, up 2.3%.

According to Freddie Mac (FM), the average 30-year residential home mortgage rate decreased to 6.16% (as of 01/08/2026). At this time a year ago, the rate was 6.93%.

Natural Resources

The Bloomberg Commodity Index regained momentum in the fourth quarter and was up 5.9%, the most for the quarter of the indexes we cover. The index finished the year up 15.8%. Within the Natural Resources category, precious metals, especially silver and gold, copper, and livestock did well in 2025.

Baron Client Strategies

Planning for multiple outcomes with Your Personal Economy℠ is critical to helping our clients answer the simple question "Am I going to be OK?".

As Registered Investment Advisers (fiduciaries) and Fee-Only advisors, we do not receive a commission for making investment transactions. Our decisions are grounded in your goals. A big reason your Baron team makes trades is to align clients' portfolios with their customized, risk-appropriate globally-diversified strategy. We believe these actions potentially strengthen clients' portfolios or financial positions. We use this same approach with our own personal money.

No matter the economic environment, our basic principles remain:

Create a globally-diversified and risk-appropriate strategy.  Validate the investment choices versus peer investments.  Rebalance when needed. Test the strategy in a comprehensive financial plan and obtain regular feedback to update information and advance your financial position.

Your Service Plan

One of our primary roles is to educate our clients to make informed decisions about reaching their goals. Critical to that process are plan reviews, a process that focuses our attention on your goals, takes account of any changes in your situation, and allows us to alter the course, as necessary. If you have experienced any changes to your financial position or are considering changing financial goals and objectives, please let us know.

Your Personal Economy^sm

Concluding Comments  

2025 closed with many positive signs and 2026 will bring new opportunities and challenges. Staying focused, reviewing your plan, and avoiding emotional pitfalls remain essential. As always, we are here to help you stay aligned with your personal goals and navigate Your Personal Economy℠.

Baron Updates

Happy New Year!  We are looking forward to seeing many of you at our next client appreciation event in Sarasota, Florida, at the Spring Training home of the Baltimore Orioles in February. If you have not already responded, please reach out to us if you would like to attend.  There is still time. This is always a fun event!

As we start the new year, please visit our website blog to view our New Year’s message and to read or view our educational content on a wealth of financial topics, such as retirement and financial planning, Social Security, Market Update videos, Medicare, and more. Look for upcoming posts with our annual financial checklist and some new financial planning numbers for 2026, in addition to tax-filing information. The Baron Advisors are often called upon by journalists for their insights on financial planning and investing.

The start of the new year is also a good time to update your trusted contact form (a protective measure we use for our Baron clients, particularly important as they get older) with a new trusted contact.  It is kept on file at Schwab and at Baron. If you have not completed this form by assigning a trusted contact, let us know. The more recent Schwab account applications include this form.  Please contact us if you need our assistance with any updates.

As we mentioned in the last newsletter, for enhanced security with your Baron portal, multi-factor authentication was enabled in November. You will receive a one-time-password via email upon sign-in.  In addition, our Baron client portal has been updated. Although it may be organized a bit differently, the same information will be there and there will be options to further customize your information.  Although you can still access information on the old version of the Baron portal, the newer version offers more options.

For those of you who are new to the Baron portal, you can visit our website to gain access to your client portal. Just click on the client-portal tab, which will allow you to view your account information. The client login requires a username and password to gain access to the portal. Please let us know if you would like to create your portal login or if you would like to learn more about what the portal provides, including paperless statements. Please also let us know if you would like to transition to the newer portal. Contact Baron at 1-866-333-6659 or at info@baron-financial.com to enroll.

We always like to share our good news, including news that is personal to the Baron Team!  We are humbled to announce that Advisors Anthony Benante (in Sarasota) and Victor Cannillo (in New Jersey) are once again recognized as Five Star Wealth Managers. You can read more about this award and its criteria on our website.

Baron is excited to announce that Colleen Celmer will be joining the Baron Team as a welcome addition to the communications and compliance teams.  Look for an official announcement in the coming weeks.  We are happy to welcome Colleen and look forward to introducing her to you!

We are also happy to share with you the arrival of  the newest member to our Baron Family, Hannah Rose Suazo, daughter of Maria and James Suazo, who was born on October 16, 2025. Congratulations to her loving parents and the entire Suazo clan!

As always, thank you for your continued support!
We wish you all a happy, healthy, and prosperous New Year!
Click here to view our New Year’s video message.

Warmest Regards,

Baron Financial Group, LLC
www.baron-financial.com

This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of January 11, 2026 and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources deemed by Baron Financial Group to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. Past performance is no guarantee of future results. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. Investment involves risks. International investing involves additional risks, including risks related to foreign currency, limited liquidity, less government regulation and the possibility of substantial volatility due to adverse political, economic or other developments. The two main risks related to fixed income investing are interest rate risk and credit risk. Typically, when interest rates rise, there is a corresponding decline in the market value of bonds. Credit risk refers to the possibility that the issuer of the bond will not be able to make principal and interest payments. Index performance is shown for illustrative purposes only. You cannot invest directly in an index. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client or prospective client’s investment portfolio. Historical performance results for investment indices and/or categories 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. Inclusion of index information is not intended to suggest that its performance is equivalent or similar to that of the historical investments whose returns are presented or that investment with our firm is an absolute alternative to investments in the index (if such investment were possible). Investors should be aware that the referenced benchmark funds may have a different composition, volatility, risk, investment philosophy, holding times, and/or other investment-related factors that may affect the benchmark funds’ ultimate performance results. Therefore, an investor’s individual results may vary significantly from the benchmark’s performance.