At Connecticut Wealth Management (CTWM), we believe that staying invested with a diversified, long-term approach is essential, especially in unpredictable market environments like what we’ve seen in 2025.
In our latest Investment Committee update, John Shanley, Partner & Managing Advisor, and Josh Sweeney, Director of Investments, break down the current market environment and how our investment approach is designed to help clients navigate market uncertainty.
Their message is clear: even when markets take unexpected turns, and a few stocks appear to be untouchable, we stay true to the data and our belief that a diversified portfolio is the best way to help you stay on track in your financial plan, working toward your life’s aspirations.
Key Themes Shaping Market Performance
What a year 2025 has been. From a volatile start, with markets down over 15% in April, to a year-end rebound with the U.S. stock market up over 15%, investors have experienced plenty of highs and lows over the course of the year.
One of the dominant themes entering the year was “U.S. exceptionalism.” Early expectations for lower taxes, lighter regulation, and pro-business policies suggested another stretch of strong domestic performance—much like the past decade. Instead, the focus on tariffs early in the year sparked an “anywhere but the U.S.” sentiment for several months.
While U.S. stocks recovered over the summer, the real bright spot for diversified investors has been the rebound in international markets thus far in 2025. Both developed and emerging markets have rallied strongly this year, reversing years of relative underperformance, and currently lead global returns.
Innovation, particularly artificial intelligence (AI), has also dominated headlines as another key theme. While some worry about an “AI bubble”, history shows us it can be extremely difficult to time the end of a bubble, and that maintaining a long-term perspective can be rewarding, even for those who entered markets at all-time highs. The following chart details return profiles if you just invested at market peaks, showing that these highs often cluster, offering opportunities for disciplined investors.
In conjunction with the discussions surrounding a “bubble,” concentration in the top 10 S&P 500 companies has reached historic levels. While these companies may seem unstoppable in the moment, the following chart shows that few companies are able to maintain their dominance across multiple decades. The key takeaway: participate in growth trends but work with your advisor to review any chances of overconcentration in individual names. They will work with you on making sure your portfolio remains diversified.
A surprising bright spot of 2025 has been fixed income. Falling interest rates have supported strong bond returns, and high-quality bonds have recently offered competitive yields relative to risk. Looking ahead, potential rate cuts remain a topic of market discussion which could impact future opportunities. Although uncertainties remain, recent employment data, tariff-driven inflation, and potential changes in Federal Reserve leadership could impact future rates in a variety of different ways. For the time being, we believe taking advantage of these attractive yield levels and monitoring excess cash are important pieces of ongoing portfolio monitoring.
Our current focus remains on thoughtful planning and reviewing short-term cash needs. CTWM’s disciplined approach and broad market philosophy remain constant, helping our clients navigate uncertainty with confidence and stay positioned for long-term success.
Why Long-Term Investing Matters
At CTWM, one of our core investment principles is maintaining a long-term focus rather than reacting to short-term market swings. Time and again, the data has shown why this approach matters. We believe in “time in the market,” not timing the market.
We often share the following chart with our clients, which illustrates market performance data going back to 1950. It provides historical return ranges for stocks, bonds, and a diversified portfolio, showing what investors could have experienced if they invested in any given year.
Historical data shows that in any given year, stock market returns have swung from significant gains to significant losses, and even bonds and diversified portfolios can vary meaningfully. This unpredictability serves as a reminder of the challenges of timing the market.
But when we look at the historical period shown, 20-year rolling returns for stocks, bonds, and diversified portfolios show much less volatility. Even through economic cycles, downturns, geopolitical conflicts, and policy shifts, maintaining a disciplined approach and staying invested has historically helped support more consistent long-term outcomes.
This continues to show why CTWM emphasizes time in the market over timing the market. Our key role is to keep you focused on your long-term plan, filter out the noise, and guide decisions that keep you aligned with your goals and aspirations. We believe that by maintaining a diversified portfolio and staying rooted in your financial plan, together we can help your portfolio grow while managing risk along the way.
Disclaimers:
Past performance is not indicative of future results. All investments involve risk, including possible loss of principal.
Forward-looking statements are based on current conditions and may change. There is no guarantee that views or expectations expressed will occur.
Index performance is unmanaged, does not include fees or expenses, and cannot be invested in directly. Historical charts are for illustrative purposes only.
Diversification does not ensure a profit or protect against loss in declining markets.
This material is for informational purposes only and should not be considered personalized investment advice.