| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| - | - | - |
Markets delivered solid Q4 gains despite navigating a complex environment dominated by a 43-day government shutdown that created data fog and contributed to volatility. The S&P 500 gained 2.7% in Q4, bringing full-year returns to nearly 18%, marking the third consecutive year of double-digit gains. The Federal Reserve cut rates twice but signaled a pause, emphasizing data dependency and creating policy uncertainty. The AI investment theme matured as investors became more selective, focusing on companies with pricing power and profitability rather than broad enthusiasm. Market leadership shifted modestly toward large-cap value, with health care outperforming as the top sector. International stocks continued outperforming US markets by over 13% for the full year. Looking ahead to 2026, the bar is higher given expensive valuations, tight credit spreads, and high expectations already priced in. While positives include tech innovation, record profits, and declining rates, there is less room for positive surprises, requiring disciplined risk management.
Markets navigated a complex Q4 environment marked by a 43-day government shutdown, Fed rate cuts with cautious messaging, and maturing AI investment themes, ultimately ending near all-time highs but facing higher expectations and reduced margin for error in 2026.
The bar is now higher for 2026 given expensive stock valuations, tight credit spreads, and high expectations already priced in. However, positives include tech sector innovation, record corporate profits, continued consumer spending, and declining interest rates. A disciplined approach focused on long-term goals, diversification, and risk management is recommended.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jan 1 2026 | 2025 Q4 | - | AI, Economic Data, Fed policy, Government Shutdown, Market Leadership, Rate Cuts | - | Artificial intelligence remained a key investment theme in Q4, but the narrative matured as investors became more selective. The market shifted focus from broad enthusiasm to companies demonstrating pricing power and a path to profitability rather than growth at any cost. Questions emerged about capital requirements for data centers and the impact of aggressive capex spending on balance sheets. The Federal Reserve cut interest rates by 1.75% since September 2024, with two cuts in Q4. However, officials signaled a pause in early 2026 and emphasized future cuts will depend on incoming data. The shutdown created uncertainty around Fed policy, leading to market volatility as expectations shifted between multiple cuts and a slower cutting cycle. |
| Oct 1 2025 | 2025 Q3 | - | - | - | |
| Jul 1 2025 | 2025 Q2 | - | - | - | |
| Apr 1 2025 | 2025 Q1 | - | - | - | |
| Jan 2 2025 | 2024 Q4 | - | - | - | |
| Oct 1 2024 | 2024 Q3 | - | - | - | |
| Jul 1 2024 | 2024 Q2 | - | - | - | |
| Apr 2 2024 | 2024 Q1 | - | - | - | |
| Jan 1 2024 | 2023 Q4 | - | - | - |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q4 |
AIAI has been integrated into RGA's research process through tools like NotebookLM, Gems in Gemini, and Claude Code. The firm views AI as a force multiplier for human judgment rather than a replacement, emphasizing the Kasparov Law principle. They believe the market narrative around AI displacement is swinging to unhelpful extremes, creating investment opportunities. |
Machine Learning Automation Software Productivity Innovation |
RatesFederal Reserve resumed rate-cutting cycle with first cut since December 2024, signaling resumption of easing. Expected three cuts of 25bps between now and first quarter 2026 as Fed responds to signs of weakness in US labor market. |
Fed Monetary Policy Labor Market Easing Liquidity |
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