As 2025 draws to a close, the economy remains stronger than many expected. The Federal Reserve’s modest 0.25% rate cut to 4.25% signals a gentler stance, but persistent inflation suggests only gradual easing ahead. Equity and credit markets have rallied to record valuations, leaving limited margin for disappointment. Bonds once again offer meaningful real returns and portfolio balance, while global growth leadership is shifting toward developed markets. With optimism high and valuations stretched, we believe investors should emphasize diversification, quality, and flexibility—positioning portfolios to potentially benefit from resilience while staying prepared for bouts of volatility that often follow periods of exuberance.