Client Newsletter Q4 2025
Dear Friends,
What a year 2025 turned out to be.
It was a year that reminded us why discipline matters. If you felt like the market was swinging on tariff headlines, you weren’t imagining it. In Q1, the S&P 500 fell about 5%, with the largest tech names doing most of the dragging amid the volatility. Then deals started to take shape—exemptions were put in place, adjustments followed—and the market settled down. By year-end, the S&P 500 was back near all-time highs.
One thing I heard repeatedly this year is that the rally didn’t feel evenly spread. Tech did much of the heavy lifting, while other areas moved more slowly. A big driver is the sheer amount of capital being deployed into AI right now—and it’s understandably on most investors’ minds. It’s an important theme, but it’s only one piece of the portfolio.
What matters is where the money goes. It tends to land in four buckets:
• Compute: chips and servers
• Facilities: data centers and cloud buildout
• Infrastructure: networking, storage, and cooling
• Power: electricity, plus the equipment and grid upgrades needed to deliver it
At this scale, AI spending doesn’t stay in “tech.” It shows up in the buildout—equipment, facilities, and power—where the dollars keep moving even when the headlines change. That’s why we’ve emphasized the buildout rather than trying to pick the “winning” AI application. We’d rather own the spend than chase the story.
Looking ahead, we see both opportunities and challenges.
The labor market isn’t as strong as it was. If hiring and pay cool from here, the economy can feel more uneven—so we’re staying selective. Inflation has improved, but it hasn’t disappeared. Tariffs and reshoring can keep certain costs higher for longer. Oil is still a swing factor for inflation and sentiment.
But we also see growth. The AI buildout continues, and the spending behind it is real—not hype. And as markets stay focused on interest rates, it’s worth remembering why: rates set the price of money. That ripples through everything—borrowing costs, business investment, housing, and how different parts of the market perform.
Through all of it, our job is the same: keep you positioned thoughtfully, protect against avoidable risk, and stay ready to act when the opportunity is real.
Wishing you a happy, healthy year ahead.
Best,
Investment Advisory services offered through Moonstone Asset Management, Inc. a registered investment adviser
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