Below is the first edition of our market commentary newsletter. We welcome your thoughts, whether there are topics you’d like us to explore in greater depth or ideas on how we can make this resource even more valuable to you. One of our strengths as a firm is our ability to adapt and tailor our communication to what clients find most useful, and this newsletter is an extension of that commitment. With that in mind, we’re pleased to share our inaugural issue.

From a market perspective, one of the defining moments of 2025 was the tariff shock in the spring. The S&P 500 entered correction territory at the fastest pace since the COVID downturn, fueled by fears that international investors would pull funds from U.S. markets and Treasuries, and that countries would seek new trade partners. Most of those concerns never materialized. Instead, patience paid off and the market rebounded strongly, delivering another banner year for equities both domestically and abroad. 

The S&P 500 finished the year up 16%, while international stocks surged nearly 30%, marking their best performance since 2009. Even U.S. bonds posted a solid 7% return. It was a classic reminder that staying the course often wins. 

Throughout the year, markets kept a close eye on the Federal Reserve. The Fed implemented three rate cuts totaling 0.75%, as it continued to navigate its dual mandate of maximum employment and price stability. Inflation remained sticky, with the latest reading showing prices up 2.7% year-over-year - down from January’s 3% but still above the Fed’s 2% target. Meanwhile, unemployment ticked higher in the second half, reaching 4.6% in November compared to 4% in January. These dynamics underscore how challenging it is to predict the interest rate environment. 

The real story of 2025, however, was corporate earnings strength. Through the first three quarters, earnings grew between 11% and 14%, exceeding the long-term average of 8%. The adage, “stocks follow earnings,” proved true once again. While some have raised concerns about valuations, robust earnings have largely justified current prices.

As we step into 2026, optimism across the investment industry remains strong. Recent surveys of 20 major investment firms show an average expected return for U.S. equities of over 10% this year. While this is lower than the exceptional 20%+ annual gains seen over the past three years, it reflects a return to more sustainable growth.  

Corporate earnings continue to trend upward, and market participation is broadening beyond the “Magnificent 7” tech giants. Additionally, recent tax cuts and deregulation historically support economic expansion and healthy equity markets. 

Despite the positive backdrop, markets can shift quickly. Last year’s tariff-driven volatility is a reminder that external shocks matter. Already in 2026, a major geopolitical event has unfolded, and its full impact remains uncertain. Mid-term elections later this year could also introduce short-term volatility. Meanwhile, the ongoing evolution of artificial intelligence continues to capture attention, and time will tell if it becomes the next “industrial revolution” that many expect it will be.

We remain generally positive on the market outlook, supported by strong fundamentals and historical trends. However, as always, risks persist, and staying diversified and disciplined remains key. We will dive into more depth on a few of these major topics below.

As we begin the year, expectations for monetary policy continue to shift toward easing. Current projections indicate the Federal Reserve may cut interest rates by roughly half a percent over the course of the year. As always, these expectations are highly dependent on incoming economic data, and we anticipate continued volatility in market assumptions as new reports are released. 

A key development to watch is the anticipated appointment of a new Federal Reserve Chair in May. President Trump has signaled support for a faster pace of rate cuts than those implemented under Chairman Powell. Any change in leadership could influence the trajectory of monetary policy and, in turn, broader financial conditions. We are monitoring these dynamics closely as they remain central to both equity and fixed income positioning.  

Questions around whether AI is entering bubble territory continue to surface, often drawing comparisons to the late1990s dotcom era. While the pace of innovation and the strong performance of a handful of mega-cap technology companies naturally raise eyebrows, there are important distinctions between today’s environment and the speculative excesses of 2000. 

Most notably, today’s leading AI related companies are generating meaningful earnings and cash flow - unlike many of the unprofitable firms that drove valuations during the dotcom boom. While valuations in the tech sector are elevated relative to historical averages, they remain well below the extremes reached in March 2000. 

We continue to view AI as a transformative long-term theme, but we remain disciplined in how we allocate to the sector, balancing opportunity with valuation awareness and diversification.

This summer brought a major legislative change with the passage of the “One Big Beautiful Bill.” The primary goal of this bill was to make the 2017 Tax Cuts and Jobs Act provisions permanent. Key items such as tax brackets, estate limits, and the enhanced standard deduction will now continue into 2026 and beyond, rather than expiring at the end of 2025. 

In addition to these extensions, several new provisions were introduced that could impact your tax planning

✔  Additional Senior Deduction (Age 65+) 

• • $6,000 for single filers; $12,000 for married filing jointly 
  • Phase-out begins at AGI of $75,000 (single) and $150,000 (MFJ) 

✔  Above-the-Line Charitable Deduction 

• • $1,000 for single filers; $2,000 for married filing jointly 
  • Available even if you take the standard deduction 

✔  Increased SALT Deduction 

• • Raised to $40,000 (up from $10,000) 
  • Significant benefit for taxpayers with high state income and property taxes 

✔  Trump Accounts 

• • For children born between Jan 1, 2026, and Dec 31, 2028 
  • Government will contribute $1,000 into an IRA-like account 

Funding expected to begin in summer 2026 

Our goal at Carolina Wealth Planners is to be able to be truly comprehensive in our approach with every client.  As we enter tax time, and you get your 1040's done, we want to be able to review those to give us as much information as possible so we can game plan for the rest of 2026. 

As you finish your taxes, please let us know so we can set up that meeting with each of you.  We will also plan to reach out in late April, early May if we haven't heard from you by then.  

As always, if you wanted to chat with us before this to discuss anything on your mind, do not hesitate to reach out to us!