If you listened to the consensus back in April, you probably thought the sky was falling.
Recession was coming. The market was toast. Time to hide.
But that’s not how things worked out, and the year-end data tells the real story. And…it’s a good reminder of why we don’t make portfolio decisions based on headlines or polls.
The Worst Start Since 2020
Through April 8th, 2025, things were shaping up to be one of the worst starts to a year in market history. We’re talking 66 trading days in, fourth worst start ever, and the worst since 2020.
Before that? You had to go back to the 1930s.
The S&P 500 dropped 21% from February to April. That’s a bear market by definition.
And the recession predictions? They were everywhere. According to a poll done by Charlie Bilello back in April, about two-thirds of respondents thought we were headed into a recession. The betting markets agreed…67% odds of a US recession.
So what happened?
The Big Comeback
From the April lows, the market ripped 43% higher.
New all-time highs along the way. One of the biggest comebacks in history.
And those recession odds? Today they sit at essentially zero.
Let that sink in. In eight months, we went from “67% chance of recession” to “what recession?”
This is why we say there are no facts about the future. Everyone is guessing. The polls, the betting markets, the talking heads on TV…all of them were looking at the same data in April and drawing conclusions that turned out to be completely wrong.
Why It Felt Worse Than It Was
Here’s the thing that surprised me.
If you asked most investors how volatile 2025 felt, they’d probably say “very.” The tariff chaos in the spring, the AI bubble fears in the fall, the constant news cycle…it felt like a lot.
But, the data tells a different story.
The S&P 500 had 29 days with a 1% or greater decline this year. You know what the average is going back to 1928?
Exactly 29. Right on the nose.
The VIX, which measures expected volatility, averaged 19.1 for the year. The long-term historical average?
Yup, 19.5.
So by every objective measure, 2025 was essentially a completely normal, completely average year for volatility.
It just didn’t feel that way because our brains don’t process risk rationally.
We remember the scary parts yet forget how quickly things recovered.
Two Corrections, Two Different Flavors
We had two pullbacks this year:
The first was the 21% bear market from February to April. That one got all the attention.
The second was a 5.8% decline from October to November on AI bubble fears. Mild by comparison. Most people probably don’t even remember it.
Here’s the broken record part…we’re likely going to see corrections in 2026 too. The reasons will be different. Maybe it’s something we’re not even thinking about right now. But the pattern is the same. Markets go down, sometimes a lot, and you never know in the moment how far they’ll fall.
The investors who do well are the ones who plan for this in advance, not the ones who react in the moment.
A Couple of Bright Spots to End the Year
Gas prices hit $2.89 per gallon nationally. That’s the lowest in over four years. If you drive, you’ve noticed. But it also feeds into the broader economy…transportation costs, shipping, all of it.
And here’s the one that matters most: wages have been growing faster than inflation for 31 consecutive months now.
That’s real purchasing power.
If you only pay attention to the political news and press, you may not feel like you agree with this, but people are actually getting ahead instead of just treading water. For a while there, from 2021 to early 2023, inflation was eating people’s paychecks alive. That’s flipped. And it’s a big deal.
What It Means for 2026
I’m not going to sit here and make predictions. You know how I feel about that.
But I will say this: 2025 was a masterclass in why the consensus is often wrong at exactly the wrong time. When everyone was panicking in April, that was the time to stay the course. When everyone forgot about risk in the fall, we got a quick reminder.
At Monument, our approach doesn’t change based on what the polls say or what the betting markets predict. We build portfolios with the expectation that volatility will show up. We maintain cash reserves so our clients don’t have to sell at the worst possible moment. And we follow our process.
I will take this philosophy to the grave – if you rely on your portfolio for ANY income, having 12-18 months of cash set aside is the best and cheapest hedge against market downturns any investor can have. Period.
With markets at an all-time high, Jan 1st (gives you more time to pay any taxes) is a great time to start replenishing any cash you spent out of your reserves over 2025.
2026 will have its own challenges…there will be scary headlines, there will be corrections, and at some point, the consensus will probably be wrong again.
The question is whether you’ll be positioned to ignore them and possibly even take advantage of selloffs.
Keep looking forward.
Dave
