Investment Commentary: Q4 2025

The Community Foundation’s Corporate Commingled Fund posted a quarterly net return of 2.9% in the fourth quarter, which was roughly in line with its Policy Benchmark.

Global markets ended 2025 on a strong footing despite early-year volatility driven by tariffs and trade policy uncertainty. U.S. equities advanced about 18%, supported by optimism surrounding artificial intelligence and the Federal Reserve’s decision to resume its easing cycle with 75 basis points of rate cuts. While valuations remain elevated, robust earnings growth, particularly among AI-driven companies, helped justify premium pricing. Market leadership, however, remained narrow, with the top 10 stocks accounting for a record 40% of the S&P 500 Index’s weight, underscoring the importance of diversification in an increasingly concentrated environment.

Most non-U.S. markets outpaced the S&P 500 Index with international equities (MSCI EAFE Net Total Return Index) generating 31% and emerging markets (MSCI EM Net Total Return) up nearly 34%. Europe surged, driven by increased defense spending and policy initiatives to mobilize household savings into productive investments. Japan delivered strong returns as corporate governance reforms and fiscal stimulus under new leadership signaled a shift toward sustainable growth. Emerging markets, led by China, were driven by AI adoption and easing trade tensions, even as consumer confidence and real estate remained under pressure.

Looking ahead, our outlook is balanced. There are clear reasons for optimism: lower interest rates can gradually support housing, small businesses, real estate and other market segments; companies are investing in technology and process improvements that can enhance productivity over time; and high bond yields offer better income and a more reliable cushion if growth slows. At the same time, we are mindful of risks. Parts of the equity market remain expensive, consumer and credit trends bear watching, and policy or geopolitical developments can create periods of volatility. None of these risks are new, and the portfolio is designed to navigate them.

In this environment, we continue to emphasize broad diversification, quality and discipline. Within equities, we maintain exposure across U.S., international developed, and select emerging markets to avoid relying too heavily on a handful of companies or a single region.  Across the global equity allocation, the portfolio is broadly diversified, with more than half in North America and meaningful exposure to Western Europe and Asia Pacific. Relative to broad-market indices, our equity allocation leans toward mid‑ and smaller‑capitalization companies and away from the largest mega‑caps, reducing concentration risk in a limited number of names. In fixed income, higher starting yields improve the role bonds can play in providing income and stability, and we retain flexibility to adjust interest rate and credit exposure as conditions evolve. We also maintain measured allocations to strategies that can help manage inflation and further diversify returns, while always keeping in mind the liquidity required to support grantmaking and spend-rate distributions.

Our approach is steady by design. We rebalance thoughtfully, trimming areas that have run ahead and adding to areas that have lagged, so that the portfolio remains aligned with long‑term objectives rather than short‑term headlines. This discipline supports The Foundation’s purpose: to inspire, support, inform, listen to and collaborate with the people and organizations of Greater New Haven in building a more connected, inclusive, equitable and philanthropic community.

We appreciate your continued trust and look forward to discussing the portfolio and outlook in more detail. 

We look forward to speaking with you soon.

*The Corporation is a Connecticut registered investment adviser and part of The Community Foundation for Greater New Haven.

Learn more about The Community Foundation's investments.