The 2025 calendar year proved to be a testament to market resilience, characterized by a dramatic “V-shaped” recovery that saw major indices overcome significant policy-driven volatility to finish near record highs. While the year was marked by geopolitical shifts and domestic policy changes, the underlying strength of the American consumer and the relentless march of technological innovation remained the primary engines of growth.
“Technology has always been a disruptive force, but never has that development been more pronounced than today, as AI is poised to surpass prior innovations in reach and impact” – BNY
The broad US equity market concluded 2025 with an impressive gain which marked the third consecutive year of double-digit returns. The trajectory of the year was anything but linear. In the first quarter, markets faced a sharp correction, with the S&P 500 dropping nearly 15% between January and April following the announcement of reciprocal tariffs. However, as the administration moderated its stance and the Federal Reserve signaled a shift toward easing—culminating in a 25-basis-point rate cut in December—investors returned to equities with renewed vigor.
In this RVW Report:
• The Crystal Ball is Cloudy
• A Picture Tells a Thousand Words—And a Chart Tells the Story
• The Shrinking Assets of Active Managers
• The 2-Speef Economy is K-Shaped
• A Tale of Two Ralphs—Lauren and the Supermarket—Shows the Reality of a K-Shaped Economy
• World’s Largest Companies by Market Cap (1998-2025)
• The Stock Market Forecasters Are Usually Very Wrong
• Farewell to the Stage of Omaha
• The Cost of Caution: Assessing Buffet’s Capital Allocation in the Modern Market
• The Markets have Changed, so have the Perspectives of Allocations
• 10 Wealth Lessons People Learn Too Late in Life, According to Self-Made Millionaires
• Special Report: Identity Theft Risk & Investor Protection Update
THE CRYSTAL BALL IS CLOUDY
Economic Backdrop
The economy navigated a complex landscape of “stagflation-lite” early in the year, with inflation remaining sticky around 3% and labor markets showing signs of cooling. Despite these headwinds, corporate earnings remained robust, growing at a rate of roughly 12%.
Don’t Predict – Prepare. The financial crystal ball is always cloudy.
As we transition into 2026, the consensus remains cautiously bullish. The primary catalysts for this optimism are structural rather than merely cyclical. We are witnessing the convergence of onshoring initiatives and the AI-driven digital revolution. The “onshoring” trend, bolstered by protective tariffs, is incentivizing a massive retooling of domestic infrastructure. When combined with the “One Big Beautiful Bill Act” (OBBBA) stimulus, this creates a fertile environment for a broadening out of the rally that was previously dominated by “Big Tech.”
THE MEGATREND: The digital revolution has entered its “industrialization phase. AI is no longer just a speculative buzzword; it is driving measurable productivity gains across the economy. Capital expenditure on AI infrastructure should exceed $500 billion in 2026, acting as a massive floor for the technology sector. This “productivity miracle” should enable companies to maintain high margins even in the face of persistent wage pressures, potentially pushing U.S. GDP growth strongly upwards.
Risks and Potential Challenges
The path to a fourth consecutive year of gains is fraught with “known unknowns.” High market valuations—with forward P/E ratios at decade highs—leave little room for error. The most significant risks include:
- Inflation: If tariffs and fiscal stimulus “run the economy too hot,” the Fed may be forced to halt rate cuts, leading to a “higher-for-longer” interest rate environment that could stifle the housing and credit markets.
- Labor Market Fragility: While layoffs have been contained thus far, any further stall in job growth could weaken the consumer spending that accounts for two-thirds of the economy
- Geopolitical and Policy Volatility: 2026 is a midterm election year, historically a period of increased market chop. Furthermore, any escalation in trade wars beyond current expectations could disrupt the delicate global supply chains currently being rebuilt. The Trump style of presidency results in frequent unexpected proclamations – often followed by backtracking – resulting in a further source for volatility ahead.
A PICTURE TELLS A THOUSAND WORDS–AND A CHART TELLS THE STORY
HERE’S THE S&P 500 TRAJECTORY FOR 2025 AND MAJOR NEWS DURING THE YEAR
THE V-SHAPED DECLINE AND RECOVERY IN EARLY 2025
EARNINGS DRIVE STOCK PRICES
CONSUMER FINANCES REMAIN IN GOOD SHAPE
Personal consumption expenditures account for about 70% of GDP. So, it’s reassuring that consumer finances remain healthy in comparison to historical trends. The household sector has low debt service, reasonable savings rates, and the uptick in delinquency over the 2022-2024 period looks to have peaked.
CONSUMER SPENDING IS STRONG
JOB CREATION IS SLUMPING
THINGS LOOK WORSE IN JANUARY
CORPORATE FINANCES ARE HEALTHY
EARNINGS GROWTH EXPANDING BEYOND MAG-7 INTO THE BROADER ECONOMY
PRODUCTIVITY HAS SURGED, DRIVEN LARGELY BY THE DIGITAL REVOLUTION
CONSEQUENTLY, PROFIT MARGINS ARE HIGH AND INCREASING
HOUSEHOLD ASSETS HAVE GROWN FASTER THAN LIABILITIES
THE SHRINKING ASSETS OF ACTIVE MANAGERS
Stock picking and market timing are generally sub-optimal especially because they are also typically tax-inefficient as compared to ETFs.
THE 2-SPEED ECONOMY IS K-SHAPED
The growing gap between the “haves” and the “have-nots”Wage growth gap between income groups reaches largest level in nearly 10 years
The U.S. continues to show growing signs of a “K-shaped” economy with spending among lower-income consumers showing little growth in comparison to their higher-income counterparts.
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A TALE OF TWO RALPHS – LAUREN AND THE SUPERMARKET – SHOWS THE REALITY OF K SHAPED ECONOMY
- Wealthy shoppers browse Ralph Lauren on Rodeo Drive while struggling consumers hunt for bargains at Ralphs grocery, revealing America’s stark wealth divide. One mile away, shoppers at a Ralphs grocery store in West Hollywood were hunting for bargains. The chain’s website has been advertising discounts on a wide variety of products, including wine and wrapping paper
- The K-shaped economy shows high-income households thriving with rising pay and asset gains while lower-income families squeeze budgets amid inflation and stagnant wages.
- Ralph Lauren’s stock surged more than 35% over the last six months while Kroger’s fell more than 10%.
WORLD’S LARGEST COMPANIES BY MARKET CAP (1998-2025):
Why a long term buy-and-hold-forever isn’t a fixed formula for success in the dynamic ever-evolving economy in which we live. Portfolios need to respond to changing business environments.
Only 10% of the Fortune 500 companies have remained on the list since 1955. Based on this history, the Fortune 500 list in 60 years from now will likely include very few of the current dominant companies — at least in their current form and structure. A plethora of new companies will be formed in emerging industries we cannot even imagine today. None of the 10 largest companies in the S&P 500 in 1985 were still in the top 10 in 2020, and only one from the list in 2000 remained in the top 10 in 2020.
Click here for a remarkable video showing corporate transitions and the transformation of dominance over the years.
THE STOCK MARKET FORECASTERS ARE USUALLY VERY WRONG
Here’s why we ignore them – and so should you:
Absolute Difference Between Equity Analyst Forecasts and Actual S&P Index Calendar-Year Price Returns:
FAREWELL TO THE STAGE OF OMAHA
Warren Buffett on America, Life and Money: A Charlie Rose Global Conversation
As he exits the CEO stage, we pay tribute to him and are grateful for the profound lessons we (and all savvy investors) have learned from him. Warren Buffett, more than others, significantly impacted much of what we do at RVW – and more importantly how we aspire to think and analyze. For many years an RVW delegation attended the annual Berkshire Hathaway Meetings in Omaha where he and his revered late partner Charlie Munger discussed life, business, risk and management.
Click here to view the interview.
How Warren Buffett Did It
The most successful investor of all time is retiring. Here’s what made him an American role model.
Warren Buffett has long been known and admired around the world for doing something that is, at its essence, mundane. He is not a brilliant artist or a great inventor or a record-setting athlete. Instead, his brilliance—a low-key, midwestern type of brilliance—found expression in the prosaic art of investing: buying this stock and avoiding that one. Buffett himself has called this task “simple, but not easy.” While millions upon millions of people buy and sell investments every day, no one has a record of doing it better than he has, as consistently as he has, and for as long as he has.
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THE COST OF CAUTION: ASSESSING BUFFETT’S CAPITAL ALLOCATION IN THE MODERN MARKET
Lessons from some of his recent mistakes: A critical look at his last few years
For more than half a century, Warren Buffett’s discipline has served as the gold standard of capital allocation. His emphasis on business fundamentals, patience, and long-term ownership produced one of the most remarkable compounding records in financial history. Yet the environment that once rewarded near-perfect selectivity has changed. In recent years, Berkshire Hathaway’s capital decisions suggest that discipline, when pushed too far, can quietly transform into a drag on performance.
This is not a story of capital destruction. It is a story of capital that was never given the opportunity to work.
Selling Great Businesses Too Soon
Perhaps the most striking development has been Berkshire’s reduction of its Apple position. Apple represented everything Buffett has historically championed: extraordinary brand loyalty, ecosystem lock-in, prodigious free cash flow, and shareholder-friendly capital returns. Berkshire’s original investment stands as one of the greatest institutional successes of modern times. Yet rather than allowing this rare franchise to continue compounding, Berkshire materially trimmed its holdings before the company reached subsequent new highs.
Such a move is difficult to reconcile with Buffett’s own doctrine of long-term ownership of exceptional businesses. No meaningful deterioration in Apple’s fundamentals justified the scale of the reduction. The decision looks less like risk management and more like the forfeiture of one of the most powerful engines of compounding in the global equity market.
A similar pattern unfolded in financials. Berkshire reduced major holdings in large U.S. banks, including Bank of America, and exited Citigroup entirely during a period of heightened uncertainty around interest rates, regulation, and potential credit stress. Historically, such conditions have been fertile ground for disciplined investors. The recovery in bank shares since then has only underscored the cost of retreating when uncertainty was greatest.
Shifting Toward Cyclicality
At the same time that Berkshire was trimming some of the highest-quality businesses in the world, it concentrated incremental capital into more economically sensitive positions. The most notable example is Occidental Petroleum. While the investment thesis—strong free cash flow, deleveraging, and strategic importance of U.S. energy—is understandable, the magnitude of the commitment represents a marked shift in risk profile. Commodity-linked earnings are inherently volatile, politically exposed, and dependent on forces beyond managerial control. This is not classic Buffett-style ownership of durable competitive advantages; it is macro exposure wrapped in a value narrative.
Berkshire’s increasing position in homebuilder Lennar further accentuates this pivot toward cyclicality. Housing remains vulnerable to interest-rate regimes, affordability pressures, and economic slowdowns. These investments may succeed, but they introduce volatility that contrasts sharply with the businesses Berkshire chose to reduce.
The Central Issue: Capital That Never Entered the Arena
The most consequential decision, however, is not what Berkshire bought or sold, but what it did not do. During one of the most powerful equity bull markets in modern history, Berkshire allowed its cash and short-term Treasury holdings to swell beyond $300 billion. While Treasury bills offered safety and respectable yield, they were no substitute for ownership of productive assets during a period of extraordinary earnings growth and technological transformation.
At that scale, caution ceased to be optionality and became an implicit asset allocation choice—a long-term bet against equities. This is precisely the scenario Buffett himself has long warned against: excessive liquidity in an inflationary, growth-driven environment.
Compounding the effect, Berkshire made limited use of share repurchases during periods when its own valuation appeared reasonable relative to intrinsic value. Buybacks are one of the few scalable tools available when external opportunities are scarce. Underutilizing that lever further magnified the drag created by idle capital.
When Discipline Becomes a Liability
None of this diminishes Buffett’s lifetime achievements. But markets evolve, and so do the demands placed on capital allocators. Berkshire’s immense size narrows its opportunity set, but size demands creativity and flexibility, not paralysis.
In recent years, Berkshire Hathaway did not lose capital. It failed to fully employ it. The distinction may appear subtle, but its impact on long-term returns is profound. The greatest risk on display is not excessive speculation, but excessive restraint.
The danger for modern investors is often recklessness. The danger for Berkshire, at this stage of its evolution, is something quieter and more insidious: the slow surrender of compounding.
THE MARKETS HAVE CHANGED, SO HAVE THE PERSPECTIVES OF ALLOCATIONS
The Case for Selectively Including Private Investments in Long-Term Portfolios
At its core, the case for private investments rests on three pillars: broader opportunity, improved portfolio resilience, and enhanced long-term return potential.
For decades, investors were taught that a well-built portfolio meant owning public stocks and bonds. That model worked in a slower, simpler world — one where bonds produced income, stocks compounded steadily, and inflation remained tame. That world is gone. Today’s markets are faster, noisier, more volatile, and increasingly driven by headlines, algorithms, and emotion. In response, the most sophisticated investors on the planet — endowments, pensions, sovereign wealth funds, and family offices — quietly built a better model. They turned to private markets.
Private investments operate outside the daily turbulence of public exchanges. They are valued by fundamentals, cash flow, and contractual structure rather than by speculation. This difference creates powerful advantages. Private markets offer access to inefficiencies that reward skill and patience, produce stable income streams, dampen emotional volatility, and provide true diversification from traditional stocks and bonds. Instead of reacting to markets, investors are positioned to harvest long-term value.
Private credit has become a central engine of modern portfolios. As banks retreat from large portions of corporate lending, private lenders have stepped in, providing capital to growing businesses while earning higher yields, senior-level protections, and inflation-resistant floating income. For investors seeking dependable cash flow in an uncertain world, few asset classes compare.
Private real estate offers a different but equally essential role. It produces income, benefits from leverage, and historically rises with inflation. Through private markets, investors can participate in the ownership of multifamily housing, industrial logistics, medical facilities, data centers, and other properties that form the backbone of the modern economy — assets designed to endure through cycles. Private infrastructure extends this durability even further. Energy systems, power grids, transportation networks, water systems, cell towers, and data networks are not optional conveniences. They are the operating system of civilization itself. These assets generate predictable cash flows, long life spans, and inflation-linked revenue, making them uniquely suited for long-term wealth building.
This is why institutional portfolios commonly allocate 30% to 50% or more to private markets. Not because it is fashionable, but because it works. The future of wealth management is not about chasing returns — it is about building durable portfolios capable of surviving inflation, volatility, recessions, and human emotion. In that future, private markets are no longer alternative. They are essentia
10 WEALTH LESSONS PEOPLE LEARN TOO LATE IN LIFE, ACCORDING TO SELF-MADE MILLIONAIRES
Most people spend decades making the same financial mistakes before discovering what truly builds wealth. The patterns are remarkably consistent across generations. Self-made millionaires often share similar regrets about what they wish they had understood earlier in life.
These lessons aren’t about getting rich quickly or finding secret investment strategies. They’re about fundamental shifts in thinking that separate those who accumulate wealth from those who spend their lives working hard but never seem to get ahead.
Here are ten essential wealth lessons that people typically learn too late, based on research, surveys, and books about self-made millionaires.
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SPECIAL REPORT: IDENTITY THEFT RISK & INVESTOR PROTECTION UPDATE
As stewards of your capital, investors are focused not only on portfolio construction and financial planning, but also on risks that can undermine their overall financial stability. One of the most persistent and growing threats in today’s environment is identity theft. Nearly one-third of Americans have experienced some form of identity theft, making personal data security a critical component of financial risk management.
The Current Threat Landscape
Identity theft occurs when personal information is used without authorization for financial gain. The most common forms include:
- Credit card fraud – unauthorized transactions using stolen card data
- Government document or benefits fraud – misuse of personal information to obtain official documents or public benefits
- Loan or lease fraud – opening credit accounts, loans, or leases in another person’s name
Financial Impact on Victims
When personal data is exposed, the recovery process can be extensive. Investors may face:
- Disputes over fraudulent charges and accounts
- Temporary or prolonged credit score damage
- Account closures and banking disruptions
- Time and cost associated with restoring financial records
Practical Risk-Reduction Measures
While no system eliminates risk entirely, consistent preventive practices materially reduce exposure and should include at least the following:
- Do not allow sensitive mail to accumulate in unsecured mailboxes
- Regularly review bank and credit card statements for unusual activity
- Freeze credit reports to prevent unauthorized new accounts
- Use strong, unique passwords and multi-factor authentication
- Shred documents containing personal information before disposal
- Review credit reports periodically across major bureaus
- Opt out of unsolicited credit and prescreened offers
- Avoid carrying Social Security cards, blank checks, or written passwords
- Exercise caution at payment terminals and fuel pumps
Digital Device Disposal
Old phones, computers, and tablets often contain recoverable data even after files are deleted. Devices should be wiped using secure data-destruction methods or physically destroyed before disposal.
Monitoring & Protection Services
Identity protection services may provide additional oversight by monitoring credit activity, public records, and illicit online marketplaces for misuse of personal information. These tools can assist with early detection and recovery support.
If Identity Theft Is Suspected
Warning signs include unfamiliar bills, collection notices, new accounts you did not open, or unexpected loan denials. Immediate steps may include placing fraud alerts, initiating credit freezes, and notifying financial institutions
Conclusion
Protecting personal identity is an essential extension of protecting wealth. Vigilance in this area helps safeguard credit integrity, financial flexibility, and long-term financial planning outcomes. We encourage investors to treat identity security as part of their overall financial risk management framework and to reach out to us with any concerns about how these issues intersect with their financial strategy.