Looking back at 2025, the market ended with a solid year, but the path it took to get there was littered with disruptions. While headline movement grabs investor attention, understanding underlying strength often requires an unbiased look into the market’s health, which is where indicators come into play. The NDW team utilizes participation indicators to identify whether movement higher or lower is broad-based or coming at the hands of just a few names. Higher levels mean more stocks are “participating” or contributing to upward price action, which is a net positive for markets. Meanwhile, lower levels or a decrease in participation can signal weakening of strength.

Among the most sensitive metrics NDW regularly uses are the Ten Week indicators, which look at the percentage of stocks in a universe trading above their ten-week moving average. The indicator is often the first domino to fall within our participation indicators but is more prone to head fakes given its sensitivity. Looking at the Ten Week for the S&P 500 (^TWSPX), things were gradually declining entering Q4, with the indicator bottoming out at 32%, just above washed-out levels. Since then, the Ten Week has moved to the upside, currently sitting at a solid level of 64%, highlighting the rebound in breadth entering the New Year.

Due to their sensitivity, short-term indicators can signal initial change but gain more significance when confirmed by the movement of intermediate-term indicators. To evaluate intermediate-term participation, NDW uses “bullish percent” charts (BPs), which measure the percentage of stocks in a universe trading on a PnF buy signal. Looking at the Bullish Percent for S&P 500 stocks (^BPSPX), it was trending lower entering Q4 and continued lower until reaching the 38% level in late November. Since then, participation has rebounded back to solid territory, with 58% of the index on a buy signal. The current market conditions suggest stability, but a decrease to open Q1 would indicate potential weakening among large cap stocks on the intermediate-term front.

To confirm the movement of intermediate-term indicators, we compare them to the movement of long-term indicators. NDW evaluates longer-term participation with the Positive Trend indicators (PTs), which measure the percent of stocks trading in a positive trend on their PnF chart. Like the BP, the Positive Trend Percent for the S&P 500 (^PTSPX) dipped initially this quarter before reversing back into Xs around 64%, confirming the reversals higher within the Bullish Percent. Most of the market’s gains occur when PTSPX is above 50%, and readings north of 60% are generally more positive, signaling a generally healthy current market given current levels. That said, the market’s ability to maintain current levels will be a crucial factor in whether we see a strong performance from 2026 or not.

Overall, most indicators started the year off at low levels before plummeting further around liberation day. Thankfully, participation bounced back as the market rallied. Similarly, things moved lower in the third quarter before eventually reversing higher in Q4, with the market entering 2026 around solid levels. So while it was an up-and-down year for participation in 2025, things ended on a positive note.

Lastly, today’s piece focuses on S&P 500 indicators given the strength of large caps and their overweight positioning within most portfolios. However, if the market rotates away from large caps and into small and mid caps, then NYSE indicators would be a better reflection of the broader market’s health. However, with large caps continuing to sit in the driver’s seat, the SPX indicators are at the forefront of analysts' attention for the time being.

Quarter endings and beginnings are typically a good time to provide a touch point with your clients and prospects, so in recognition of the change of calendar, we wanted to give you a sample newsletter to aid you with this communication. You want to let your clients know that you are holding the reins of their portfolios and that you are holding on tight. This letter has not been FINRA approved; however, you are welcome to use the text as you like. Feel free to "slice and dice" the text to best incorporate it within your business.

Sample Client Newsletter: Q4 2025

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The fourth quarter and 2025 are officially in the record books and it was another strong year for US stocks. The year got off to a solid start as momentum from 2024 and expectations for pro-business, America-first policies from the incoming administration helped the S&P 500 gain more than 2.5% in January. The market quickly reversed course, however, as concerns about protectionist policies and potential trade war led to three consecutive months of losses for the S&P. The decline culminated in a four-day stretch that saw the S&P fall more than 12% after the announcement of reciprocal tariffs in early April. A week later, on April 9th, President Trump announced a 90-day pause on the tariffs driving a 9.5% rally for the S&P, the index’s largest single-day gain since 2008 and among the 10 largest in its history. From there, it went on to notch seven consecutive months of gains. The S&P finished 2025 with a total return of almost 18% and has now gained more than 15% in six of the last seven years.

While US stocks had another strong year, they were outperformed by international equities, upending a prevailing prognostication for 2025. Many analysts predicted that the America-first stance of the incoming Trump administration would lead to continued underperformance by international stocks. However, buoyed by a weakening US dollar, the MSCI EAFE Index (EFA) and the MSCI Emerging Markets Index (EEM) gained more than 25% and 30%, respectively; the first year both international indexes outperformed the S&P 500 since 2017.

2025 also brought surprises in commodities. Despite a significant decline in the US dollar, which is usually a boon for commodities, crude oil was down almost 20% for the year and fell to its lowest level since the 2020 pandemic. Still, it wasn’t all bad news for commodity investors as precious metals produced eyepopping gains. Gold followed through on a strong 2024, rising more than 60% and crossing $3,000/oz and $4,000/oz marks for the first time. Even though it posted its largest gain in at least 15 years, gold was still handily outperformed by silver, which gained more than 140%, and platinum, which was up more than 125%.

The Federal Reserve continued to ease monetary policy in 2025, lowering the target for the federal funds rate by 0.75%. Long-term rates were also down modestly helping the Bloomberg US Aggregate Bond Index to its best year since 2020. Meanwhile, international bonds were among the strongest performers as the falling US dollar was also a major factor in fixed income.

As we begin 2026, domestic equities remain at the top of the asset class rankings in our Dynamic Asset Level Investing (DALI) tool. DALI provides us with a heat map of where relative strength (and weakness) resides across and within class classes. From a sector perspective, technology once again leads the pack as artificial intelligence remains a major driver of the bull market that has been in place for the last few years. As always, we continue to monitor for any shifts in the market landscape and stand ready to action if .

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Please be aware that the content of this newsletter is based on the opinion of Dorsey, Wright research and may differ from the research provided by your financial advisor. This market theme letter was written by Dorsey, Wright & Associates and is provided courtesy of your advisor.

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