THE APPALACHIAN TRAIL: 2025 IN REVIEW, AND LOOKING AHEAD IN 2026
Lucidity Ledger — Insights for the Learned Investor
A map showing the Appalachian Trail. The Trail spans almost 2200 miles from Georgia to Maine.
February 5, 2026
What does the Appalachian Trail have to do with your portfolio? Nothing much, but as we learned more about the AT (check out #10 in the Endnotes at the end of this post), we realized they do share some characteristics for their participants.
More on that in a bit. While 2025 is still in our rearview mirror, we want to first review some memorable happenings that impacted markets and the world last year.¹
Economy and Markets
As the chart below shows us, staying invested through 2025's volatility paid off for patient investors. The U.S. stock market finished 2025 with substantial gains, having reached dozens of new record highs throughout the year.
In a broader context, the following Periodic Table shows that all major asset classes, not just the S&P 500, generated positive returns in 2025. A few observations are worth noting:
Gold had a breakout year, with its price rising over 64% in 2025. Historically, gold has been one of the most volatile asset classes. What goes up will eventually come back down.
International and Emerging Market stocks were the top equity performers, benefiting from a weakening U.S. dollar and tariff tensions.
U.S. stocks performed well in 2025, extending a third consecutive year of strong double-digit performance boosted by tech stocks and the ongoing AI infrastructure buildout.
Bonds provided the portfolio stability they're designed for while delivering their best returns since 2020, reinforcing their continued role in a diversified investment strategy.
This vibrant table reinforces the importance of diversification, a cornerstone of Lucidity's investment philosophy. Pick a color and follow it across the 10-year span – up and down your finger goes as it moves from top to bottom and back up again. Every asset class will both outperform and underperform at some point. It's a fool's game to try to predict in which direction and over what time frame a given asset class will move. Instead, we own a little bit of everything at once, knowing that markets tend to go up more than they go down.
2026 Strategy: Continued Focus on the Broadening Market
As we continue managing portfolios with a global, multi-asset perspective, we thought we'd share some of the "why" behind our asset allocation strategy. While we continue to tailor each of our clients' portfolios to their specific situations, here are some standard guidelines that we follow from an investment philosophy and conviction standpoint, mixed in with some themes for 2026:
To manage stock market risk, a basic tenet of the risk spectrum: Larger U.S. companies are generally safer than smaller ones; U.S. companies are generally safer than foreign companies; and foreign companies in developed, first-world countries (“International” stocks) are generally safer than foreign companies in emerging, non-first-world countries (“Emerging Market” stocks). To reduce stock market risk, put most of your stock market money into large U.S. companies, less into small or foreign companies. If you want more risk, reverse that. (More risk doesn't always equal more return. Invest wisely. Or, get help!)
The S&P 500 is still our primary growth driver. An index of the 500 largest U.S. companies, it includes all the mega-large tech companies (Nvidia, Apple, Microsoft, Amazon, Google, Meta) that are driving the AI revolution powering the world's growth today. This index has been benefiting hugely as a result. That said, we're wary of the concentration risk posed by the handful of companies driving the index's performance. We continue to participate in the S&P's growth while prudently pulling some chips off the table, locking in recent profits while diversifying into other areas.
U.S. Small Cap and Mid Cap stocks are two areas that we've increased our exposure to while lightly pruning our S&P position. Adding to these asset classes will allow us to continue capturing growth across a wider variety of industries.
International Large Cap stocks are another area that’s serving as a diversifier away from the pure-AI trade while taking advantage of our weaker dollar, which is boosting foreign stock prices. Our equity strategy has always embraced a global footprint, and we continue to strategically rebalance to ensure our global exposure is robust enough to act as a meaningful diversifier. We also maintain our ongoing exposure to Emerging Market stocks, providing further diversification and long-term growth potential as emerging countries like India, China, Taiwan, Brazil, and South Korea continue to expand their markets.
We continue to preserve our dedicated Satellite positions in three critical "Physical World" sectors: Energy, Utilities, and Real Estate. We view these as essential infrastructure plays for the current climate. We invest in Utilities and Real Estate in part because they provide the physical infrastructure for AI, including massive amounts of electricity and data centers (and as we all know, our electric bills keep going up). We invest in Energy because, let's face it, the world still runs on oil and gas.
Our fixed income allocation remains refined and intentional, balancing duration with credit and interest rate risks, and always maintaining the overarching goal of keeping our safe money safe. (We prefer to take risk where we expect risk, which is in the equity markets, and to keep our bonds safe—and boring—so they can do the job they're supposed to do, which is to provide consistent income and be a ballast to the other risk-on areas of our portfolios).
Our core investment objective remains the same: providing reliable, diversified growth with the least required risk, being as tax-efficient as possible through asset location and tax-loss harvesting strategies, and always remembering that each client's investment strategy is in place to support their specific financial plan. Investments in a portfolio are tools in the toolbox, designed to be used in conjunction with your financial plan to achieve the ultimate goal of financial freedom (whatever that means to you).
Back to the Appalachian Trail
The Appalachian Trail spans 2,190 miles from Georgia to Maine, with 464,500 feet of elevation gain along the way. Most people never attempt a thru-hike (walking the entire trail in one long, continuous journey over weeks or months). Of those who do, many quit after a few hundred miles once the reality of constant ups and downs sets in.
Building long-term financial freedom works the same way: Small daily progress compounding over months and years; no way to avoid the difficult stretches that you know are coming; and fighting the temptation to quit when conditions get really rough. Thru-hikers who keep walking the AT from Georgia eventually reach Maine, and investors who stay invested through market ups and downs build and keep wealth. Having a plan ahead of time—a map for the journey, supplies for rain or shine, mud or rocks, and a backup plan for when conditions on the trail change rapidly, as they're known to do—gives both hikers and investors the confidence and calm that are necessary for seeing the trail ahead as a grand adventure to enjoy, knowing that even the tough parts serve a purpose. Even better, having a plan allows you to trust the journey itself – after all, the plan was made precisely for this very moment.
¹ A few things that won't be on a market chart but that are notable nonetheless for 2025:
1. Trump Inaugurated as President (his second term): Love him or hate him, he's hard to ignore. In the first few months of his second term he made it clear that he wasn't messing around: he launched DOGE to slash federal bureaucracy and wasteful spending; he established the MAHA Commission to tackle chronic disease and food safety; and he signed into law the One Big Beautiful Bill Act (OBBBA), a sweeping tax reform that made many of Trump's 2017 tax cuts permanent and introduced new "No Tax on Tips" guidelines. Trump also implemented sweeping illegal immigration crackdowns early on, with many of those operations continuing controversially today.
2. Southern California Wildfires: In January, the devastating "Palisades Fire" and "Eaton Fire" swept through Los Angeles, destroying thousands of acres and homes. Taking over three weeks to be contained, these fires caused widespread destruction that will have lasting consequences for Angelenos.
3. Eagles Super Bowl Victory: The Philadelphia Eagles won their second Super Bowl as they defeated the Kansas City Chiefs in Super Bowl LIX, ending the Chiefs' run for a "three-peat." (After the win, Eagles fans were reportedly chanting, "Taylor who?")
4. Election of Pope Leo XIV: Following the death of Pope Francis, Cardinal Robert Francis Prevost, a Chicago native, was elected as the first American pope.
5. Labubu: These collectible plush bag charms generated over $400 million in sales in 2024, and in 2025 they continued to give Pop Mart (the maker of Labubu dolls) a cult following. Labubus are famously sold in sealed "blind box" packaging that conceals the specific character inside, further fueling the collecting frenzy.
https://time.com/7271656/popmart-china-blindbox-labubu-designer-toys-genz-luxury-industry-revenue/
6. 3I/ATLAS Arrives: 3I/ATLAS is the third and most recent interstellar object confirmed to have entered our solar system from another one. Estimated to be the size of Manhattan, this comet is giving scientists a rare opportunity to study material from outside our solar system.
7. Taylor Swift & Travis Kelce got engaged: Enough said. (Blessings to them!)
8. The Louvre Jewel Heist: An 8-minute, $104 million theft of French Crown Jewels on display at the Louvre Museum in Paris went down like a real-life Ocean's Eleven. At the time of this writing, the thieves have been caught, but the jewels are still on the lam.
https://www.nytimes.com/2025/10/19/world/europe/louvre-heist-items.html
9. The L.A. Dodgers Won the World Series: In a dramatic Game 7 against the Toronto Blue Jays, the Los Angeles Dodgers prevailed and became the first team to have back-to-back World Series wins since the NY Yankees in 2000.
10. 80-year-old woman hikes the entire Appalachian Trail: Betty Kellenberger is inspiring adventurers everywhere with her feisty determination, proving age is truly just a number.
https://thetrek.co/appalachian-trail/betty-kellenberger-just-became-the-oldest-woman-to-thru-hike-the-at-at-age-80/
Betty Kellenberger at the summit of Mount Katahdin, the northern endpoint of the Appalachian Trail in Maine.
This commentary is only general information and should not be construed as investment, tax, or legal advice. You should consult your own investment, tax, and legal advisors before engaging in any transaction. Past performance of any market results is no assurance of future performance. The information presented within has been obtained from sources believed to be reliable but is not guaranteed.
Do you have questions about applying these ideas to your unique situation or about anything else related to money, investments, or financial education? We are happy to help get you on track! Contact us for a complimentary, no-obligation conversation.