Friday Focus – Dec 19, 2025

3 minute read

Smart insight and clear visuals that matter – what we’re watching now and how intention and conviction shape our portfolios.

Markets

An increasingly top-heavy equity market. The Top 10 stocks in the S&P 500, unsurprisingly mostly AI leaders, are a combined 40% of the S&P 500, far eclipsing 25% at the height of the Dotcom Bubble. As we’ve seen sporadically over the years, this concentration can quickly swing from anchoring steady Index upside to the source of turbulence.

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Source: FactSet, Standard &Poor’s, J.P. Morgan Asset Management

In what would be the third year in a row, the S&P 500 is on track to post double digit YoY gains in 2025. That has only happened nine other times for data going back nearly a century. The S&P 500 posted double digit returns (either negative or positive) in the following year in seven of those nine occurrences, ranging from -19% in 2022 to +31% in 1945.

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Private Credit

What is the point of market making privates?

Apollo Global Management CEO Marc Rowan expects to see more market makers emerging for private credit as firms seek to enable investors to buy and sell high-grade private assets more easily. Apollo has done close to $7 billion of such trades this year and expects that number to triple next year. So, what is the point? It likely facilitates access to one of the biggest pools of capital ($9.3T) on planet Earth - US 401Ks. ETFs would not be far behind. The introduction of a trade-able market for a private credit holding, however, pushes those trade-able assets towards a strict mark-to-market requirement, as it provides the most reliable data point (a current, observable price) for its fair value. This MTM valuation then flows into the fund's overall NAV calculation, and one of the primary benefits of private markets - the "smoothing" effect that protects investors from the daily emotional swings that plague public markets - becomes less compelling.

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Energy

Recent data on the S&P 500 energy sector highlights a shift in capital allocation trends. Energy companies have generated historically high cash flows in recent years, supported by strong commodity prices and disciplined spending. Unlike prior periods of heavy reinvestment (2011-2014), current strategies emphasize maintaining controlled capital expenditures while increasing shareholder distributions. This approach has coincided with record dividend payments, reflecting a broader trend toward financial stability and consistent returns. The sector’s focus appears to have evolved from growth-driven investment to prioritizing cash flow management and shareholder value.

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Source: Capital IQ. Data from 1Q ’07 – 3Q ’25, most recent data available
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Source: Capital IQ. Data from 1Q ’07 – 3Q ’25, most recent data available.

Carbon

Coal demand has grown 0.5% year-over-year, and is at an all time high of 8,845 million tons. This demand is driven domestically by US power demand. Power demand is expected to grow at a 2.4% CAGR in the next 10 years, up from the 0.5% avg in the last 10 years. Investment bank Jefferies sees growth in coal demand for the next decade based on that power thirst. Oil demand continues of course as well. Ford took a $20 billion write-down this week on its electric pickup and the European Union is backing away from its petrol car ban by 2035. Good news for those watching inflation numbers, gas prices are cooperating.

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Investment

In the past 50 years Europe has created, from scratch, only 14 companies with a market cap greater than $10 billion. The U.S. has created 241. India is second but we wouldn’t have guessed the UK and Canada were 3rd and 4th. One of America’s best investors is one of its other corporates, Google, who has bought a select number of those startups. The list below of its success and GOOG’s returns are truly unbelievable.

Real Estate

Equities up as a percentage of net worth shouldn’t surprise but they have now eclipsed real estate as a percentage of net worth.

Economic Calendar: Week Ahead (Eastern Time)

Tues, 12/23 @ 8:30 am: Q3 GDP (delayed report)
Tues, 12/23 @ 8:30 am: Oct. Durable-goods orders (delayed report)
Tues, 12/23 @ 10 am: Consumer Confidence
Wed, 12/24 @ 8:30 am: Initial Jobless Claims
Wed, 12/24 @ 1pm : Early Stock Market Close
Thur, 12/25: Stock Market Closed. Happy Holidays!

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