Third Consecutive Positive Year Led by International Markets
Investment Review
Global equity markets had a third year of strong performance, driven by AI optimism, corporate earnings growth and the U.S. Federal Reserve proactively cutting interest rates. Notably, both emerging markets and international developed markets outperformed U.S. markets in 2025.
Large U.S. companies (S&P 500) increased +17.88% in 2025. The Russell 2000® Index, which measures the performance of smaller U.S. companies, increased by +12.81% in 2025. Despite the Magnificent 7’s1 continued dominance this year, only two of the seven companies outperformed the index.
International equity market returns were very strong. The international developed markets, as represented by the MSCI EAFE index, increased by +31.22% in 2025. Emerging markets (MSCI EM) ended the year up +33.57% with a strong contribution from China.
Regarding the fixed income markets, bonds as represented by the Bloomberg U.S. Government/Credit Index, were up +6.88% in 2025. The J.P. Morgan Blended Emerging Market Debt Index was up +16.79% in 2025.
Our U.S. large-cap managers had difficulty given the concentrated performance of the top 10 companies in the index, and U.S. small-cap managers were hurt as riskier, non-earning companies outperformed quality and profitable companies. Most of our sustainability focused managers experienced a positive turnaround in 2025 benefiting from AI data center need for electrification, and related commodities.
As for the UCC Lifetime Retirement Income annuities, the funded status (assets compared to the future projected payments to annuitants over their lifetimes) both improved over 2025. Given the improvement, there was a 1.5% increase for the Basic Annuity and 8.0% increase for the Participating Annuity, beginning in 2026.
Market Outlook
With midterm elections being the focus in 2026, stimulus from both fiscal and monetary policies will likely support further economic growth in the U.S. On the other hand, unpredictable government interventions, escalating geopolitical tensions, and the uncertainties of AI benefits in commensurate with spending could all be sources of market risks.
We remain focused on employing our Faith and Finance lens to responsible investing and holding our managers accountable for incorporating long-term sustainability factors into their analysis. Above all, we continue to be good stewards of investments for your retirement assets in this increasingly complex world.
1Magnificent 7 companies include: Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, Tesla.