Wright Cove Capital: December 2025

Our Investment Playbook: Looking Back and Ahead

Our 2025 investment playbook outlined last January was intentionally straightforward and has proven effective.

Reflecting on our January 2025 outlook:

• Equities: We maintained a primary focus on large-cap growth while gradually diversifying our exposures. Following two consecutive years of 20%+ returns, domestic equities were trading at a premium, but select areas continued to offer attractive growth potential.
• Fixed Income: We favored the intermediate portion of the yield curve (the 2–5-year sector) over ultra-short and longer-duration bonds, targeting yields in the 5–6% range without taking excessive credit or duration risk.
• Economic Outlook: Although inflation had moderated, we anticipated progress toward the Federal Reserve’s 2% target to remain challenging. As a result, interest rates were likely to remain range-bound over the following 6–12 months. Even if political or market pressures prompted rate cuts, we anticipated a steeper yield curve, with long-term rates remaining elevated amid fiscal and deficit concerns.

Looking back, many of the themes we highlighted at the start of 2025 played out largely as expected. Equity markets continued to be led by a narrow group of large-cap growth companies, and the yield curve behaved much as anticipated, with longer-term yields staying elevated despite Fed easing. While no outlook is ever perfect, our disciplined approach and adherence to core principles helped clients navigate the year effectively, capturing opportunities while managing risk in line with their long-term objectives.

Positioning for 2026

As we transition to 2026, we are implementing modest but essential adjustments to our playbook.

Domestic equities remain our preferred asset class for long-term growth; however, valuations and entry points are increasingly important. A small group of large technology companies – often referred to as the “Magnificent Seven”- have driven much of the market’s gains in recent years. While we maintain high conviction in their strength and profitability, their ability to continue outperforming the broader market may be more limited in 2026.

Consequently, we are further broadening equity exposure by increasing allocations to international markets, as well as to financial, industrial, and small-cap sectors. These areas offer attractive valuations and are well positioned to benefit over time as advances in technology and artificial intelligence enhance efficiency and support margin growth.

Regarding fixed income, our focus remains on the yield curve. We expect short-term rates to stay accommodative but see limited benefit in extending into longer-dated maturities. Despite three Fed rate cuts in 2025, yields on the 10-year Treasury have remained relatively stable since the easing cycle began. While short-term rates are influenced primarily by the Fed, longer-term yields are generally shaped by fiscal policy and broader market dynamics, including inflation expectations and government deficits. As such, we continue to favor the 2–5-year portion of the curve, where risk-reward opportunities remain more attractive.

Alternative Investments, Transparency, and Liquidity

Beyond the traditional mix of stocks and bonds, we will continue to be active in diversifiers such as gold, energy and real estate where appropriate.  While we maintain the capacity to incorporate additional asset classes – including commodities, currencies, alternative investments, and selective cryptocurrency exposure – these are utilized strictly when they align with a client’s specific risk tolerance, liquidity needs, and financial circumstances.

We are keenly aware of the industry-wide push into private credit, private equity and structured products. However, we believe that the associated high fees, illiquidity and lack of transparency often outweigh the potential benefits for many investors. In most instances, we believe we can achieve compelling long-term risk-adjusted exposure to these sectors through low-cost, liquid ETFs and mutual funds.

Our “Best Idea” for 2026: Heightened Awareness

Our “best idea” for 2026 takes a different approach than in prior years. Rather than highlighting a specific investment opportunity, we believe it is vital to emphasize heightened awareness when it comes to financial fraud. Scam attempts—including fraudulent texts, phone calls about suspicious account activity, and phishing emails that closely resemble legitimate institutions—are increasingly difficult to detect. Advances in AI will further make many of these frauds even more convincing.

We encourage all clients to remain attentive. Use caution when accessing accounts on public Wi-Fi, use strong passwords and 2-factor authentication, and if you are unsure whether an alert is legitimate, log in through a secure source or contact your financial institution using the number on your card or official statements. While added security measures may feel inconvenient, our experience assisting those affected by fraud confirms they are well worth the effort.

Closing Thoughts

In summary, we end 2025 at or near record highs across most equity indices. The stock market has outperformed its long-term average over the past three years despite a volatile geopolitical environment. While valuations are elevated, we remain both cautious and energized about the prospects ahead. Advances in AI and technology have been a primary driver of market performance in recent years; looking ahead, we believe the implementation of these technologies across the financial, retail, healthcare, and industrial sectors could serve as a catalyst for continued market gains.

We continue to define our success by our ability to listen, understand, and work toward achieving each client’s unique objectives. As Wright Cove Capital enters its sixth year as an independent boutique investment advisory firm, we thank all our clients for their continued support and referrals.

We began this journey in early 2020 with a mission to provide independent, institutional-grade financial advice at a cost well below the industry average. Today, as an SEC-registered investment advisory firm, we remain dedicated to the protection and growth of our clients’ wealth in a straightforward, efficient manner. As we move into 2026, we remain steadfast in our commitment to your financial success and deeply appreciate the opportunity to serve as your partner in wealth management.

As always, if you have any questions or would like to discuss any of these topics further, please feel free to reach out.

Regards,

Eric and Cass

Eric Leinwand, Principal – Eric@wrightcovecapital.com

Cass Tokarski, Principal – Cass@wrightcovecapital.com

The themes and strategies that we speak about and the positioning we take in portfolios are all customizable to best reflect each of our clients’ own unique goals and should not be interpreted as general investment advice.