A New Year Message from GSWM
Dear Friend,
I hope your 2026 is off to a warm and healthy start! One year ago, Gottfried & Somberg entered our 25th year with high expectations that it would be our most successful yet.
While the year brought its share of challenges and opportunities, it ultimately delivered many positive highlights and meaningful milestones, which we are pleased to share with our clients. As is our custom, we will do so in two parts: first, an overview of the investment markets, followed by updates on our firm.
2025 Market Returns:
S&P 500: +17.9%
NASDAQ: +21.1%
Russell 2000: +12.8%
MSCI EAFE (International): +31.2%
US Aggregate Bond Index: +7.3%
US stocks have been on an extraordinary run over the past decade, with particularly strong gains in recent years. Heading into 2025 we were certainly optimistic, but after navigating many market cycles over the past twenty-five years we did not expect a repeat of the exceptional performance seen in 2023 and 2024 where the S&P 500 gained +26% and +25%, respectively. Moderating our expectations, at least for the US stock market, turned out to be correct as the S&P 500 returned +17.9% in 2025. Not quite the growth of 2023 and 2024, but solidly above the average return of +15% over the past ten years.
Another pleasant surprise in 2025 was the outperformance of international stocks. For well over a decade, international stocks have lagged US stocks for various reasons—slower GDP growth, less favorable demographic trends, and lower levels of technological innovation. In 2025 however, sentiment shifted as fiscal stimulus in Europe, improved earnings growth, and cheaper valuations drew investor interest. These tailwinds, combined with a decline in the US dollar led international stocks to rally approximately 30% in 2025, their best return since 2009. Bonds, the final core building block of client portfolios, also delivered a solid year. The US Aggregate Bond Index gained +7.3%, marking its best annual return since 2020. A major driver of the healthy 2025 bond performance was yields that remain well above the post-GFC average, with additional price appreciation spurred by Federal Reserve interest rate cuts.
The combination of above-average US equity returns, stellar international equity returns, and solid bond market performance produced the strongest results for diversified portfolios in over five years. If anything, 2025 served as another great example of why the core principles we preach—diversification across asset classes and regular rebalancing of these asset classes—remain so vitally important.
2026 - The Year Ahead
Looking ahead to 2026, we remain optimistic. We are now almost six years from the beginning of the COVID pandemic and our economy, slowly but surely, has gotten back to normal. Inflation has fallen to pre-pandemic levels, the labor market has cooled after a number of overheated years, and GDP growth remains slightly above the long-term average thanks to robust consumer spending, encouraging productivity gains, and investment in Artificial Intelligence infrastructure.
We would be remiss to not discuss Artificial Intelligence in more detail, as it has become a juggernaut in terms of news flow, the amount of capital being spent on its buildout, and its impact on the stock market. To state the obvious, no one knows how the technology will ultimately shape our world. That said, an encouraging feature of the current discussion is the healthy balance of optimism and concern surrounding its impact. We tend to fall into the “glass-is-half-full” camp and are broadly optimistic about AI. History is littered with examples of new technologies that were initially met with skepticism but ultimately proved helpful —electrification, automobiles, computers, ATMs, and the internet, to name a few. We are not naïve and it is certainly possible that AI could have some negative consequences, but our belief is that AI will likely become another useful tool that allows people to be more productive and create new opportunities across the economy.
As it relates to the stock market, a key question is whether AI stocks have entered bubble territory. Many clients have a clear memory of the dot-com bubble, and at times the enthusiasm surrounding Artificial Intelligence can sound a lot like things did back then. We agree there are similarities, particularly in how the AI theme has moved into the mainstream and dominates investor conversations. As of early 2026, however, we think the comparison is flawed, or at least premature. Why? The companies leading the AI charge are the largest and most profitable businesses in the world. By contrast, much of the dot-com investment was fueled by IPO dollars of unprofitable companies. Valuations are also an important metric, and those look reasonable. The largest and most influential tech companies today trade at a fraction of peak dot-com levels and have barely budged in the last year. In fact, five of the seven “Magnificent 7” stocks underperformed the S&P 500 in 2025. Finally, the sheer market appreciation of the NASDAQ (the ‘tech index’), has been far more measured than in the 1990s. Over the past five calendar years, the NASDAQ has returned a cumulative 81%. Impressive growth, but much lower than the 400%+ cumulative return seen in the five years leading up to the dot-com bust. Put simply, the enthusiasm of AI may feel familiar, but the fundamentals tell a very different story.
GSWM Updates
2025 marked our 25th year in business - a milestone that is hard to believe, as time certainly does fly. As we reflect on this achievement, we continue to focus on where the wealth management industry is headed and remain committed to staying ahead of the curve. Today, the firm employs thirty professionals and manages over $2.7 billion* in assets for our clients, a responsibility we take seriously and are grateful to hold.
In spring 2025, we shared that our ‘back office’ Commonwealth Financial had been acquired by another firm, LPL Financial. That transaction closed in August. Later in 2026, we anticipate there will be a transfer of custody from our current custodian, NFS to LPL. This transaction will result in changes such as redesigned client statements and a new client log-in experience, replacing Investor 360. We anticipate a transition to take place in November 2026 and will provide additional details as the timing approaches.
In addition, Commonwealth tax forms are currently being prepared for distribution. Commonwealth has indicated that 2025 Form 1099‑R mailings will begin toward the end of January. As in previous years, we expect that most tax forms will not be available until late February, and some may be released as late as mid‑March. If you have not received your 1099‑R by March 15, 2026, please contact the Gottfried & Somberg Wealth Management team and we will be happy to assist you.
In the Community 2025:
- We continued our long-standing tradition of volunteering at House of Bread, a local Hartford food shelter, supporting individuals in need.
- As a firm, we came together to adopt several families in need, helping provide them with a joyful and gift-filled holiday season.
- Our firm volunteered for Connecticut Foodshare, contributing our time and effort to support their mission of addressing food insecurity and ensuring access to nutritious meals for communities across the state.
- I remained actively involved with Connecticut Children’s, serving on the Foundation Board.
- In October, we organized an intimate golf gathering that successfully raised more than $120,000 to support Connecticut Children’s.
Industry Recognition 20251:
- Dan Heffernan, Kathy Erickson, and I were honored with the Five Star Wealth Manager designation, recognizing our commitment to exceptional client service and professional excellence.
- In September, I was named by Barron’s as a Top 100 Independent Advisor and was also recognized as an elite advisor on Barron’s list of America’s Top 1,200 Financial Advisors for 2025.
- Additionally, I was recognized by Forbes as a Best-In-State Wealth Advisor in Connecticut for 2025, an acknowledgment of our team’s dedication to delivering high-quality advice and trusted guidance.
Together, these community efforts and industry recognitions reflect what matters most to us, which is giving back, maintaining perspective, and holding ourselves to the highest standards in everything we do. Our involvement in the community keeps us grounded and connected, while recognition from respected industry peers affirms our disciplined approach and commitment to excellence. Most importantly, both reinforce our purpose: to serve our clients with integrity, care, and thoughtful guidance, while making a positive impact beyond our firm.
Above all, we want to thank you for the trust you consistently place in us. Although 2025 was a successful year, we know that no two years are alike, and challenges are always part of the journey. Your steadfast confidence in our firm, even in uncertain times, means a great deal to us and inspires our ongoing commitment to excellence.
Sincerely,
Matthew Somberg, AIF®
Co-Founder & Partner
Accredited Investment Fiduciary®
*Assets under management as of 12/31/25
Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. Fixed insurance products and services are separate from and not offered through Commonwealth.
Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged, and investors cannot actually invest directly into an index. Unlike investments, indices do not incur management fees, charges, or expenses. Past performance does not guarantee future results
1These awards are not indicative of the wealth manager's future performance. Your experiences may vary. For more information, see: https://www.gottfriedsomberg.com