In this month's issue:
Is Productivity the Answer?
Mark Luschini, Chief Investment Strategist
In 1987, Nobel Laureate economist Robert Solow was quoted as saying, “You can see the computer age everywhere but in the productivity statistics.” A loose version of the same statement may be made today by substituting “artificial intelligence” for “computer age.” While it is unequivocal that a copious amount of money is being spent to build out the ecosystem to support the computer, infrastructure, and artificial intelligence (AI) neural networks needed for large language model (LLM) architecture, it remains a bit slippery when attempting to draw a conclusion about it sparking a productivity boom, at least yet.
To be sure, there are some, including Federal Reserve board members, who speculate that the strength in the U.S. economy that seemingly does not square with the softening witnessed in the labor market may be attributed to an increase in productivity, generally defined as output per labor hour worked. In fact, at the press conference following its recently concluded Federal Open Market Committee meeting, Fed Chair Jerome Powell cited improved productivity as one factor driving the policy board’s upgraded U.S. growth forecasts for 2026.
Year in Review
Guy LeBas, Chief Fixed Income Strategist
In continuation of our longstanding tradition, this first Investment Perspectives of the year will be a rundown of fixed income markets over the prior 12 months. In contrast to recent years, interest rate volatility was fairly muted in 2025, save for a few short-lived episodes. Ten-year Treasury yields finished the year at 4.16% after a decline of about 0.40% while 2-year Treasury yields ended at 3.47% after a 0.77% decline, leaving the yield curve somewhat steeper at year’s end. These interest rate moves came in the wake of three 0.25% Federal Reserve (Fed) rate cuts in the back half of 2025.
The yield declines on the 10-year part of the yield curve were almost spot-on with our forecasts, though the declines on the front end of the curve were larger than we projected. As discussed in Janney ISG’s Outlook 2026, we anticipate interest rates to trace a relatively narrow range in the coming year, with the primary risk to that outlook being political capture of the Federal Reserve.
May the Fourth Be With Us
Gregory M. Drahuschak, Market Strategist
Our December Investment Perspectives issue noted that December is often a wonderful month for stocks—typically one of the three best months of the year for stocks. However, December 2025 was not one of them. In fact, the month ended with a 0.06% loss.
This year begins with three straight years on investors’ minds, as the S&P 500 posted annual gains of 24.23%, 23.31%, and 16.39% in 2023, 2024, and 2025, respectively. The key question this year is whether a fourth straight winning year is on tap.
You can read the full Investment Perspectives here.
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