Intelligence is the ability to form sound judgments and solve problems. The year ends with the idea that human intelligence will soon take a backseat to artificial intelligence (AI) or machine learning. However, economic and market performance in 2025 demonstrated humanity’s remarkable collective ability to infer information, retain it as knowledge, and employ that knowledge to adapt. The fourth quarter began with the government shutdown and fears of unsustainably high AI infrastructure spending. Signs of US asset hedging appeared in the rising price of gold. While credit spreads widened modestly in most sectors, equity prices maintained an upward path, with technology and foreign assets leading the way. The Fed, lacking BLS data, leaned on alternative sources and lowered its policy rate again, despite diverging committee member opinions.

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