Acclerating Into 2026
The last three years have been quite positive for the US equity markets, as have 6 of the last 7 years (did I really say “6-7”). For Investors, though, we now need to anticipate the direction of our investments going forward and, in many ways, the economy and the markets could be poised for possibly more good news. For the record, the S&P 500 rallied about 17% in 2025 along with international stocks finally catching a bid and popping over 20%. Not to be outdone, the bond market followed suit, with the Vanguard Total Bond Market ETF gaining 7% for the year. On to 2026… We believe that economic growth comes from a combination of savings (money available to invest) and innovation (witness AI). There appears to be plenty of both, with over $90 trillion in US investable assets and a recently announced 4.9% productivity gain, due in part to AI spending and now application. Another factor influencing corporate earnings is the realization of new tax cuts from the OBBBA Act which could act as a “buyback” mechanism as corporations can either reinvest stronger earnings or give these gains to shareholders as dividends. In addition, the current trend for interest rates is lower and even though it receives much headline attention, falling interest rates can be good for stock investors. Finally, potential M&A deals this year, on top of a breakout increase in deals during 2025, might also be a catalyst for economic and asset growth. In fairness, there are plenty of things that could go sideways in the world in which we are living. Geopolitical risk is certainly out in the universe, with potential flare-ups in Asia, the Middle East, etc. a possibility. There is also the risk that for all the hype, the cost and productivity savings stemming from AI fail to materialize, which could cause a major disruption to tech growth and spending which could lead to lower stock prices. Finally, inflation remains very sticky and is causing real financial burdens to the middle class in addition to being a threat to possible higher interest rates down the road. Our goal is to manage portfolios in a manner that continuously addresses risk while simultaneously striving to invest where our money is treated the best. Here’s to another New Year and above all, cheers to healthy and happy years to come.
Alone with My Thoughts – 12/19/25
Going Out On A High As we head into the year-end of 2025, we are fortunate to have hit all-time highs in the major stock averages this year. Speaking of all time highs, gold and silver are also in rarefied air and major international markets like the UK and Germany have hit the same highs in 2025. Not to be outdone, Keith Richards hit his new high of 82 years of age yesterday. Talk about a high within a high. Have a wonderful holiday season!
Alone with My Thoughts – 11/18/25
The CPI inflation gauge has been negative year over year for only 13 months since the year 2000. That is 13 times out of 300, so inflation is and continues to be a basic element of the US economy. The talk now is all about “affordability” as the weight of inflation continues to bear down on the middle and lower class. The problem is that we expect the government to have some magic cure to the problem. They try to divert our attention with names like the “Affordable Care Act”, the “Inflation Reduction Act”. Now this week, there is talk out of Washington about sending everyone $2000 as a kind of personal return on our new tariff policies. Or there is a suggestion of 50 year mortgages perhaps. We all need to say it out loud, more government spending does not cure inflation or created affordability, it is more likely to stoke the flames of inflation. Maybe we should use the Clinton playbook, ride a period of immense innovation (the internet) that stimulates the economy which leads to balanced budgets and low inflation. The AI buildout is upon us, let’s ride this time of incredible innovation like it was 1994.
Alone with My Thoughts – 10/10/25
There are two epic and related battles beginning to shape up as we go head first into the final quarter of 2025. First, the corporate bond market is on a tear, with record setting new issues at the most narrow credit spreads since 1998 according to the Wall Street Journal. This would make investors think that the economy is strong and the chance of default is low. On the other side, economists and politicians are clamoring for lower bond yields because the economy is weak based on much slower job and wage growth. This leads us to the other battle, significant slowing job growth representing a weak economy versus an AI driven new gold rush to higher productivity indicating a strong economy that just needs fewer jobs. There it is, the yin versus the yang, which could ultimately work out to higher inflation, lower job growth, higher productivity, and lower interest rates and hopefully bullish stock prices.