Why should we invest in public markets when there’s so much uncertainty? I’ve heard different versions of this question lately so I wanted to explore the topic again due to recent market activity.

You’ve likely heard how a social media post from the White House on Friday quickly pushed major stock indexes down in the afternoon from 2% to over 3%, and 7% to 25% in the crypto space. Stocks made about 60% of that back yesterday, depending on the index. That’s a good Monday snapback as the news cooled off over the weekend but, as I type pre-market on Tuesday, stocks look set to open lower again. Ups and downs like this aren’t a huge deal in the grand scheme of things. Still, unexpected shots of volatility are unsettling for a lot of people, regardless of one’s political perspective, so the “why are we even doing this?” question is reasonable.

This is a huge issue by itself and I don’t intend to cover all the angles in this short post. Whole books have been devoted to this topic and I try to keep these posts to about two pages.

Anyway, let’s consider the main reason we invest in public markets in the first place: growth of our savings that exceeds the inflation rate over time. That’s obvious but can be overlooked. We’re not trying to get rich quick by speculating. We’re trying to accumulate value, often over many years, with the plan to spend it intelligently during retirement and maybe leave something behind for the next generation. We choose to do so via the public markets because they’re readily available, relatively cheap, the most transparent in the world (don’t laugh, it’s true), and easily accessible when needed. Roughly 65% of Americans are homeowners and nearly that percentage participate in the stock market, so we’re in good company.

What are some alternatives?

We could leave our money in the bank. This is safe and returns are predictable, which can be comforting. The problem is that safe + predictable = low return, it’s just the way our system works. While cash in the bank can outperform stocks and bonds during times of market stress, those periods tend to be short and eventually leave cash growing slower than inflation. This erodes the purchasing power of your savings. Most people understand this superficially but the risk/reward tradeoff often gets colored by whatever is going on in the world at the time.

We could start our own business or invest in the privately-held businesses of others. Starting a business is one of the riskiest financial moves you can make but it also has the highest potential reward. While the overwhelming majority of small businesses don’t grow into multinational juggernauts, many thrive and create meaningful value for owners, employees, and their communities. The internet suggests there are about nine nonemployer businesses (an owner with no paid staff) per 100 people in the US. Add that to small businesses with just a few employees and you’re in good company there as well. You’re also a risktaker because roughly 20% of small businesses fail in the first year and 50% fail during the first five. Beyond the risk of outright failure, owners have to contend with liquidity issues, legal problems, eventual staffing concerns, and various other issues along the way (I certainly have). The list is long so you had better choose this path for reasons besides simply making more money.

Privately-held investments are another option. This could be direct investments in local businesses, putting money into an apartment or office building (or a bunch of them) owned by a real estate investment trust, or even buying trust deeds. A big issue with private investments is being able to get your money back when needed, aka “the return of versus the return on” your principle. These investments require you to give up control of your cash for a sometimes-lengthy period, and you usually have to ask permission to get some of it back. Maybe the ultimate return justifies the liquidity risk but that’s not guaranteed.

We can directly invest in real estate. For lots of Americans this means owning (and yes, paying a lender for the privilege) their own home. Home equity gains help drive the wealth-effect which drives consumption in our consumer-based economy, so that’s a good and necessary thing. Owning one or more rental properties is an extension of this and is similar to owning a small business. It can be expensive, however. You’ll have mortgage costs (presumably), insurance and maintenance costs, legal expenses, plus large transaction costs along the way. There are lots of risks but probably the biggest practical one again deals with your personal liquidity. Imagine getting into a cash crunch and finding it hard and/or impractical to borrow against or sell your property to access equity (assuming you have some after expenses). Still, personally owning rental real estate can be a great financial move if you play your cards right.

We can invest in non-standard asset classes. What on earth does that mean? While real estate was alluded to above, other “alternatives” include collectibles, precious metals and commodities, private equity and a favorite these days, cryptocurrencies. Each amplifies liquidity risk and comes with various costs, potential tax issues, plus a steep (though often rewarding) learning curve.

So those are a handful of options beyond or in place of investing in public markets. Which sounds more appealing? And for extra credit and a bit of a loaded question, which do you still think is immune from risk?

Ultimately, the categories I mentioned should be thought of as tools – some are more specialized but all can serve a purpose. You decide which tool is right for the job and learn how to leverage it to the best of your ability. You may find you need multiple tools. Obviously my opinion is biased but I think investing in public markets is probably the most fundamental tool in your toolkit and can be supplemented by others.

Part of the challenge is bringing all this together in a way that’s appropriate for your situation. Focus on that, on the structure of your overall household portfolio and the tools you use to build and maintain it, and less on the news of the day. You’ll be on a much better financial path and hopefully be able to sleep better at night.

Have questions? Ask us. We can help.

We’re in the final hours of another good quarter. I’ll send out my Quarterly Update next week but I can’t help starting this post out with some appreciation for how resilient the markets have been.

In just the past three months we’ve had tariff news, mixed economic messages, acts of domestic terrorism, whacky headlines, and now a potential shutdown of the federal government (at least as I type). The major indexes have risen through it all, with the S&P 500 up around 8% this quarter. Foreign stocks are up nearly 5% and bonds are up almost 2%. It’s amazing how investors (collectively) can look past these issues, but that’s the public markets for you. I find this collective rationality comforting in an otherwise crazy time.

Okay, this morning I’d like to share some inside baseball after attending an industry conference in New Orleans last week. The conference had less to do with market predictions and more to do with the planning profession itself – where we’re headed with tech innovations, how to serve clients better, and so forth. This is different from my typical post but maybe it helps you understand what professional planners are talking about.

First I’ll say that New Orleans is an interesting town. I had never been before so I spent time on several occasions walking throughout the French Quarter. It was a good way to process conference sessions while getting my steps in each day. I’m not much of a drinker but I still traversed the length of Bourbon Street several times as I crisscrossed the Vieux Carré – wow, it certainly lived up to its reputation! Conferences tend to be in places like Denver, Phoenix, or San Diego, so being in NOLA added an interesting twist. Beyond the craziness of Bourbon Street, there was plenty of architectural beauty and centuries of history to soak up. Unfortunately there wasn’t time for an organized tour. Maybe next time.

The conference, known as the Insider’s Forum, was hosted by a long-time industry journalist and publisher of Inside Information. This has nothing to do with insider trading or other nefarious market conduct. Instead, for decades the newsletter and associated conferences have covered the evolution of the planning profession and the firms and service providers moving it forward.

As you’d probably imagine, the rise of artificial intelligence permeated just about every conference session. There was worry and concern, but otherwise the sentiment around AI was positive. The number of planners who are trying to leverage (or at least learn more about) AI rose substantially from last year’s conference, with maybe 90+% now in that camp.

The primary use of AI currently is as a notetaker, which is considered the simplest way to integrate it into our back offices. There were two AI notetaker vendors at the conference and the idea is that they are linked to our phone system and Zoom (or other video conferencing app) and transcribe conversations. One company stores the video and audio while the other only transcribes and autodeletes the original. Each service can then do all sorts of things with the data, like linking the notes to a client’s file, creating summaries and follow-up tasks. I’ve seen both companies at another conference earlier this year and the feature sets have expanded dramatically since – that’s how fast the tech is improving.

I’m waiting and watching services like these because the regulatory, security, and quality issues are in flux. Early adopters at the conference spoke of transcription errors and other issues, although not as many as you might imagine. I may end up adding this in the months ahead but only when I feel confident that data security is rock solid.

Other AI use cases centered around client experience. For example, some firms are now (or planning on) using AI to write blog posts and newsletters and even respond to client emails. Apparently this is pretty basic in terms of AI capability, but the aforementioned security and quality control issues still have to be addressed.

There was much discussion about the importance of understanding prompts to get accurate information from AI platforms. We’ve all heard stories about how ChatGPT, etc, can hallucinate answers or simply be inaccurate. This is often due to the end user misunderstanding how to guide the tool through its “thought” process. We also need to be specific about where to find our information versus telling the AI engine to search the whole web. Otherwise, it’s garbage in and garbage out, and it can be impossible to tell what’s garbage if you don’t already understand the context.

Apparently, in the short-term (some now and others over the next year or so) we’ll see more industry-specific AI versions. Your information could reside in a “data lake” that reaches across platforms to be accessed by AI agents (“Agentic AI”, like a digital employee), presumably provided by third-party industry-specific apps. Essentially, one information request could search multiple data providers simultaneously and make back-office tasks much faster.

There was lots of discussion around trust. Data governance and who’s ultimately responsible for it is obviously critical. Various panelists and presenters suggested that trust will come with time and understanding. It was suggested that everyone learn more about these technologies, at least in general, because they’re here to stay and the growth rate is so rapid that many of us are being left behind, we just don’t know it yet.

We also discussed job security. Our collective opinion may be biased but the thinking is that human experts will become more valuable as we rely more on technology. If true, this bodes well for financial planners who can leverage these changes in a prudent and secure way. However, the more basic customer service tasks will be done by AI in the very near future – the agentic IA already mentioned. Traditional client service roles would obviously be impacted by this.

Other discussions included:

Integrating crypto currencies into our firms – pros and cons, regulatory issues, etc – “be very cautious” was the main takeaway.

AI will assist in determining long-term care coverage and creating cost-effective estate planning documents. An interesting company, Waterlily, recently came to market and was at the conference. More to come on this in a future post.

Big custodians like Schwab (and new entrants like Goldman Sachs and Wells Fargo) want to increase their profit margins by asking us to offer banking products to our clients.

We discussed cybersecurity and how current threats are often fancy versions of old threats, such as getting us to click links in phishing emails. Fraudsters are using AI to impersonate emails, phone calls, even adding in human tells like throat clearing to fool people. I’m considering keeping track of unique verbal code words that we’d verify prior to starting any new request.

Beyond that, I kept coming back to one thought throughout the conference: It’s good to be small. There’s so much change happening that it’s good to be nimble and unconstrained by bureaucracy and outside interests. The best technology, consulting, and security measures alluded to above are available to me, even as a small firm.

Another thought is that I’m definitely mid-career, although I’ve been doing this for over 20 years. Technology will keep improving and change can be scary, but I’ll keep adapting and improving along with it. We all will. That’s empowering as I look ahead to a long career.

Otherwise, please know that I won’t use third party AI services until I feel confident about the security of your information. And I won’t use AI to write these posts, even if it has better grammar.

Have questions? Ask us. We can help.

As I mentioned last week, negative indicators have been building out there but each seems matched by something positive, creating a familiar tug of war that tends to show up at market cycle inflection points. This will be on full display in the coming days as the Fed is expected to start lowering its interest rate benchmark on Wednesday. While this sounds good on the surface because it’s what investors expect and juices up the parts of the economy and markets, it creates negative ramifications elsewhere – it’s just the way it works.

This week I’m leaning on a couple of pieces I received yesterday from JPMorgan. One sheds light on the difficult spot the Fed is in with this rate decision while the other talks about four potential directions for the markets from here.

The bottom line with all this, also like I mentioned last week, is that it’s a good time to rebalance your portfolio.

The primary US stock benchmark, the S&P 500, has been “overbought” since May. Overbought is a technical term indicating the current price of the S&P 500 is at least one standard deviation above its 50-day moving average. That’s spread across the 500 stocks in the index and while some of those stocks are very expensive, many more are fairly valued or even undervalued. That internal mix is a positive spin on what’s otherwise a negative indicator, and it could help prices stay higher for longer. After all, the next three months are usually some of the best of the year for stock performance.

Remember that rebalancing doesn’t mean selling all of your stocks and waiting to get back in later. You’re trimming from the winners and adding to underperformers. This means you’re still invested in stocks when rebalancing, just not quite as much as before, so you’ll benefit if stocks continue higher from here. What you’re doing is incrementally reducing risk.

Okay, on to the two pieces from JPMorgan…

To cut or not to cut? Markets have been weighing each economic data print on the Fed’s balance of risks. As this week’s chart shows, mixed reports on jobs and inflation have sent the scale tipping back and forth, underscoring the difficulty of the Fed’s position.

After several months of stronger than expected payroll gains, July’s jobs report showed definitively that hiring momentum had slowed. Last Friday’s August report told a similar story. The U.S. economy added just 22k jobs last month, well below expectations of 75k, and 27k jobs were removed from the past two months. But this weaker labor market hasn’t translated to material disinflation. Immigration policies are contracting the labor supply, putting upward pressure on wage growth, despite the slowdown in hiring. August’s 4.3% unemployment rate is the highest since the pandemic, but well below the 50-year average of 6.1%. On the other hand, Thursday’s CPI report showed core inflation of 3.1%, well above the Fed’s 2% target, and tariffs and OBBBA stimulus could spark an acceleration. So, while the last two jobs reports green light the Fed to cut next week, the margin of error is razor thin.

Stock and bond markets might cheer the decision initially, but the longer-term investing implications aren’t so clear. Rather than boosting demand, rate cuts can destroy it as households lose interest income much faster than the cost of debt comes down. Longer-term yields may actually rise, as a cut [this] week could fuel concerns about inflation and Fed independence. Real assets like infrastructure and diversifying globally could help investors with the tough task of building portfolios resilient to both a growth slowdown and an inflation speedup.

There are four market outcomes: higher or lower equities in combination with higher or lower yields.

While peak uncertainty has subsided, many outstanding questions for investors remain: How much will the Fed cut rates? Will tariffs boost inflation? Is labor market weakness a headwind or head-fake? Forecasting definitive answers to these questions may be challenging – let alone how these dynamics interact – but devising a spectrum of scenarios to assess how markets could be impacted can help investors position portfolios. We’ve done just that in partnership with our Portfolio Insights team.

Principally, there are four market outcomes: higher or lower equities in combination with higher or lower yields. With that as a framework, here are four potential scenarios that could play out in markets over the next 6-12 months:

• Full steam ahead: Accelerating growth (stocks up, yields up) - Weakness in the labor market proves to be a head-fake, unemployment remains low, and tariff impacts prove to be manageable. With peak uncertainty behind us, consumption picks up and AI capex balloons, further aided by tax cuts enacted. The Fed delays rate cuts. Stocks, yields, and the U.S. dollar rise. Opportunities: Large cap, small cap, high yield | Risks: Core bonds

• Steady as she grows: Slow and stable growth (stocks up, yields down) - The U.S. economy is growing but slowing. Corporations pick up most of the tab on tariffs, which weighs on profits, but revenues are solid given the consumer absorbs less of the cost and inflation remains relatively contained. Markets drift higher and yields drift lower. The Fed cuts modestly and the U.S. dollar falls further. Opportunities: Large cap, international stocks, core bonds | Risks: Small cap, U.S. dollar

• Rough waters: Recession (stocks down, yields down) - Cost pressures and lingering uncertainty prompt companies to pull back on hiring and capex. Labor market weakness accelerates, and unemployment rises. Consumers pull back on spending. Profits decline. The U.S. economy enters recession. Stocks tumble, but bonds protect. The Fed cuts meaningfully to support the economy. The U.S. dollar rises as investors seek refuge. Opportunities: Core bonds, U.S. dollar | Risks: Domestic (large and small) and international stocks, high yield

• Inflation unanchored: Stagflation (stocks down, yields up) - Inflation reaccelerates due to tariffs and rising service costs. The labor market weakens, and consumption slows. Growth sputters but avoids recession. The Fed is forced to reverse course and hike rates. This U-turn in monetary policy causes stocks to stumble and the dollar to fall, while yields spike above 5%. Opportunities: Short-term fixed income, international stocks | Risks: Large cap, small cap, core bonds, U.S. dollar

Have questions? Ask us. We can help.

Market resilience was a theme during the third quarter (Q3) of 2025, buoyed by investor enthusiasm about AI-related spending, an overall healthy economy and, perhaps ironically, an interest rate cut by the Federal Reserve. Investors contended with any number of crazy headlines and a federal government shutdown as the quarter ended but still managed to keep major stock indexes in “overbought” territory for most of Q3.

Here's a summary of how major market indexes performed during the quarter and year-to-date, respectively.

• US Large Cap Stocks: up 8.1% and up 14.7%
• US Small Cap Stocks: up 12.5% and up 10.4%
• US Core Bonds: up 2% and up 6.1%
• Developed Foreign Markets: up 4.5% and 25.6%
• Emerging Markets: up 10.7% and 28.9%

US stocks performed well during Q3, as did stocks overseas. Generally speaking, investors continued moving past concerns about tariffs and inflation while shifting focus toward declining interest rates, government spending plans here and abroad, and corporate spending on AI-related infrastructure. According to Bespoke Investment Group, the big five AI-related companies (Meta, Google, Microsoft, Oracle, Amazon) spent roughly $40 billion on US data centers in July alone, with plans to spend around $1 trillion over the next year. Others suggest this spending could grow to several trillion by the end of the decade. More data centers are necessary to power the proliferation of AI models and their ability to “reason” which, according to NVIDA, could need over 100 times the power of earlier AI models.

All this growth impacts market dynamics. There are now nine publicly traded companies with $1+ trillion market valuations and eight of those are tech-related and the Technology sector makes up nearly 36% of the S&P 500. Add that to Communication Services (which includes AI “hyperscalers” Google and Meta) and we’re at 46% of the market’s primary benchmark for just those two sectors, up from about 30% pre-ChatGPT’s launch in 2022. The S&P 500 is organized based on a company’s market capitalization (value) so index returns get skewed by larger weightings. For example, AI-related stocks generated nearly all of the S&P 500’s return of about 3.5% in September.

Also lifting the spirits of investors during Q3 was a progression of generally positive economic news followed by a highly anticipated interest rate cut by the Federal Reserve in September. The cut was pretty much a given but there was some doubt because inflation was still above the Fed’s target and the economic outlook was favorable (September GDP surprised to the upside, rising at an annualized 3.8% vs 1.5% expected). However, labor market weakness was the main reason offered for the Fed’s rate cut. Investors ended the quarter expecting multiple quarter-point rate cuts from the Fed going into 2026 even though there’s low risk of major slowing or recession in the months ahead. This would, at least in theory, act as additional tailwind for the economy and markets.

Expectations for lower rates helped drive the yield on the benchmark 10yr Treasury note from about 4.5% in July to nearly 4% during September before climbing back to almost 4.2% as Q3 ended. Falling yields mean higher bond prices so this helped fuel the 2% return for core bonds mentioned above. This also helped reduce the average rate on a 30yr fixed mortgage to around 6.3%, which led to an uptick in purchase applications across the country. This pent-up demand was good to see given how much the wealth effect impacts consumer spending. We also learned that average home equity is at multi-decade highs. That might sound reminiscent of the Great Financial Crisis but homeowners have a mortgage on about 27% of their home’s value, according to Bespoke Investment Group. (Average mortgage debt was over 80% in 2007.) That’s just an average and home equity doesn’t help consumers who rent, but it helps support consumption for those who do, especially as interest rates fall.

So Q3 was a good quarter during a good year, but what does that mean going forward? Taking a contrarian view is prudent here. Numerous analysts suggest that we may only be in the middle of the game when it comes to AI’s development, and that could keep fueling returns for a while but how long is anyone’s guess. The economy is doing reasonably well, with positive indicators seeming to match or even outweigh negative ones. This could also last a while assuming rates continue moving down in the months ahead. Taken together, it’s a good situation that grows precarious as values rise and parts of the market get overextended, or more so depending on one’s perspective.

This type of environment cries out for incremental rebalancing. If you’re retired, trim from your winners to help fund your lifestyle, pay down debt, add to your emergency fund, buy some bonds, or all of these. If you’re still working and saving, keep it up but get prepared for volatility – it’s just a question of when and what the catalyst will be, and it will create opportunities for smart and patient investors.

Another theme for rebalancing is to consider incrementally moving some of your broad market-cap weighted holdings into equal-weighted funds to reduce your exposure to overheated sectors. One popular index fund from Invesco (ticker symbol RSP) that equal-weights the S&P 500 members contains only 17% in Tech and 5% in Communications Services as of this writing. Swapping a portion of a cap-weighted fund with something like this in your IRA or Roth IRA would be an easy way to diversify without near-term tax impacts. I may do something like this on your behalf if I'm managing your portfolio.

Have questions? Ask us. We can help. 

I'm skipping my post today because I'm at an industry conference in New Orleans. I'm still working so let me know of any questions and so forth. Otherwise, I'll be back to these posts next Tuesday. Have a great week! 

- Brandon

Good morning! I hope your last few weeks of summer went well. Summer always seems to pass quickly but now with our kids out of the house its end doesn’t have the same significance. Anyway, my short blog break is over and it’s back to writing these posts.

There are several updates percolating so let’s review…

US and foreign stocks performed well over the summer but have slowed a bit so far in September, which is typical. Bonds were up about 3% in the last three months and this is great for more conservative investors. Part of the reason for the good performance from stocks and bonds is the odd way that markets can sometimes climb a “wall of worry” when investors continue buying as negative information builds. And it has been building, especially in recent weeks.

While the economy continues to grow its growth rate is slowing. That’s not terrible, of course, but it changes the outlook. We’ve seen this play out over the summer in broad measures of economic activity like ISM reports, downward revisions to labor market numbers, and inflation upticks (plus expectations for tariff-related and even immigration-related price pressures).

This puts the Federal Reserve’s rate-setting committee in a difficult spot between its dual mandates to prop up the labor market while keeping inflation in check. Based on the CME Group’s FedWatch tool, investors now see a quarter point interest rate cut by the Fed as a given at its meeting next week. Two more similar cuts are expected later this year and there’s roughly a 40% chance of a fourth cut in January. All would be in response to an economy that’s continuing to slow into year-end. That may not play out exactly as the market expects, but this evolving consensus about the Fed ultimately juicing up the economy helped fuel stock market returns over the summer. It also sent the yield on the 10yr Treasury, a key economic benchmark, down by nearly half a point during this timeframe to a hair over 4% as I type. Bond prices move opposite to bond yields so this mostly explains the good performance coming from bonds.

I don’t think it’s time to worry too much about the economy and markets because it seems like there are positive indicators countering each negative one. Maybe we’re in a slower-growth balance phase for a while, not teetering on the edge of recession, and markets will keep climbing that wall of worry for months. Only time will tell.

Still, it’s wise given market performance to look ahead and think about raising cash for upcoming spending needs. This can be done through rebalancing stocks that have performed well. A broad market US stock fund would be an obvious choice for rebalancing, but sectors like Tech, Communication Services, and Industrials have done the best lately so you can be choosy if you own a variety of funds in your portfolio. Small cap stocks have also had a run this summer and could be good candidates. You can easily rebalance within tax deferred accounts like IRAs and Roth IRAs because the transactions themselves aren’t taxable. But you’ll want to consider your gain/loss options carefully when rebalancing within other account types. You could add sales proceeds to bonds or stick that cash into a money market fund or bank CD if you’ll need to spend it in the next year or so.

Reminder – be wary of mixing near-term spending cash with volatile asset classes. Bitcoin, to pick on something popular, began the summer at around $108,000 per coin, fell to about $99,000, and rose to nearly $123,000 before dropping to $112,000, with all sorts of volatility in between. What if you needed the money along the way – would that have been on a good day? One can make a case for crypto as a long-term speculative asset but it’s no place for short-term cash.

Money market funds from firms like Schwab and Vanguard are still paying a bit over 4% APY, but that’s expected to fall assuming the Fed lowers interest rates as mentioned above. The funds work with a lag of maybe a month or more so the rate decline won’t match Fed policy exactly. You could stick some cash into a short-term CD but those rates, such as out to 12 months, have trended lower over the summer to just below 4% APY in recent weeks. CD rates going out two years and beyond are also below 4%.

All in all, we had a pretty quiet but positive summer in the markets. Volatility typically picks back up heading into the fall and, as usual, there are lots of potential catalysts. However, I still think we have some tailwind in the markets but the sails are starting to buffet a bit. So it’s a good time to review basic portfolio management concepts like rebalancing and setting aside cash as needed. I’m doing this for you if I’m responsible for managing your portfolio. If you’re managing on your own, let me know if you have questions and I’ll be happy to assist.

Have questions? Ask us. We can help.