Happy holidays and warm wishes to you and your families as we wrap up 2025 and look ahead to 2026. It is our privilege to serve as your investment advisor, and we wish you and your family a very happy and peaceful holiday season.
The end of the year is an ideal time to reflect on the past twelve months and anticipate the opportunities and potential challenges of the future.
This year proved to be another period of remarkable resilience for the U.S. economy and markets. Despite ongoing concerns regarding inflation, persistent geopolitical tensions, and a cautious Federal Reserve, equity markets delivered strong performance. Strong corporate earnings, AI innovation, and consumer spending were all key drivers of performance this year.
Heading into 2026, we are optimistic with an eye on uncertainties. While economic expansion is expected to continue, we could see potential volatility due to policy uncertainty, trade dynamics, and consumer financial strain. The Federal Reserve is expected to maintain its rate-cutting cycle with forecasters generally anticipating two to three rate cuts through 2026. Just as we saw beginning mid-year 2025, we believe market leadership will further broaden beyond the mega-cap names that dominated in recent years. In this environment, the case for diversified portfolios remains compelling, and an emphasis on high-quality investments continues to be a prudent foundation for long-term success.
As we navigate the year ahead, we remain focused on your long-term financial objectives while ensuring your portfolio is well-positioned for various economic scenarios. Thank you again for your partnership this past year. We wish you a joyous holiday season and a prosperous New Year.
As always, if there is anything you would like to discuss, please reach out. We would love to hear from you!
"After weathering the 2025 policy storm, 2026 should be another year of U.S. economic resilience, continuing to support risk assets like stocks and corporate credit. Beneath the surface, however, cyclical economic momentum remains modest – with a K-shaped economy where middle income and below consumers feel pressured and rate-sensitive sectors of the economy (like housing) remain soggy. The risks around the base case outlook are wide next year – for investors and for the Fed, which will remain in rate normalization mode for a bit longer but at a slow pace given risks to both sides of its mandate."
"Back in 1980, a central feature of President Reagan’s campaign was a thirty percent across-the-board cut in income tax rates. Once elected, he followed through with the 1981 tax cut, which closely resembled this campaign promise. Those Reagan-era tax cuts were inspired by a combination of two factors. First, the very similar 'Kennedy' tax cuts proposed by President Kennedy in 1963 and then passed posthumously in 1964. Interestingly, the conservative Senator Barry Goldwater and many other Republicans opposed this tax cut on the grounds that it would increase the budget deficit."
"Sometimes stocks are cheap for good reason. Within value equities, screening out companies with weak operating metrics—and emphasizing ones with consistent cash flow generation—can help identify attractive investment candidates."
"Many of you may have recently seen a chart circulating on the internet suggesting a nationwide collapse in home prices is on the way, that we are in the 'biggest bubble in history,' the collapse is 'inevitable and nothing can stop it.' The claim is that since home prices adjusted for general price inflation are even higher than they were in the previous bubble that peaked nearly twenty years ago, the coming crash 'will be even worse.' Just to refresh our recollections, the bursting of the last bubble led to a massive decline in home prices, with the national Case-Shiller home price index down 27% in the five years ending in early 2012. An even larger decline today could be devasting for the US economy. But we don’t think this is going to happen."
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