August 3, 2026 by felipe.revuelta By: Steve Tomisek, CFP® | Partner and Chief Investment Officer There is an old saying that calm waters do not produce skilled sailors. In the world of investing, few periods have illustrated this truth more vividly than the first half of 2026. Investors navigated significant events, including the war in Iran, oil-driven inflation reaching multi-year highs, and ongoing questions surrounding artificial intelligence (AI). Despite these headwinds, markets climbed to new all-time highs, corporate earnings expanded at a double-digit pace, and a broad range of asset classes delivered positive results. The opening six months of 2026 served as a powerful reminder of why staying invested and maintaining a long-term perspective matters so much. This lesson carries even greater weight today, as the business cycle has entered its seventh year while the market cycle approaches its fifth. For many investors, it can feel as though the same set of concerns, including inflation, Federal Reserve policy, and valuations, keep cycling back into focus. Navigating these competing challenges is not an obstacle to successful investing; it is a fundamental part of it, and it is precisely why investors who stay the course tend to be rewarded over time. The second half of 2026 will almost certainly bring its own unexpected developments, from the ongoing Middle East conflict to the upcoming midterm election and new market activity such as initial public offerings (IPOs). Understanding how to maintain perspective as these events unfold is essential for every investor. Key market and economic highlights from the first half of 20261 The S&P 500, Nasdaq, and Dow Jones Industrial Average returned 9.6%, 12.8%, and 8.9% year-to-date through the end of June, respectively. The second quarter was historically strong, with the S&P 500 returning 14.9%, the Nasdaq 21.4%, and the Dow 12.9%. The Bloomberg U.S. Aggregate Bond Index rose 0.6% year-to-date. The 10-year Treasury yield ended the second quarter at 4.47%, up from 4.17% at the start of the year. Developed market international stocks (MSCI EAFE) gained 7.7%, and emerging market stocks (MSCI EM) returned 22.7% year-to-date, both in U.S. dollar terms. The Bloomberg Commodities Index rose 12.3% year-to-date, driven by a strong first quarter gain of 23.3%, followed by a decline of 8.9% in the second quarter. Brent crude peaked just under $120 per barrel in May before closing the quarter at $73 per barrel. Gold prices fell to $4,007 per ounce, while Bitcoin declined to a recent low of $58,633. Headline CPI rose 4.2% year-over-year in May, largely driven by energy prices. Core CPI, which excludes food and energy, rose 2.9%. The Federal Reserve held rates unchanged at 3.50% to 3.75% throughout the first half of the year. Kevin Warsh was sworn in as Fed Chair in May. The business cycle has now entered its seventh year Some investors may find it surprising that the current business cycle traces its origins back to April 2020, in the depths of the pandemic, and quietly passed its sixth anniversary during the second quarter. There have been several moments along the way when recession fears flared, most notably when inflation peaked in 2022 and when tariffs disrupted global trade last year. Through each of these challenges, the economy proved resilient, continuing to grow at a steady pace. The business cycle touches virtually every dimension of investing and financial planning, from mortgage costs to wage growth. A healthy economy supports consumer spending and business investment, which in turn fuels corporate earnings and, ultimately, stock market returns. While the stock market and the broader economy are distinct, they are closely intertwined. The chart above places the current cycle in historical context. The longest expansions on record, including the cycle that followed the 2008 financial crisis and the boom of the 1990s, lasted a decade or more. Where does the economy stand today? Inflation remains elevated but may ease if oil prices stay low. The labor market has regained momentum, reversing last year’s concerns about sluggish hiring. The dollar has stabilized and recently recovered some ground, trade conditions remain uncertain but have settled somewhat, and business investment has picked up. Consumers are expressing caution in surveys, yet continue to spend on both essential and discretionary goods. On balance, the economy appears healthy despite some mixed signals, which historically bodes well for financial markets over the long run. Broad asset class gains have supported diversified portfolios this year A wide range of global asset classes have contributed positively to portfolios in 2026, building on the trend established last year. As the chart above illustrates, gains have extended well beyond large cap stocks represented by the S&P 500 to include small caps, emerging markets, and commodities. The second quarter, in particular, ranked among the strongest on record, partly reflecting the timing of the Iran conflict, which meant that the market recovery got underway at the very start of April. Several themes have underpinned these returns, including the resilience of the economy, optimism around a potential peace deal in Iran, and enthusiasm for AI. Many of these factors have supported strong corporate earnings growth, with profits for S&P 500 companies rising more than 20% over the past twelve months.2 This positive market environment has also sparked a wave of high-profile IPOs, including SpaceX in the second quarter, with the listings of OpenAI and Anthropic, both AI companies, anticipated to follow. While investors naturally pay close attention to the first few days of an IPO when media coverage is at its peak, the real value of these listings tends to accumulate over a much longer horizon. Their significance lies in broadening the investment opportunity set for all investors, which is particularly important given the trend of companies remaining private for longer periods. What matters most is how these businesses perform across full market and economic cycles over the years and decades ahead. The largest technology companies today, for example, have built their scale through many such cycles. These positive trends have pushed U.S. stock valuations to historically elevated levels. The S&P 500 currently trades at a price-to-earnings ratio of 20x, above its long-term historical average of 16x.3 Such valuation measures are not reliable predictors of near-term market performance, but they serve as useful guides when constructing long-term portfolios and considering diversification across asset classes. Taken together, this year’s results underscore the enduring value of a balanced approach. Inflation remains a concern, though declining oil prices offer some relief The fluctuations in the Iran conflict have affected the U.S. economy most directly through energy markets. Disruptions to oil shipments through the Strait of Hormuz pushed Brent crude to nearly $120 per barrel before prices retreated sharply. In recent weeks, oil has fallen to around $70 per barrel, approaching pre-conflict levels. Gasoline prices have followed a similar trajectory on a lagged basis, peaking above $4.50 per gallon nationally before pulling back below $4.00 per gallon.4 These swings in energy prices have had a direct impact on inflation readings. The Consumer Price Index rose 4.2% year-over-year in May, its highest level in several years, with the gasoline component surging 40.5% over the same period. Notably, core CPI, which strips out food and energy, rose only 2.9%.5 This distinction highlights that inflationary pressure has been concentrated in fuel costs rather than spreading broadly through the economy. With oil prices declining in recent weeks, many economists believe inflation may be near its peak. This pattern echoes other historical geopolitical disruptions to oil supply, such as Russia’s invasion of Ukraine in 2022 and others shown in the chart above. Once those situations stabilized, oil prices typically recovered, and inflation rates moderated over time. Market volatility has remained at manageable levels Investors have become familiar with brief bouts of volatility triggered by macroeconomic developments. Tariffs, the Middle East conflict, and uncertainty surrounding the Fed have all contributed to short-lived market swings over just the past year. This can be observed in the VIX, a widely followed measure of stock market volatility. The current VIX reading of 16 sits below its long-term average of 18.4 and well below recent peaks, as shown in the chart above. This also illustrates that periods of elevated volatility can present meaningful market opportunities. Another useful way to assess the impact of market swings on investors is to examine the largest drawdown within a given year. In 2026, the S&P 500’s deepest peak-to-trough decline has been 9%. Pullbacks of this magnitude are never comfortable to experience, but markets have a history of rebounding when investors least anticipate it. Today, not only has the market fully recovered from its earlier decline, but the S&P 500 has registered 24 new all-time highs so far this year.6 The first half of the year reinforces a key principle: the most significant risk investors face during turbulent periods is not the volatility itself, but how they respond to it. The temptation to time the market during uncertainty is understandable, but it frequently proves counterproductive. A more effective approach is to hold a well-constructed portfolio designed to endure all phases of the market cycle while remaining aligned with long-term financial goals. This positions investors to navigate the inevitable uncertainties that the second half of 2026 will bring. Remaining invested is critical to long-term financial success One consequence of investors stepping away from markets during volatile periods is the accumulation of what is often called “cash on the sidelines.” The central challenge with this approach is determining when to re-enter the market. The chart above illustrates the scale of this phenomenon today. Money market fund assets have reached a record $7.9 trillion, more than double their pre-pandemic level when interest rates were near zero. This reflects both the uncertainty that has characterized markets in recent years and a period of higher short-term rates that made holding cash more appealing. Although cash can feel like a safe harbor, it carries its own risks. Cash yields often fail to keep pace with inflation. For example, current average rates on certificates of deposit mean that the real income from cash holdings is negative after adjusting for inflation.7 Even when nominal yields on money market funds and short-term instruments look attractive, sustaining those rates and staying ahead of inflation over time presents a genuine challenge. As a result, the purchasing power of cash holdings can erode steadily. This is precisely why maintaining a balanced portfolio capable of generating growth, income, and capital preservation remains so important. As the market and economic cycle continues to evolve, this principle will only become more relevant. The bottom line? The first half of 2026 has rewarded investors who stayed diversified and maintained a long-term perspective, even as geopolitical and economic headlines created short-term uncertainty. References All figures are as of June 30, 2026 and are on a price return basis unless otherwise noted Clearnomics research and LSEG data as of June 30, 2026 Ibid. https://gasprices.aaa.com/ https://www.bls.gov/news.release/cpi.nr0.htm Clearnomics research and Standard & Poor’s data as of June 30, 2026 Clearnomics research and FDIC data as of June 30, 2026 Index Descriptions S&P 500 The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. Dow Jones Industrial Average The Dow Jones Industrial Average consists of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors. NASDAQ The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. MSCI Emerging Markets Index The MSCI EM (Emerging Markets) Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of the emerging market countries of the Americas, Europe, the Middle East, Africa and Asia. The MSCI EM Index consists of the following emerging market country indices: Brazil, Chile, Colombia, Mexico, Peru, Czech Republic, Egypt, Greece, Hungary, Poland, Qatar, Russia, South Africa, Turkey, United Arab Emirates, China, India, Indonesia, Korea, Malaysia, Philippines, Taiwan, and Thailand. MSCI EAFE Index The MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada. The MSCI EAFE Index consists of the following developed country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the UK. Bloomberg US Aggregate Bond Index The Bloomberg U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds. This newsletter is a publication of Kirk Capital Advisors, LLC. It should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. A professional advisor should be consulted before any investment decisions are made. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for your investment portfolio. All investment strategies have the potential for profit or loss. Historical performance results for investment indexes and/or categories, generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment management fee, the incurrence of which would have the effect of decreasing historical performance results. Kirk Capital Advisors, LLC is registered as an investment advisor and only transacts business in states where it is properly registered or excluded or exempted from registration requirements. Registration as an investment advisor does not constitute an endorsement of the firm by securities regulators nor does it indicate that the advisor has attained a particular level of skill or ability. ©2025 Kirk Capital Advisors, LLC. Copyright (c) 2026 Clearnomics, Inc. All rights reserved. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein. The views and the other information provided are subject to change without notice. All reports posted on or via www.clearnomics.com or any affiliated websites, applications, or services are issued without regard to the specific investment objectives, financial situation, or particular needs of any specific recipient and are not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Past performance is not necessarily a guide to future results. Company fundamentals and earnings may be mentioned occasionally, but should not be construed as a recommendation to buy, sell, or hold the company’s stock. Predictions, forecasts, and estimates for any and all markets should not be construed as recommendations to buy, sell, or hold any security–including mutual funds, futures contracts, and exchange traded funds, or any similar instruments. The text, images, and other materials contained or displayed in this report are proprietary to Clearnomics, Inc. and constitute valuable intellectual property. All unauthorized reproduction or other use of material from Clearnomics, Inc. shall be deemed willful infringement(s) of this copyright and other proprietary and intellectual property rights, including but not limited to, rights of privacy. Clearnomics, Inc. expressly reserves all rights in connection with its intellectual property, including without limitation the right to block the transfer of its products and services and/or to track usage thereof, through electronic tracking technology, and all other lawful means, now known or hereafter devised. Clearnomics, Inc. reserves the right, without further notice, to pursue to the fullest extent allowed by the law any and all criminal and civil remedies for the violation of its rights.
November 24, 2025 by Steve Tomisek, CFP® By: Steve Tomisek, CFP® | Chief Investment Officer As the holiday season begins, it’s the perfect time to pause and appreciate what we have, both in our personal and financial lives. This is particularly important since investors tend to focus on what could go wrong rather than what has gone right. At the moment, with markets performing well, it’s helpful to reflect on the past year to gain perspective as new challenges and opportunities emerge. Financial markets have delivered strong returns over history, and this year has been no exception. The S&P 500 has gained over 15% with dividends year-to-date, while bonds have returned approximately 7% as measured by the Bloomberg U.S. Aggregate Bond Index. International stocks have outperformed U.S. stocks for the first time in many years. Many diversified portfolios have benefited from this broad-based performance across asset classes. What can investors keep in mind as they prepare for the coming year? We have entered the fourth year of the bull market First, investors can be thankful that financial markets have performed well this year despite market swings. This bull market cycle, which began after the market bottom in October 2022, is now entering its fourth year. While past performance is no guarantee of future results, history shows that bull markets tend to last much longer than bear markets, often running for five to ten years or more. The typical bull market has delivered cumulative returns far exceeding what we’ve seen so far in this cycle, despite the many challenges investors faced during those times. While there are important concerns around valuations and market concentration, investing for the long term requires us to navigate all types of market conditions. The bond market’s positive returns are important to highlight after the challenging interest rate and inflation environment of recent years. As rates have stabilized and the Federal Reserve has begun easing monetary policy again, bond prices have recovered. This demonstrates why holding both stocks and bonds remains important for portfolios in terms of both balance and income generation. This resilience underscores an important principle: trying to time markets around short-term events is not only difficult, but can be counterproductive if not considered as part of your broader financial plan. This was true even in April when markets fell close to bear market levels as new tariffs were announced. Markets not only rebounded quickly, but rose to new all-time highs. Investors who remained disciplined were rewarded, while those who reacted to headlines may have missed opportunities and, in some cases, may still be on the sidelines. Inflation has improved and the Fed is cutting rates Second, investors can be grateful that inflation has improved, even if progress has been slower than many would prefer. Prices have risen about 3% over the past year, which continues to be a challenge for households and policymakers. However, from an investment standpoint, inflation has been much more stable, and there are fewer fears of runaway inflation compared to prior years. This has allowed the Fed to begin cutting interest rates after keeping them at restrictive levels for most of the year. This is also to support the job market, which has been weakening since the summer. Historically, lower rates benefit both stocks and bonds by reducing borrowing costs for businesses and consumers while making existing bonds with higher interest rates more valuable. So, even though inflation and interest rates will remain important factors for markets, fears of ever-rising inflation and interest rates appear to be behind us. Asset allocation helps manage risk while capturing opportunities Finally, investors should also appreciate the importance of ongoing risk management and proper asset allocation. The year ahead will likely bring new sources of uncertainty just as every year does. When this happens, there will naturally be worries about recessions, bear markets, and that the cycle may be ending. Rather than reacting to every market event, long-term investors can instead hold an appropriate portfolio that can navigate different phases of the market and economic cycle. We can also be thankful that we have different assets available to help balance risk and reward. Risk management is important at all points in an investor’s journey, and especially so after a three-year rally. The S&P 500 price-to-earnings ratio of 22.6x is above average and steadily approaching its peak dot-com levels. Valuations do not predict what the market will do in the near-term, so this doesn’t mean markets can’t continue performing well. However, it does suggest that future returns could be more modest, especially when compared with cheaper asset classes and sectors. Thus, it’s important to have realistic expectations and to hold different parts of the market with more attractive valuations. Questions about artificial intelligence will persist. It’s natural that the effect on stock prices is difficult to predict given the transformative nature of the technology. This is similar to the challenges of predicting how the internet revolution would unfold beginning in the mid-1990s. Political volatility is also likely to continue with ongoing tariff changes, geopolitical worries, the growing national debt, and more. Recent history underscores that overreacting to these events is not only counter-productive, but can derail financial plans. The bottom line? The holiday season is an ideal time to reflect on the many reasons to be thankful and to review your portfolio allocations. A properly constructed portfolio balances the benefits of different asset classes and aligns them toward financial goals. This remains the key to navigating challenges and opportunities in the year ahead.
October 1, 2025 by Steve Tomisek, CFP® By: Kirk Taylor, CFP® | Founder & Chief Investment Officer Washington is back in the headlines as the federal government faces a shutdown if policymakers can’t reach a new funding agreement. This adds to a year in which government policies around trade, taxes, immigration, and more have created uncertainty for the economy and markets. For investors, it’s natural to wonder how politics might affect their portfolios, especially for those concerned about the size of the budget deficit and national debt. Understanding the historical patterns, and why markets generally look past them, can help investors maintain perspective during periods of political gridlock. Political drama in Washington can create uncertainty, but history shows that government shutdowns typically have limited impact on financial markets. While the toll that shutdowns have on government workers can be real, their effect on financial markets has historically been minimal. For long-term investors, these episodes highlight the need to separate political views from financial plans. This is especially important when daily headlines focus on controversial topics that have not historically affected portfolios. Government shutdowns have not historically affected markets or the economy On an annual basis, the federal government must pass a budget for the next fiscal year, which begins on October 1. While the government passed the “One Big Beautiful Bill Act” earlier this year that lays out tax and spending policies, a budget is needed to allocate the actual dollars to different departments and agencies. Failure to do so by the deadline means that the government might face a shutdown, resulting in a lapse in government services and employees being furloughed. It’s rare for Congress to pass budget bills on time. This may not be surprising given the increasingly polarized political environment in Washington, where compromise has become more difficult to achieve. Over nearly fifty years, Congress has managed to pass appropriations bills before the fiscal year deadline only a few times, making last-minute negotiations the norm rather than the exception. One solution that Congress has used often is known as a “continuing resolution” which temporarily funds the government while lawmakers negotiate. Republicans are currently proposing a seven-week stopgap bill for this purpose. As the accompanying chart shows, government shutdowns have occurred regularly since 1980 under presidents of both parties, with minimal long-term impact on financial markets. The chart illustrates that this was true even during the most contentious shutdowns, including during the Reagan administration, Clinton’s 21-day shutdown in 1995, Obama’s 16-day shutdown in 2013, and Trump’s 35-day shutdown in late 2018 to early 2019 – the longest on record. For investors, shutdowns have generally served as temporary disruptions rather than fundamental threats to economic growth. Shutdowns reflect deeper political differences The current situation reflects disagreements over spending priorities, primarily around healthcare. While the immediate funding of the government is the focus, these budget battles reflect deeper differences around the role of government and fiscal responsibility. With federal debt now around 120% of GDP, many agree on the need for fiscal discipline but there is fundamental disagreement as to how this should occur. What makes this situation unique is the administration’s directive for agencies to prepare permanent workforce reduction plans beyond typical temporary furloughs. This represents a departure from previous shutdown patterns and could create longer-lasting impacts on the job market and fiscal spending. Note that furloughed federal workers do automatically receive back pay once the shutdown ends, a policy that was enacted as part of the negotiations that ended the 2018 to 2019 shutdown. For some investors, the threat of a government shutdown may blend in with other fiscal issues such as the debt ceiling. The debt ceiling becomes a problem when spending the government has already approved needs to be paid for, but the Treasury Department isn’t authorized to borrow above a certain limit. The only solution in these cases is for Congress to raise the debt limit, or else the government risks defaulting on its obligations. All of these fiscal challenges are one reason the major credit rating agencies have downgraded the U.S. debt below AAA. Fortunately, the One Big Beautiful Bill Act also raised the debt ceiling by $5 trillion, so this problem can be avoided for some time. Markets focus on fundamentals, not political headlines So, while many investors have concerns over the fiscal trajectory of the country, government shutdowns have generally been uneventful for financial markets. The reason is straightforward: shutdowns are temporary disruptions that don’t change underlying economic fundamentals. Shutdowns can affect economic data reporting, which may temporarily affect important data used by investors and economists such as the Bureau of Labor Statistics’ jobs report and Consumer Price Index. However, this typically only delays the data, with reporting resuming once the shutdown ends. They can also create modest headwinds for economic growth if they last long enough, as federal workers delay spending and government services are disrupted. As the Economic Policy Uncertainty chart above demonstrates, tariffs and taxes earlier this year created significant challenges for investors. However, with recent clarity around both issues, this measure has fallen toward the longer run average. While a shutdown could always result in greater uncertainty, history shows that even longer government disruptions have not generally impacted investors. The bottom line? Government shutdowns may dominate headlines, create challenges for federal workers, and disrupt important services, but they have historically had minimal impact on financial markets. Investors should continue to focus on their financial plans rather than daily events in Washington. This newsletter is a publication of Kirk Capital Advisors, LLC. It should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. A professional advisor should be consulted before any investment decisions are made. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for your investment portfolio. All investment strategies have the potential for profit or loss. Historical performance results for investment indexes and/or categories, generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment management fee, the incurrence of which would have the effect of decreasing historical performance results. Kirk Capital Advisors, LLC is registered as an investment advisor and only transacts business in states where it is properly registered or excluded or exempted from registration requirements. Registration as an investment advisor does not constitute an endorsement of the firm by securities regulators nor does it indicate that the advisor has attained a particular level of skill or ability. ©2025 Kirk Capital Advisors, LLC. Copyright (c) 2025 Clearnomics, Inc. All rights reserved. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein. The views and the other information provided are subject to change without notice. All reports posted on or via www.clearnomics.com or any affiliated websites, applications, or services are issued without regard to the specific investment objectives, financial situation, or particular needs of any specific recipient and are not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Past performance is not necessarily a guide to future results. Company fundamentals and earnings may be mentioned occasionally, but should not be construed as a recommendation to buy, sell, or hold the company’s stock. Predictions, forecasts, and estimates for any and all markets should not be construed as recommendations to buy, sell, or hold any security–including mutual funds, futures contracts, and exchange traded funds, or any similar instruments. The text, images, and other materials contained or displayed in this report are proprietary to Clearnomics, Inc. and constitute valuable intellectual property. All unauthorized reproduction or other use of material from Clearnomics, Inc. shall be deemed willful infringement(s) of this copyright and other proprietary and intellectual property rights, including but not limited to, rights of privacy. Clearnomics, Inc. expressly reserves all rights in connection with its intellectual property, including without limitation the right to block the transfer of its products and services and/or to track usage thereof, through electronic tracking technology, and all other lawful means, now known or hereafter devised. Clearnomics, Inc. reserves the right, without further notice, to pursue to the fullest extent allowed by the law any and all criminal and civil remedies for the violation of its rights.
September 9, 2025 by Steve Tomisek, CFP® By: Kirk Taylor, CFP® | Founder & Chief Investment Officer The stock market climbed to new all-time highs in August, while bonds also contributed positively to portfolios. This occurred despite continued uncertainty around tariffs, Fed independence, and technology stocks. The month began with U.S. tariffs going into effect against most major trading partners after the initial 90-day pause. A federal appeals court later ruled that the “reciprocal tariffs” are illegal, possibly paving the way for the case to reach the Supreme Court. Markets also stumbled mid-month due to concerns that the Fed could keep rates higher for longer to fight inflation. Recent inflation reports, such as the Producer Price Index, suggest that companies are beginning to pass tariff costs through to consumers. However, market sentiment quickly rebounded due to better-than-expected corporate earnings and greater confidence that the Fed will cut policy rates at its upcoming September meeting. Economic figures were mixed. GDP growth for the second quarter was revised higher from 3.0% to 3.3%, a strong improvement from the first quarter’s 0.5% decline. However, the jobs report published at the start of the month showed a significant decline in new payrolls, including large downward revisions to prior months. This led the White House to fire the Commissioner of the Bureau of Labor Statistics, adding to the uncertain environment. Despite these challenges, market volatility remains low by historical standards. August’s solid performance across stocks and bonds underscores the importance for investors to stay balanced and focused on the long run. Key Market and Economic Drivers The S&P 500 rose 1.9% in August, the Dow Jones Industrial Average 3.2%, and the Nasdaq 1.6%. Year-to-date, the S&P 500 is up 9.8%, the Dow is up 7.1%, and the Nasdaq is up 11.1%. The Bloomberg U.S. Aggregate Bond Index gained 1.2% in August. The 10-year Treasury yield ended the month lower at 4.2%. International developed markets jumped 4.1% in U.S. dollar terms using the MSCI EAFE index, while emerging markets gained 1.2% based on the MSCI EM index. Year-to-date, the MSCI EAFE index has gained 20.4% and the MSCI EM index 17.0%. The U.S. dollar index ended the month lower at 97.8. Bitcoin fell in August, ending the month at 109,127 after experiencing a “flash crash” on August 24. Gold prices ended the month at a new all-time high of $3,487. The Consumer Price Index rose 2.7% on a year-over-year basis in July, in line with economist expectations. The jobs report showed that the economy added only 73,000 jobs in July. Significant downward revisions to the May and June figures mean that the labor market was much weaker than originally reported. The unemployment rate remained low at 4.2%. Markets climbed higher on healthy earnings While day-to-day news and headlines can drive markets in the short run, fundamentals like earnings and valuations are what affect portfolio returns in the long run. Although stock market valuations are quite high by historical standards, this is supported by corporations that continue to grow earnings at a healthy pace. The latest earnings season numbers show that 81% of S&P 500 companies have beaten estimates, according to FactSet. This is the highest percentage since the third quarter of 2023, demonstrating that the economy and corporate fundamentals have been stronger than many expected.1 This also underscores the adaptability of companies as they adjust to tariffs, absorb higher costs, and find ways to grow despite policy uncertainty. Many investors are focused on the earnings and returns of the Magnificent 7, a group of mega-cap companies, including some with multi-trillion-dollar market capitalizations. This group now represents over one-third of the S&P 500, so their performance can have a major impact on the broader market. The earnings results were mixed for this group overall, but some of these “hyperscalers” did exceed expectations. Despite concerns about an “AI bubble,” these results helped to drive a market rally in the second half of August.The Fed is expected to cut rates In contrast, consumer-facing businesses reported mixed results due to changing household spending patterns. This is exacerbated by the implementation of tariffs, as companies pass on a greater proportion of tariff costs to consumers. Combined with the weaker-than-expected jobs data, markets began anticipating greater rate cuts beginning in September. Fed Chair Jerome Powell, in a speech at their annual conference in Jackson Hole, Wyoming, provided the clearest signal yet that the central bank is prepared to resume cutting interest rates after pausing this year. The Fed has a “dual mandate” to keep inflation steady and unemployment low. Recently, they have kept interest rates relatively high due to stubborn inflation and a strong job market. Thus, early signs of job market softness could tip the Fed’s decision-making toward careful rate cuts. Fed rate cuts can create opportunities across asset classesThe prospect of additional Fed rate cuts could create opportunities across asset classes. In addition to supporting broad economic growth, lower interest rates can improve borrowing costs for companies, reduce hurdles for new projects, and increase the present value of future cash flows. For bonds, lower interest rates boost the prices of existing bonds that were issued at higher yields. Bond yields have hovered in a narrow range this year, with the 10-year Treasury yield generally fluctuating between 4.0% and 4.5%. Even if short-term yields decline as the Fed cuts rates, many bond sectors are providing healthy levels of income. The U.S. aggregate bond index is yielding 4.4%, investment-grade corporate bonds 4.9%, and high-yield bonds 6.7%. These levels are well above historical averages and support balanced portfolios. For overall portfolios, investors should continue to focus on managing the different risk and return drivers. Topics such as tariffs, Fed policy, and the risk of a government shutdown in Washington are only some of the issues that investors will face in the months ahead. Rather than reacting to each event, holding a portfolio that can withstand these swings, while providing both income and long-term growth, is the best way to achieve financial goals. The bottom line? Markets reached new all-time highs in August despite many policy concerns. Healthy earnings and economic growth continue to support portfolios despite ongoing uncertainty. 1.https://advantage.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_082925.pdf This newsletter is a publication of Kirk Capital Advisors, LLC. It should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. A professional advisor should be consulted before any investment decisions are made. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for your investment portfolio. All investment strategies have the potential for profit or loss. Historical performance results for investment indexes and/or categories, generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment management fee, the incurrence of which would have the effect of decreasing historical performance results. Kirk Capital Advisors, LLC is registered as an investment advisor and only transacts business in states where it is properly registered or excluded or exempted from registration requirements. Registration as an investment advisor does not constitute an endorsement of the firm by securities regulators nor does it indicate that the advisor has attained a particular level of skill or ability. ©2025 Kirk Capital Advisors, LLC. Copyright (c) 2025 Clearnomics, Inc. All rights reserved. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein. The views and the other information provided are subject to change without notice. All reports posted on or via www.clearnomics.com or any affiliated websites, applications, or services are issued without regard to the specific investment objectives, financial situation, or particular needs of any specific recipient and are not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Past performance is not necessarily a guide to future results. Company fundamentals and earnings may be mentioned occasionally, but should not be construed as a recommendation to buy, sell, or hold the company’s stock. Predictions, forecasts, and estimates for any and all markets should not be construed as recommendations to buy, sell, or hold any security–including mutual funds, futures contracts, and exchange traded funds, or any similar instruments. The text, images, and other materials contained or displayed in this report are proprietary to Clearnomics, Inc. and constitute valuable intellectual property. All unauthorized reproduction or other use of material from Clearnomics, Inc. shall be deemed willful infringement(s) of this copyright and other proprietary and intellectual property rights, including but not limited to, rights of privacy. Clearnomics, Inc. expressly reserves all rights in connection with its intellectual property, including without limitation the right to block the transfer of its products and services and/or to track usage thereof, through electronic tracking technology, and all other lawful means, now known or hereafter devised. Clearnomics, Inc. reserves the right, without further notice, to pursue to the fullest extent allowed by the law any and all criminal and civil remedies for the violation of its rights.
June 23, 2025 by Steve Tomisek, CFP® By: W. Kirk Taylor, CFP® | Founder & Chief Investment Officer The conflict between Israel and Iran has captured global attention and created uncertainty in financial markets. Israeli strikes on Iranian nuclear facilities and military targets began on June 13 and quickly led to retaliatory attacks. Then, on June 21, the U.S. launched strikes on Iran’s nuclear facilities. The situation is still evolving and can change quickly, and there are many views on what Iran may do next. This is occurring even as the Israel-Gaza war rages on, and regional conflicts continue in other parts of the world. While the humanitarian consequences are the most important consideration, it’s also necessary for investors to understand how such events impact markets. Perhaps the biggest concern among investors is whether events like these could escalate into full-scale global wars, especially now that the U.S. is actively involved. While this is always possible, recent history does not point in this direction. Instead, even serious conflicts, including Russia’s invasion of Ukraine, Hamas’s attack on Israel, and the war in Afghanistan, remained contained, leading only to short-term stock market volatility. This is not to diminish the severity of these conflicts, but to remind ourselves that overreacting to these events with our portfolios can be counterproductive. In times like these, it’s more important than ever to maintain perspective and focus on the lessons of history and long-term market trends. What should investors focus on in this environment to stay disciplined in these markets? Middle East tensions have escalated The latest developments mark an escalation in Middle East instability. Israeli forces targeted Iranian nuclear sites and military leadership, with reports indicating damage to uranium conversion facilities. In turn, Iran has responded with missile and drone attacks, with some reaching Israeli territory. The U.S. then bombed the three key nuclear sites of Fordo, Natanz, and Isfahan. The conflict has also damaged critical infrastructure in both Israel and Iran, including natural gas facilities and oil refineries. At the risk of oversimplifying, historians tend to view every event as unique, with its own narrative, causes, and consequences. Economists, on the other hand, tend to look for patterns and similarities between events to draw broad conclusions. As investors, both perspectives are important in order to understand what lessons do and do not apply. After all, a common saying is that history doesn’t repeat itself, but it often rhymes. The accompanying chart provides some historical perspective around geopolitical events over the past 25 years. This includes conflicts in the Middle East that impacted oil prices, such as the Iranian drone strikes against Saudi Arabia in 2019. These periods show that while there can be market swings in the short term, markets have typically recovered from geopolitical shocks, often within weeks or months of the initial event. What mattered more during these periods were the underlying business cycle trends. Oil prices have been volatile In the short run, oil prices can act as a transmission mechanism by which regional conflicts impact the rest of the world. The immediate market reaction to the latest conflict focused on energy markets, with Brent crude futures rising above $74 per barrel. Oil prices remain volatile but fell back toward $70 per barrel on a possible de-escalation. Oil prices affect the global economy since they are still a significant input into all products and services. Higher oil prices lead to more expensive gasoline and transportation costs, raising prices for everyday consumers and businesses. This is compounded by the possible closure of important shipping lanes, including the Strait of Hormuz in the Persian Gulf. This strait is a critical waterway through which approximately one-quarter of the world’s oil supply passes. Still, it’s important to maintain perspective on current oil price levels. While recent swings are notable, prices remain well below the peaks reached in 2022 during the early stages of the Russia-Ukraine conflict, when oil exceeded $120 per barrel. The current price level in the mid-$70s is within the range experienced over the past few years. Just this year alone, oil prices have fluctuated between $60 and $82 per barrel. It’s also important to note that the U.S. has grown increasingly energy independent over the past two decades. American oil production now exceeds 13.5 million barrels per day. Some may find it surprising that the U.S. is the world’s largest producer of both oil and natural gas. While the U.S. still requires foreign oil and is sensitive to global oil prices, the fact that there is a significant domestic supply helps to insulate the U.S. economy and financial markets. The impact of wars on portfolios depends on business cycles For investors worried about escalating conflicts around the world, zooming out can help provide perspective. From World War II to the Iraq War, markets may have reacted to these conflicts in the short run, but were driven by investment fundamentals in the long run. For example, World War II jump-started industrial production after the Great Depression, and led to a significant shift in the labor market with women entering the workforce. These factors helped propel the economy through the rest of the century. Similarly, the Gulf War affected oil prices, but also coincided with the Information Technology revolution of the 1990s. In contrast, the decade following the Vietnam War coincided with high oil prices and stagflation, resulting in poor market performance. Again, none of this is to trivialize the humanitarian and societal consequences of these wars. For the current situation, much will depend on whether the conflict expands further or begins to de-escalate. The involvement of major powers and threats to critical supply routes add complexity, but history suggests that even significant regional conflicts tend to have limited long-term impact on global financial markets. The bottom line? While Middle East tensions have created short-term market volatility, investors should maintain perspective and avoid overreacting to headlines. A portfolio aligned with long-term financial goals remains the best approach for navigating periods of geopolitical uncertainty. This newsletter is a publication of Kirk Capital Advisors, LLC. It should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. A professional advisor should be consulted before any investment decisions are made. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for your investment portfolio. All investment strategies have the potential for profit or loss. Historical performance results for investment indexes and/or categories, generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment management fee, the incurrence of which would have the effect of decreasing historical performance results. Kirk Capital Advisors, LLC is registered as an investment advisor and only transacts business in states where it is properly registered or excluded or exempted from registration requirements. Registration as an investment advisor does not constitute an endorsement of the firm by securities regulators nor does it indicate that the advisor has attained a particular level of skill or ability. ©2025 Kirk Capital Advisors, LLC. Copyright (c) 2025 Clearnomics, Inc. All rights reserved. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein. The views and the other information provided are subject to change without notice. All reports posted on or via www.clearnomics.com or any affiliated websites, applications, or services are issued without regard to the specific investment objectives, financial situation, or particular needs of any specific recipient and are not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Past performance is not necessarily a guide to future results. Company fundamentals and earnings may be mentioned occasionally, but should not be construed as a recommendation to buy, sell, or hold the company’s stock. Predictions, forecasts, and estimates for any and all markets should not be construed as recommendations to buy, sell, or hold any security–including mutual funds, futures contracts, and exchange traded funds, or any similar instruments. The text, images, and other materials contained or displayed in this report are proprietary to Clearnomics, Inc. and constitute valuable intellectual property. All unauthorized reproduction or other use of material from Clearnomics, Inc. shall be deemed willful infringement(s) of this copyright and other proprietary and intellectual property rights, including but not limited to, rights of privacy. Clearnomics, Inc. expressly reserves all rights in connection with its intellectual property, including without limitation the right to block the transfer of its products and services and/or to track usage thereof, through electronic tracking technology, and all other lawful means, now known or hereafter devised. Clearnomics, Inc. reserves the right, without further notice, to pursue to the fullest extent allowed by the law any and all criminal and civil remedies for the violation of its rights.
June 3, 2025 by Steve Tomisek, CFP® W. Kirk Taylor, CFP® | Founder & Chief Investment Officer Financial markets rebounded in May with the S&P 500 recovering its year-to-date losses. This positive month occurred against a backdrop of new trade agreements, mixed economic signals, and ongoing concerns about U.S. fiscal health. While many reports continued to show that the economy is strong, consumers remained pessimistic about the future. Treasury yields fluctuated throughout the month due to concerns around federal spending and debt. For long-term investors, May serves as a reminder that markets can adapt to changing conditions, even when there is significant uncertainty around economic and fiscal policy. Key Market and Economic Drivers1 The S&P 500 gained 6.2% in May, its best month since 2023, the Dow Jones Industrial Average was up 3.9%, and the Nasdaq rose 9.6%. Year-to-date, the S&P 500 is up 0.5%, the Dow is down 0.6%, and the Nasdaq is down 1.0%. The Bloomberg U.S. Aggregate Bond index declined 0.7% in May but is up 2.4% year-to-date. The 10-year Treasury yield ended the month at 4.4%. International stocks also performed well with the MSCI EAFE index of developed markets and the MSCI EM index of emerging markets both climbing 4.0%. The U.S. dollar index fell further to end the month at 99.3, near a three-year low. Bitcoin hit a new record high of $111,092 before ending the month at $104,834. Gold also hit a new record high of $3,422 before closing the month at $3,288, a 24% year-to-date gain. The Consumer Price Index report released in May showed that consumer prices rose 2.3% in April from a year earlier, the lowest 12-month increase since February 2021. The economy added 177,000 new jobs in April while the unemployment rate remained low at 4.2%. Markets continued to recover despite new concernsMay’s market rebound underscores the importance of staying the course during periods of market volatility. After a challenging April, markets demonstrated resilience by recovering most of their losses and returning to positive territory in May. This illustrates how quickly market sentiment can shift when conditions begin to stabilize, a pattern that investors have experienced many times over the past decade. Of course, the past is no guarantee of the future, and markets will continue to worry about trade deals, the U.S. debt, and the health of the economy in the coming months. Moody’s downgraded the U.S. credit rating One of the biggest surprises in May was Moody’s downgrade of the U.S. credit rating from Aaa to Aa1. This followed previous downgrades by Fitch in 2023 and Standard & Poor’s in 2011 which all reflect concerns about the nation’s growing debt and spending. The accompanying chart shows that the U.S. total debt grew to 122% of GDP in 2024. Net debt, which excludes debt the government owes itself, has risen to 97%. Despite the historic nature of the U.S. debt downgrade, markets hardly reacted. This is because the downgrade is mostly backward-looking, and investors are already familiar with the nation’s fiscal challenges. The muted response also reflects lessons from the 2011 Standard & Poor’s downgrade, when Treasury securities continued to be viewed as safe haven assets. Perhaps it was not a coincidence that this downgrade occurred as the House of Representatives was passing a comprehensive tax and spending bill. The approved bill would extend the individual tax cuts from the Tax Cuts and Jobs Act. This includes a 37% top rate, child tax credits, higher State and Local Tax deduction caps, and exemptions for tips and overtime pay, among other measures. According to the Penn Wharton Budget Model, the legislation could increase deficits by $2.8 trillion over the next 10 years.2The bill will now be debated and potentially modified in the Senate. While many would agree that these fiscal challenges require long-term solutions, the U.S. dollar remains the world’s primary reserve currency and there will continue to be demand for Treasurys for the foreseeable future. Trade negotiations show progress There was also progress on trade negotiations in May, taking many of the worst-case scenarios off the table. The administration reached agreements with both the U.K. and China, while negotiations continued with other major trading partners. The U.S.-China trade agreement included a 90-day period of reduced U.S. tariffs on Chinese goods. Despite these deals, there will likely continue to be uncertainty around trade. More recently, China and the U.S. have both accused each other of violating the trade truce, and the administration wants higher tariffs on steel and aluminum. At the same time, negotiations with the European Union produced optimism when the White House delayed its scheduled 50% EU tariff after positive discussions. This suggests that diplomatic solutions remain possible, even when initial positions appear far apart. The administration is also facing legal challenges to its tariffs. In May, the U.S. Court of International Trade struck down many of the newly enacted tariffs, ruling that they exceed presidential power under the International Economic Emergency Powers Act. While a federal appeals court paused the ruling, allowing tariffs to remain in place for now, this legal challenge adds another layer of uncertainty to the trade landscape.It is important to remember that trade policy typically unfolds over months and years rather than days or weeks. The recovery in May is a reminder that investors should not overreact to trade headlines, especially now that the worst-case scenarios are less likely to occur. Steady earnings growth supports market First quarter corporate earnings reports presented another reason for optimism. S&P 500 companies delivered positive earnings per share surprises and 64% reported positive revenue surprises, according to FactSet.3 This strong earnings performance highlighted the underlying health of corporate profitability, with technology companies showing resilience as they navigate trade uncertainty. In contrast, consumers have been pessimistic this year due to tariffs and inflation concerns. However, recent sentiment indicators began showing signs of improvement that align more closely with positive earnings and economic data. The University of Michigan’s most recent survey for May showed inflation expectations decreasing slightly and sentiment stabilizing. While it’s important not to read too much into a single month’s data, this improvement represents an encouraging development. A strong economy and improving sentiment could help to support markets. The bottom line? May was a positive month for investors. While the U.S. debt downgrade and fiscal concerns created new challenges, progress on trade deals helped to boost markets. For long-term investors, these developments underscore the importance of maintaining perspective and staying focused on fundamental trends rather than short-term policy headlines. 1. Standard & Poor’s, Nasdaq, Bloomberg. All month end figures are as of May 30, 2025.2. https://budgetmodel.wharton.upenn.edu/issues/2025/5/23/house-reconciliation-bill-budget-economic-and-distributional-effects-may-22-20253. FactSet Earnings Insight May 30, 2025 This newsletter is a publication of Kirk Capital Advisors, LLC. It should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. A professional advisor should be consulted before any investment decisions are made. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for your investment portfolio. All investment strategies have the potential for profit or loss. Historical performance results for investment indexes and/or categories, generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment management fee, the incurrence of which would have the effect of decreasing historical performance results. Kirk Capital Advisors, LLC is registered as an investment advisor and only transacts business in states where it is properly registered or excluded or exempted from registration requirements. Registration as an investment advisor does not constitute an endorsement of the firm by securities regulators nor does it indicate that the advisor has attained a particular level of skill or ability. ©2025 Kirk Capital Advisors, LLC. Copyright (c) 2025 Clearnomics, Inc. All rights reserved. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein. The views and the other information provided are subject to change without notice. All reports posted on or via www.clearnomics.com or any affiliated websites, applications, or services are issued without regard to the specific investment objectives, financial situation, or particular needs of any specific recipient and are not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Past performance is not necessarily a guide to future results. Company fundamentals and earnings may be mentioned occasionally, but should not be construed as a recommendation to buy, sell, or hold the company’s stock. Predictions, forecasts, and estimates for any and all markets should not be construed as recommendations to buy, sell, or hold any security–including mutual funds, futures contracts, and exchange traded funds, or any similar instruments. The text, images, and other materials contained or displayed in this report are proprietary to Clearnomics, Inc. and constitute valuable intellectual property. All unauthorized reproduction or other use of material from Clearnomics, Inc. shall be deemed willful infringement(s) of this copyright and other proprietary and intellectual property rights, including but not limited to, rights of privacy. Clearnomics, Inc. expressly reserves all rights in connection with its intellectual property, including without limitation the right to block the transfer of its products and services and/or to track usage thereof, through electronic tracking technology, and all other lawful means, now known or hereafter devised. Clearnomics, Inc. reserves the right, without further notice, to pursue to the fullest extent allowed by the law any and all criminal and civil remedies for the violation of its rights.
March 19, 2025 by Steve Tomisek, CFP® By: W. Kirk Taylor, CFP® Concerns over the economy have intensified, leading to a challenging investment environment. The S&P 500 briefly fell into correction territory recently (a decline of 10% or more), while the Nasdaq and major technology stocks have led the downturn. In times like these, it’s important for investors to remember that market uncertainty is a normal part of investing. While downturns are never pleasant, history shows that those who stick to their financial plans are in a better position to achieve their long-term goals. So, what is underpinning investor concerns? A key factor is whether tariffs and inflation will harm consumer spending. This is because consumers are the backbone of the U.S. economy, with consumer spending making up more than two-thirds of annual GDP. When consumers feel confident about their finances and the world, they tend to spend more on goods and services, which drives economic growth and corporate profits. Conversely, when uncertainty rises, consumers often tighten their belts, which can ripple through the entire economy. Consumer sentiment has fallen due to tariffs and inflation Recent data suggest that consumer sentiment, which measures how consumers feel about current and future conditions, has worsened alongside the stock market. According to the University of Michigan Surveys of Consumers, overall consumer sentiment has fallen to a level of 57.9 from a high of 79.4 a year ago, and is approaching the historic low of 50.0 in mid-2022. Much of this is driven by the expectation among consumers that inflation could rise as high as 4.9% in the coming year. Tariff uncertainties are the latest reason for consumers to feel nervous about the economy, especially when it comes to inflation. Historically, tariffs increase the prices of imported goods, as demonstrated when washing machine prices rose following 2018 tariff implementation. When businesses face higher import costs due to tariffs, they must choose between absorbing costs, negotiating with suppliers, or passing expenses to consumers. It’s not surprising that how consumers feel and how much they spend are usually related, and the latest retail sales report for February shows a slowdown in spending in some categories. However, this relationship has been unusual in recent years: although consumers may feel uneasy in this economic environment, spending has generally remained robust. This has led to a mix of conflicting data that needs to be viewed with a broader perspective. One reason for steady spending despite poor sentiment is that the job market remains strong. The unemployment rate of 4.1% remains near historic lows. There are 7.7 million job openings, for a ratio of more than 1 job per unemployed individual. Having job prospects may help bolster confidence and could help to support consumer spending in spite of recent uncertainty. Additionally, employers are more likely to raise wages if they know their workers could be considering other job opportunities. Consumer preferences have also evolved in the past few years, with spending increasingly focused on services and experiences rather than physical goods. Case in point: inflation for services remains well above average while the prices of many goods have declined, according to Consumer Price Index data. Goods are tangible items that consumers can purchase and own, such as electronics, clothing, or furniture, whereas services represent intangible offerings such as dining out, travel, memberships, healthcare, education, and entertainment. Household savings rates have fallen while debt has steadily risen The other side of the spending coin is savings and debt. While the savings rate has recovered somewhat, suggesting that households are saving 4.6% of their paychecks, this remains below the historical average of 6.2%, as shown in the accompanying chart. This means that consumers have been slow to rebuild their rainy day funds and are choosing to spend extra income (above inflation), rather than save. Some investors worry that resilient spending has been fueled by a rising level of consumer debt. According to the latest Federal Reserve Bank of New York report, credit card balances grew to $1.2 trillion in Q4 2024, but it’s important to put this figure into context. While individual debt levels are likely to be growing, aggregated data points like debt balances tend to rise as the population and economy grow. In other words, these figures usually only contract with a sharp slowdown of economic growth or a recession. As a percent of income, consumer credit has risen, but still remains below concerning levels. Household net worth remains near historic peaks Despite concerns about rising debt levels, U.S. household net worth has reached record levels, providing a strong foundation for the financial health of consumers. This “wealth effect,” or the idea that consumers spend more when their perceived wealth increases, is driven by strong asset prices, real estate, and more. It’s important to recognize that this is not evenly distributed across all economic segments, and there can be variation among different demographic groups and income levels. Some households continue to struggle with debt and limited savings, even as overall net worth statistics paint a positive picture. While household net worth and consumer spending provide no guarantee a recession will be avoided, they do suggest that the economy is more resilient than some might fear. The bottom line? Despite concerns around tariffs and the economy, consumer spending remains healthy. This reinforces the importance of seeing the bigger picture before making portfolio changes based on short-term market swings.
