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Q3 2025 Market Update

Q3 2025 Market Update: Fiscal & Monetary Policy and A Disconnect Between Valuations & Fundamentals

The Yes Wealth Team
Summary Thoughts

What an interesting year! It seems that the disconnect between the economy and the market is unusually large. Consumer sentiment is near an all-time low while the U.S. stock market is at an all-time high! It is usually better to invest when sentiment is low rather than when it is high.

⏪ Fiscal policies creating headwinds for the economy are tariffs, immigration shut down and rising deficits (government overspending).

⏩ Fiscal and Monetary policies creating tailwinds for the economy include interest rate cuts, deregulation and stimulus from Tax Bill. 

⚖️ There appears to be a disconnect between valuations and fundamentals which require the strategies of diversification and risk management.

Q3 and YTD Highlights
  • Consumer Sentiment has been this low rarely in the past and can represent a turning point in stock market performance. Normally consumer sentiment tracks with market performance:

Source: JPM Q4 Guide to the Markets

  • Stocks: Market Performance is a positive Global affair in 2025!
    • S&P 500 hit a record high on Sept. 22 [6694] to close the quarter at 6688 +14.8% YTD. Right chart above
    • International equities continue to be the star performers of 2025!
      • The left chart below reflects the market performance in local currencies and translated to U.S. dollars. The impact of U.S. dollar depreciation is evident in the stock prices. For example, EU stocks were up 18.5% YTD through 9/30 in Euros, but they appreciated by 34.4% in U.S. dollars
      • The middle chart shows global investment opportunities in our portfolios today.
      • The right chart below shows why most portfolios have been underweight international equities for some time:

Source: JPM Q4 Guide to the Markets

  • Economic Growth (GDP) grew aggressively in Q2 {+3.8%} after declining by -0.5% in Q1.
    • The right chart below highlights the impact of tariffs on economic growth. Net exports represented by purple bar are exports minus imports. Higher imports have a negative impact on U.S. economic growth because we are consuming product not made here, while exports have a positive impact.
    • Companies loaded up inventories in anticipation of tariffs in Q1 and then dramatically reduced them in Q2.
    • Estimates for Q3 are not yet available, but the expectation is for solid growth
    • No Recession continues to be the likely case for 2025 and well into 2026

Source: JPM Q4 Guide to the Markets

🏛️ Policy & Economic Landscape Highlights

Q3 and YTD Highlights

  • Tariff Impact: tariffs had a big impact on companies who are importers but for the most part, companies absorbed some of the cost while also passing some on. They also worked on long-term supply chain solutions to avoid this expense in the future. Consumers can expect to see more of the cost increases passed through to them in the coming months
  • Immigration and Demographics: Tight immigration policy and demographics are contributing to tight Labor force supply Our current path is leading to zero U.S. labor force growth, causing economists to reduce their economic growth forecasts.

Source: JPM Q4 Guide to the Markets

  • Budget Bill passed: Tax cuts will provide stimulus, and deregulation will help corporate investment. What we aren’t talking about is the growing size of the U.S. deficit and the cost to finance it. JPM’s Dr. David Kelly said, “We are going broke slowly”. Look at the size of Net Interest payments!
Source: JPM Q4 Guide to the Markets
  • Household (consumer) debt also hitting record highs: Total HH debt hit $18.4 Trillion in 2025 (70% in mortgages – $12.9 T; Auto loans $1.66T, Student loans $1.64T and credit card debt $1.2T). Debt being driven by high interest rates and inflation, and delinquency rates are increasing as could be expected. Implications: reduced consumer spending and potentially tighter lending standards. Most affected are lower income households, younger generations, and women.

Monetary Policy

  • Interest Rates: Fed cut short-term interest rates by 25 basis points (0.25%) in September for the first cut in 9 months to a range of 4% to 4.25%.
    • Market forecasters expect an additional two cuts in 2025 and another two rate cuts in 2026
Source: JPM Q4 Guide to the Market
Source: Dr. David Kelly - JPMorgan Immigration Presentation
  • Federal Reserve Mandates: Two main mandates – keeping Inflation low at ~2% (see right chart above) and unemployment steady, currently historically low at 4.3%. Inflation just increased from 2.9% to 3.0%, below expectations that tariff increases get passed on to consumers.
  • 10-Year Treasury Yield ended quarter at 4.15%: This represents the market perspective on inflation which the Fed does not control. So far this year, the yield is down 2.45%, signifying lower inflation expectations by the market.
  • U.S. Dollar declined by 10.6% versus other global currencies when President Trump announced his tariff plan (raised inflation expectations and reduced growth expectations) and investors anticipated that the Fed would cut rates. For these reasons, many expect the value of the dollar to continue to decline over time.
📈 Discussion on U.S. Stock Market Valuations and AI
  • Valuations: Headlines are screaming about how over-priced U.S. stocks are right now!
    • Left chart below shows S&P 500 ended Q3 at 22.8 times earnings which is historically high
    • Mag 7 stocks continue to power the S&P 500 behind the strength of global AI capital investment

Source: JPM Q4 Guide to the Markets

  • Other Sectors driving YTD growth include Comm Services +24.5%, Industrials +18%, Utilities +18%
  • Profit margin forecasts continue to strengthen (left chart below) with the other 493 companies beginning to show double digit earnings growth and catching up to the Mag 7 companies
  • S&P 500 margins continue to improve, resulting in growing earnings (right chart below)

Source: JPM Q4 Guide to the Markets

  • Artificial Intelligence’s major impact on the stock market has been covering up slower growth rates in the rest of the market.
    • The chart below shows the ten largest companies by market cap over the last five decades
    • Three companies stayed on the list over the last decade and only one company (Microsoft) has stayed on the list for two decades.
    • Shows the power first of the internet and more recently AI investment
Source: JPM Q4 Guide to the Markets
  • Some explanation of economic key drivers could help us understand the power of AI
    • Economic growth is growth in workers plus growth in productivity per worker (left chart below)
    • Labor force is declining due to a population aging which results in less economic growth in workers (middle chart below)
    • Labor force productivity becomes a key driver of growth with expectations that AI will be a major driver (right chart below)
Source: JPM Q4 Guide to the Markets
Source: JPM The AI Revolution
Source: JPM The AI Revolution
  • The adoption of AI technology so far has been extremely rapid, yet with plenty of room left for businesses to figure out how to use the technology to drive down their costs (left chart below)
  • There has been astounding level of investment by industry in the infrastructure required to power AI, from chips to data centers and data storage capabilities, to energy generation of all types!
  • The perspective that AI could be in a bubble does get us thinking about diversification. We don’t like the idea of missing out on the investment returns, but a drop in valuation when it comes most likely will be rapid.
Source: JPM The AI Revolution
Source: JPM Q4 Guide to the Markets
💼 Investment Strategy & Tactical Positioning

Market uncertainty is the certainty we confront, forcing us into decision-making in the market fog. As always, we as Investors face two competing instincts: either staying the course or attempting to time the market. We know from experience that amid heightened volatility, making reactionary moves can be risky. We believe Portfolio decisions should align with individual risk tolerance and individual investment time horizons.

Our current approach includes:

  • Increasing diversification between value and growth, U.S. and International, and using Alternatives
  • Maintaining bond durations in the 4 to 6-year range – given potential inflation impact on interest rates on elevating bond yields going forward and continued volatility in 10-year bond yields.
  • Staying disciplined – we have learned that the best approach for long-term investors while market headlines may evoke strong emotions, we encourage investors not to overreact to short-term swings.

 

Asset Allocation Adjustments

  1. U.S. Equities
    • We are adjusting portfolios to a diversified approach in large-cap U.S. equities while incorporating more mid-cap and value exposure and giving AI-driven opportunities full consideration.
    • Tariff implications on tech remain a concern, but the sector’s long-term outlook – particularly driven by AI adoption and productivity gains – must be balanced against policy uncertainties.
    • We have adjusted our hedging strategies from sole reliance on puts for downside protection to also utilize calls for income generation to help protect against downside.
  2. International Equities
    • We have increased our position weight in developed international markets, while increasing value sectors.
    • We are maintaining emerging markets as equal weight but continue to be underweight China.
  3. Fixed Income
    • Fiscal pressures and high real interest rates are expected to keep US bond yields elevated.
    • Bonds play a role in portfolio diversification and offer attractive income streams
    • Our strategy is holding bonds to maturity, slightly extending durations in high-yield and corporate bonds (4–6 years) to capture pricing upside when interest rates eventually ease, and to add in actively managed multi-sector funds as appropriate to portfolios.
    • Fixed income alternatives offer a significant variety of strong investments, and we will continue to leverage them strategically. We have identified options in private credit that provide access to more varied investment structures across the Private Credit landscape rather than just senior loans via direct lending. These opportunities do have some liquidity restrictions, but come with lower volatility, higher returns with risk levels equal to High Yield Corporate bonds for long-term investors.

Questions?

Interested in learning more? Reach out to your advisor for a more in-depth discussion.

Not a client? No problem! Get in touch with us here: Contact Us

Important Disclaimers:

This content is intended solely to provide general information about Yes Wealth Management and its services, and to offer an overview of our investment philosophy and strategies.  It is not intended to offer or deliver investment advice in any way. Direct consultation with a financial professional, who has full knowledge of your financial situation, is essential in determining how to apply these principles and strategies to your personal situation. Market data, articles and other content in this post are based on generally available information and are believed to be reliable – however, Yes Wealth Management is not in a position to be able to fully guarantee the accuracy of all cited information contained in this post.  Financial professionals at Yes Wealth Management rely on a wide range of sources to determine market conditions and appropriate strategies for each client, and as such the individual sources cited in this blog should be used for descriptive and informational purposes only.

Please review our full list of disclosures here: https://yeswealth.com/important-disclosures/ 

Q2 2025 Market Update

Q2 2025 Market Update: A Rally, Risks, and What’s Ahead

The Yes Wealth Team
Summary Thoughts

We agreed with Priya Misra from JPMorgan that, “It was a quarter that felt like a year!”

The quarter was full of surprises, from “Liberation Day” when President Trump announced his tariff plans that plunged the U.S. stock market to the brink of a bear market (-20% decline) to hitting a stock market high just three weeks later when he put many of the tariffs on “pause.” Now tariffs are back, and pundits are arguing about whether tariffs will cause inflation (they will) and whether the Fed will cut rates to help economic growth (they probably won’t).

While there is Monetary Policy uncertainty from the Fed, Fiscal Policy uncertainty has been resolved with the passing of the budget bill, tightening immigration policies, and the ever-rising government deficit.

Getting Into the Details
  • S&P 500: Overcame major volatility in the quarter by growing +10.8% in Q2, resulting in +6.1% growth YTD.
Source: Capital Speculator (July 10)

Drivers:

  • Strong corporate earnings (78% of companies beat estimates).
  • Tech and AI sector rally despite the risk caused by tariffs on their supply chains
  • Lowered earnings expectations helped companies beat forecasts.
Source: JPM Guide to Markets Q3
🏛️ Policy & Economic Landscape Highlights

Fiscal Policy

  • “One Big Beautiful Bill” Budget Bill passed: Tax cuts were made permanent, deregulation was a key objective, but massive increase in spending is projected.
  • Tariff Uncertainty: Tariff uncertainty was paused when deadlines were extended to Aug 1; however, the administration has ramped up the rhetoric and threats when they sent new tariff letters in July to countries who have not finalized new trade terms with U.S.
  • Immigration Cuts: Trump administration has been successful in closing off illegal immigration as desired but has also dramatically reduced legal immigration. Half of U.S. growth in labor supply in 2023 and 2024 was supplied by immigrant workers, which led to strong economic growth.

Monetary Policy

  • Fed on Hold: The Fed has two main mandates – keeping Inflation at ~2% and unemployment steady, currently historically low at 4.1%. They have stated that they will wait to see hard economic data reflecting the impact of the tariffs on inflation before making any rate cuts.
  • Rate Cut Expectations: We find it interesting that the “market” still expects 1–2 cuts in 2025 and possibly 1 in 2026.
  • 10-Year Treasury Yield: This represents the market perspective on inflation which the Fed does not control. So far this year, the yield is down 2.45%, signaling lower inflation expectations by the market.
Source: JPM Guide to Markets Q3
Source: JPM Guide to Markets Q3
🌍 Global & Domestic Economic Outlook Highlights
  • Economic Outlook was dominated by the impact of dramatic policy changes on a relatively slow growing U.S. economy that will most likely further reduce economic growth and raise inflation.
Source: JPM Guide to Markets Q3
  • No Recession is the Likely Case: However, risks remain elevated. It is quite possible that the inflationary impact of the tariffs could impact consumer spending more than the stimulus from the tax cuts – but this remains to be seen.
  • Deficit: What concerns everyone is the apparent impact of the budget bill of dramatically increasing the budget deficit from 98% of U.S. GDP today to 126% by 2034.
  • Energy Prices: -8.9% in Q2, easing inflation despite Middle East conflict.


⛈️ Headwinds

  • Tariffs have the potential to significantly increase inflation which will lead to reduced consumer spending.
  • Labor shortages due to immigration cuts could hurt economic growth.
  • Rising U.S. debt requires an increasing slice of annual government spending, and the new budget is projected to hit 126% of U.S. GDP by 2034.

🌬️ Tailwinds​

  • Tax cuts, deregulation, and business incentives are all stimulants to economic growth, giving both consumers and businesses extra spending potential.
  • AI-driven productivity gains could help reduce the negative impact of labor supply shortages.

🔍 2025 Second Half Outlook​

  • The global economy is expected to experience a widespread growth slowdown in the second half of 2025, but a recession is not the base case.
  • New US trade policies and associated uncertainty are significant factors in this slowdown, potentially leading to lower global demand.
  • Changes in perspective are only a TWEET away, so investors have to stay alert.
  • Central bank actions, especially the Federal Reserve’s rate cuts (or lack thereof), will play a major role in shaping market direction.
  • Despite volatility, there are still opportunities for investors, particularly in equities and core fixed income.
  • US stocks: The general outlook for US stocks is cautiously optimistic, with expectations for continued, albeit slower, growth. Projections vary greatly, but analysts at Goldman Sachs, Eaton Vance, JPM and many others are positive.
  • However, high valuations are a concern, potentially limiting stock pricing upside and increasing vulnerability to negative economic surprises.
  • International stocks, including Europe and other developed and emerging markets, outperformed in the 1st Half 2025. This shift is notable after the U.S. market had outperformed for the past 14 years. It is important to realize that the 11% decline in the dollar YTD represented HALF the gain in international stocks, and the 2nd Half of the year is unlikely to repeat that decline.
💼 Investment Strategy & Tactical Positioning

Market uncertainty presents a challenge for strategic decision-making. Investors face two competing instincts: either staying the course or attempting to time the market. However, amid heightened volatility, making reactionary moves can be risky. Portfolio decisions should align with individual risk tolerance and individual investment time horizons.

Our current approach includes:

  • Increasing diversification between value and growth, U.S. and International, and Alternatives
  • Maintaining bond durations in the 3 to 6-year range, given potential inflation impact on interest rates on elevating bond yields going forward and continued volatility in 10-year bond yields.
  • Staying disciplined: we have learned that the best approach for long-term investors while market headlines may evoke strong emotions, we encourage investors not to overreact to short-term swings.

 

Asset Allocation Adjustments

  1. U.S. Equities
    • We are adjusting portfolios to a diversified approach in large-cap U.S. equities while incorporating more mid-cap and value exposure and giving AI-driven opportunities full consideration.
    • Tariff implications on tech remain a concern, but the sector’s long-term outlook – particularly driven by AI adoption and productivity gains – must be balanced against policy uncertainties.
  2. International Equities
    • We are maintaining equal weight position in developed international markets, while increasing value sectors.
    • We are moving emerging markets from underweight to equal weight as many of the uncertainties around Asian economies and global supply chain disruptions stemming from tariffs are resolved. We continue to be underweight China.
  3. Fixed Income
    • Fiscal pressures and high real interest rates are expected to keep US bond yields elevated.
    • Bonds still play a role in portfolio diversification and offer attractive income streams
    • Our strategy is holding bonds to maturity, slightly extending durations in high-yield and corporate bonds (3–6 years) to capture pricing upside when interest rates eventually ease, and to add in actively managed multi-sector funds as appropriate to portfolios.
    • Fixed income alternatives offer a significant variety of strong investments, and we will continue to leverage them strategically. We have identified options in private credit that provide access to more varied investment structures across the Private Credit landscape rather than just senior loans via direct lending. These opportunities do have some liquidity restrictions, but come with lower volatility, higher returns with risk levels equal to High Yield Corporate bonds for long-term investors.

Questions?

Interested in learning more? Reach out to your advisor for a more in-depth discussion.

Not a client? No problem! Get in touch with us here: Contact Us

Important Disclaimers:

This content is intended solely to provide general information about Yes Wealth Management and its services, and to offer an overview of our investment philosophy and strategies.  It is not intended to offer or deliver investment advice in any way. Direct consultation with a financial professional, who has full knowledge of your financial situation, is essential in determining how to apply these principles and strategies to your personal situation. Market data, articles and other content in this post are based on generally available information and are believed to be reliable – however, Yes Wealth Management is not in a position to be able to fully guarantee the accuracy of all cited information contained in this post.  Financial professionals at Yes Wealth Management rely on a wide range of sources to determine market conditions and appropriate strategies for each client, and as such the individual sources cited in this blog should be used for descriptive and informational purposes only.

Please review our full list of disclosures here: https://yeswealth.com/important-disclosures/ 

Update on the Post-Tariff Investment Landscape

Update on the Post-Tariff Investment Landscape

Buy the Dip? / Recession? / Stagflation?
What’s an Investor to do?

THE YES WEALTH TEAM

First the good news: A Recent Rally

  • The S&P 500 rallied nearly 20% in under six weeks, bouncing back from the edge of a bear market to a +1.3% year-to-date gain.
Source: Financial Times – May 13th, 2025
  • Long-term interest rates are close to their levels at the start of 2025.
  • The U.S. Dollar is down 8% year-to-date, enhancing global competitiveness for U.S. exports.
  • This rally has been driven by several factors: a pause in tariff policies, strong Q1 earnings (+13.3%), resilient economic hard data, and the implied fiscal stimulus within the budget reconciliation bill currently taking shape in Congress.

Areas Warranting Caution:
Despite the recent rally, caution is warranted due to several developing trends:

  • Tariffs are higher than at the start of the year – averaging 13.3% – with pauses set to expire in early July and early August. This Policy Uncertainty is delaying business decisions which earlier this year got us close to the Bear Market. 
  • Falling immigration (both illegal and legal) is expected to negatively impact the U.S. labor supply.
  • While not currently in the headlines, projected government spending cuts will likely temper near-term economic growth.
  • The Reconciliation Budget Bill stands as the single biggest policy issue, with the potential to further increase the already historic budget deficit.

Economy and the Fed: A Closer Look:
Attention is now shifting to the broader economy and the Federal Reserve’s stance:

  • We are beginning to observe softness in both consumer and business sentiment.
  • Economic growth in Q1 was negative (-0.3%).
  • Q2 Growth is expected to be only slightly positive, as falling imports (due to tariffs) may not offset domestic growth as they normally do.
  • Monthly payroll job gains are anticipated to fall to 100,000 or lower. This could lead to a rise in unemployment to 4.5% from the current 4.2%, especially given labor force constraints from reduced immigration.
  • Expect inflation to pick up in Q2 2025. 
  • Corporate profits are projected to slide, though they should remain positive after the strong +13.2% year-over-year growth in Q1.
  • This economic outlook suggests the Fed could end up further from its 2% inflation goal than from its unemployment target. Consequently, we anticipate only one interest rate cut in 2025 and little to no change in 2026.

Investment Implications

Today we often hear about recession fears and even “Stagflation” fears.   Both are periods of economic difficulty, but have different causes, indicators and implications.  In brief, if the economy is slowing or shrinking with low inflation it’s likely a recession.  If the economy is barely growing (or not at all), with high inflation and unemployment, it’s stagflation.  Either situation would suggest that we make adjustments in our investment approach, but we do not see these as high probability events at this time.

The diminishing uncertainty around government policies points to a clearer path: higher tariffs, lower immigration, and government spending cuts will collectively dampen economic growth. However, a moderation in tariffs, combined with the fiscal stimulus from the Budget Reconciliation and potential tax cuts should help the economy avoid a near-term recession.

These policies, however, have the potential to reduce the long-run growth rate of the U.S. economy, increase the budget deficit, and modestly raise inflation. This combination poses a risk for highly valued mega-cap U.S. equities that have recently driven the S&P 500.

Therefore, we continue to favor diversification to navigate this challenging environment. Our focus remains on increasing exposure to International Equities (attractive relative valuations, fiscal stimulus, and dovish monetary policies) and U.S. Value Stocks (high quality, dividend-paying). Given the potential inflation headwinds, we are also maintaining shorter bond durations.

As David Giroux of T.R. Price wisely noted: 

“You shouldn’t invest based on how you feel today because your feelings (and markets) will likely be very different six months from now.” 

We must remember that uncertainty is inherent to investing. The key is to assess whether that uncertainty is trending positively or negatively. Until we have greater clarity, we will maintain a cautious, diversified tactical approach.

 

Important Disclaimers:

This content is intended solely to provide general information about Yes Wealth Management and its services, and to offer an overview of our investment philosophy and strategies.  It is not intended to offer or deliver investment advice in any way. Direct consultation with a financial professional, who has full knowledge of your financial situation, is essential in determining how to apply these principles and strategies to your personal situation. Market data, articles and other content in this post are based on generally available information and are believed to be reliable – however, Yes Wealth Management is not in a position to be able to fully guarantee the accuracy of all cited information contained in this post.  Financial professionals at Yes Wealth Management rely on a wide range of sources to determine market conditions and appropriate strategies for each client, and as such the individual sources cited in this blog should be used for descriptive and informational purposes only.

Please review our full list of disclosures here: https://yeswealth.com/important-disclosures/ 

About US

Yes Wealth Management has provided trusted quality investment advice to individuals and financial institutions for over 30 years. Our experienced team creates investment portfolios that help our investors to minimize significant downside risk while participating in upside returns through the use of a range of modern investment options and risk management approaches that are suitable for each client’s unique situation.

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Q1 2025 Market Update

Q1 2025 Market Update: Volatility, Tariffs & Outlook

The Yes Wealth Team
Source: Invesco

Current Market Perspective

The chart above (from Invesco) reflects our interpretation of the current landscape. Tariffs have dominated headlines, especially leading up to “Liberation Day” on April 2nd. A week later, on April 9th, the U.S. announced a “pause” on new reciprocal tariffs aimed at imports. Still, a universal 10% tariff remains in place across the board, with China facing even steeper rates – starting at 125% and later raised to 145%. Some product categories, like computers and phones, have been temporarily exempted. 

Here’s how the market responded: 

Source: Perplexity via The Oxford Club
  • Markets rebound: While markets have rebounded from tariff announcement, uncertainty over tariff responses remains high. February 19th marked an all-time market high.
  • Bear market territory: Since then, the Nasdaq and Dow have fallen into bear market territory (-20% from their peaks), and the S&P 500 is nearing bear market status. Volatility has surged, with the VIX hitting 60 – a level historically seen only during crises like the 2008 Financial Crisis, COVID, the 2024 Yen unwinding (triggered by rising Japanese interest rates forcing traders to liquidate leveraged equity positions), and now “Liberation Day.”
  • Ongoing tariff negotiations: Talks continue with allies and trading partners, with deal-making hopefully reducing the worst-case scenarios for global trade.
  • China’s response: Beijing has escalated its rhetoric in the trade war while signaling a willingness to negotiate – albeit with conditions.
  • Dollar depreciation: The U.S. Dollar Index has dropped 8% year-to-date, likely due to the current administration’s trade policies. While this makes imports more costly – adding to inflation – it boosts export competitiveness, benefiting American manufacturers. Some speculate that capital outflows from U.S. fixed income may have influenced the administration’s pause on reciprocal tariffs.
  • Persistent uncertainty: While the tariff details are known, their long-term impact on economic growth, inflation, and Federal Reserve policy remains unpredictable. Some analysts recommend we buy the dips, and some recommend we sell the rebounds.
  • Recession concerns: Forecasts projecting a higher likelihood of recession in 2025 have gained traction, driven by the anticipated drag on global demand due to tariffs.
  • Inflation trajectory: Inflation has been easing, but tariff-induced price pressures raise the question: will this inflation be transitory or persistent? Either way, the Fed’s 2% target remains elusive.
  • Border restrictions and economic implications: Reduced immigration – often overlooked – has potentially negative consequences for economic growth and labor markets.
  • Corporate outlook uncertainty: While pre-announcement economic data was strong, companies and analysts are now scrambling to reassess GDP growth and earnings projections. The uncomfortable reality? No one has a definitive forecast for the near-term outlook.
  • Valuation considerations: Analysts are increasingly hedging their forecasts by outlining base-case, bullish, and bearish scenarios. Stock valuations remain dependent on earnings per share (EPS) and market multiples, which fluctuate based on GDP growth, business sentiment, and consumer behavior.
Source: Citi Bank
Source: Hamilton Lane

Positioning for the Future

Market uncertainty presents a challenge for strategic decision-making. However, it is especially risky to be making reactionary moves at times of heightened volatility like right now. While our approach is to make tactical adjustments, we believe portfolio decisions should align with individual risk tolerance and investment time horizons.

Our current approach includes:

  • Reducing exposure to volatile tech holdings across portfolios.
  • Enhancing diversification by increasing allocations to international and value stocks.
  • Maintaining bond durations in the 3–5 year range, given ongoing volatility in 10-year bond yields (which have fluctuated from 4.8% in January to a low of 3.99% in April, currently at 4.36%).
  • Staying disciplined – while market headlines may evoke strong emotions, we encourage investors not to overreact to short-term swings.

 

Asset Allocation Adjustments

  1. Equities:
    • We have adjusted portfolios to an equal-weight allocation in large-cap U.S. equities while incorporating more mid-cap and value exposure.
    • Tariff implications on tech remain a concern, but the sector’s long-term outlook – particularly driven by AI adoption and productivity gains – must be balanced against policy uncertainties.
  2. International Equities:
    • With the U.S. dollar softening, we are shifting from an underweight position to equal weight in developed international markets.
    • European and Japanese governments are expanding fiscal spending to bolster economic growth and defense, presenting opportunities.
    • We remain underweight emerging markets, given heightened uncertainties around Asian economies and global supply chain disruptions stemming from tariffs.
  3. Fixed Income:
    • Yield volatility and inflation risk demand caution in fixed income positioning.
    • The elevated probability of recession further underscores the importance of fixed income in portfolio management.
    • We maintain an overweight stance on select fixed income opportunities, holding bonds to maturity while slightly extending durations in high-yield and corporate bonds (3–5 years) to capture pricing upside when interest rates eventually ease.
    • Fixed income alternatives – focused on market neutral, merger and acquisition (M&A) and credit event opportunities – remain valuable, low-risk investments that are not as affected by interest rate moves.

 

Final Thought

Market turbulence creates challenges, but disciplined investment principles remain essential. While uncertainty persists, strategic adjustments, rather than overreaction, position portfolios for resilience in the evolving policy and economic landscape.

 

Questions?

Interested in learning more? Reach out to your advisor for a more in-depth discussion.

Not a client? No problem! Get in touch with us here: Contact Us

Important Disclaimers:

This content is intended solely to provide general information about Yes Wealth Management and its services, and to offer an overview of our investment philosophy and strategies.  It is not intended to offer or deliver investment advice in any way. Direct consultation with a financial professional, who has full knowledge of your financial situation, is essential in determining how to apply these principles and strategies to your personal situation. Market data, articles and other content in this post are based on generally available information and are believed to be reliable – however, Yes Wealth Management is not in a position to be able to fully guarantee the accuracy of all cited information contained in this post.  Financial professionals at Yes Wealth Management rely on a wide range of sources to determine market conditions and appropriate strategies for each client, and as such the individual sources cited in this blog should be used for descriptive and informational purposes only.

Please review our full list of disclosures here: https://yeswealth.com/important-disclosures/ 

Investing Beyond Politics: How to Navigate Financial Anxiety During Elections

 

Investing Beyond Politics: How to Navigate

Financial Anxiety During Elections.

The Yes Wealth Team

 

 

Amid  the uncertainty of elections, financial anxiety can spike, prompting many investors to make decisions based on political outcomes rather than sound financial strategy. In their insightful piece, Brett Angel and Ben Marks caution against betting your investments on political promises. While elections can influence short-term market trends, history shows that the president’s impact on long-term market performance is often overestimated. Instead of reacting to political shifts, investors should focus on stability and strategic diversification for lasting financial health.  The following article was recently printed in the Minnesota Star Tribune:

BE WARY OF BETTING YOUR FINANCES ON POLITICAL PROMISES. PRESIDENT DOESN’T HAVE AS MUCH INFLUENCE ON MARKET AS MAY THINK.  By BRETT ANGEL and BEN MARKS The Minnesota Star Tribune,  November 17, 2024

On Nov. 6, the day after Election Day, the Dow Jones industrial average jumped more than 1,500 points (3.6%), the S&P 500 gained 2.5% and the Nasdaq 3%.

By the end of that week, the three benchmarks had increased between 4.6% and 5.7%, literally the best week of the year for U.S. equities.

Stock fluctuations are never due to just one reason. Financial markets are complex instruments intended to aggregate and value thousands of variables instantaneously. But there’s no doubt that the election heavily influenced the latest boom in stock prices.

The “Trump trade” is real, but it’s still up for debate whether or not it will be profitable.

No shortage of financial podcasts and newspaper columns have cautioned investors not to make investment decisions based on party preference or political outlooks. You hear it repeated every election cycle because it’s historically accurate.

The president simply doesn’t have as much influence on market performance as many people believe. Only three presidents since 1900 have avoided a recession while in office (Lyndon Johnson, Bill Clinton and Joe Biden). Only one president, George H.W. Bush, has avoided a bear market (a decrease of 20% or more).

But isn’t it significant that Trump will have more political power given the “red wave” on Election Day, meaning Republicans will have control of the White House, the Senate and the House of Representatives for at least two years? Not necessarily.

History tells us the stock market actually prefers a divided Congress. Since 1950, the S&P 500 has increased an average of 22% in two-year terms when we had a divided Congress, compared to returns of 14% when both the Senate and House were under the control of one party.

It’s a reminder that financial markets generally desire stability instead of change.

Plenty of investors obviously think the election results will be good for certain market sectors and bad for others. The S&P regional banking sector soared 13% in the first four trading days after Nov. 5.

International equities have sold off, on the other hand, based on expectations that increased tariffs will be bad for foreign profits.

It makes sense. But will it make you money? It might be just as likely that tariffs, which increase the price of foreign goods for U.S. consumers, will reignite inflation. Or Trump and his political allies will view tariffs more as a negotiating tactic with foreign leaders than as inevitable policy.

J.P. Morgan recently published some data citing the difficulty of investing based on expected political policies. In 2016, Trump campaigned on supporting traditional domestic energy industries (oil, coal and natural gas). Yet the S&P Energy index was down 40% during his term, while the Global Clean Energy index returned 275%.

In 2020, Biden campaigned on scaling back fossil fuels and galvanizing renewables. Since he’s been in the Oval Office, the S&P Energy index has more than doubled, while the Clean Energy index is down roughly 50%.

Part of the challenge is forecasting which political issues will become the biggest priorities of any new administration.

There is a difference between campaigning and governing. No president accomplishes everything on his or her wish list.

Ironically, one of the most likely consequences of the election that will matter to investors could actually result in keeping the status quo. With Republicans in control, it’s a strong bet the Tax Cuts and Jobs Act, originally passed during Trump’s first term in 2017, will extend.

Doing so would prevent income tax brackets from increasing for either families or corporations beginning in 2026.

The U.S. economic outlook looks strong, interest rates are coming down and the stock market is likely to trend higher during the next four years. But it is a dangerous game to make portfolio decisions based on political promises.

Ben Marks is chief investment officer at Marks Group Wealth Management in Minnetonka. He can be reached at ben.marks@marksgroup.com. Brett Angel is a senior wealth adviser at the firm.

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At Yes Wealth Management, we are here to help with any financial concerns you may have. 

Reach out to us for guidance and support.

Yes Wealth Management
Financial Care that’s refreshingly human.®
Contact Yes Wealth Management at 651-426-5854 to explore a financial plan tailored to your needs

Why Choosing a Fiduciary Financial Advisor Matters

Why Choosing a Fiduciary Financial Advisor Matters.

 

by Robert Schneeweis, CEO

A fiduciary is someone legally and ethically bound to act in another person’s best interest when managing assets. This responsibility, which rests on principles of good faith and trust, represents the highest legal duty one party can owe to another. 

When it comes to financial advising, finding a fiduciary advisor is crucial. Unlike non-fiduciaries, fiduciary advisors must prioritize your needs over their compensation, ensuring a commitment free from conflicts of interest. However, not every financial advisor is a fiduciary. Only Registered Investment Advisors (RIAs) registered with the SEC or a state securities regulator are legally bound by fiduciary duty. In contrast, broker-dealers, stockbrokers, and insurance agents need only meet a “suitability” standard, which allows them to recommend suitable but potentially higher-cost products that may favor their commissions over your financial best interest. 

This potential conflict of interest is also present with “Hybrid” advisors, who operate in both fee-based and commission-based environments. Even automated “Robo-Advisors,” which are technically fiduciaries, may fall short by relying on limited input from short questionnaires instead of in-depth, personalized advice. 

Working with a fiduciary financial advisor offers greater peace of mind. Knowing they are legally obligated to make decisions in your best interest, you can trust that they will provide guidance aimed at your financial well-being. 

Contact Yes Wealth Management at 651-426-5854 to explore a financial plan tailored to your needs.

FINANCIAL CARE THAT’S REFRESHINGLY HUMAN.®

What Is A Fiduciary? Why Should It Matter For Investing And How Can You Know If Your Advisor Is One?

 What Is A Fiduciary? Why Should It Matter For Investing And How Can You know If Your Advisor Is One?      

By: Robert Schneeweis, Chief Executive Officer

By definition, a fiduciary is a person or organization that acts on behalf of another person or persons to manage assets. Essentially, a fiduciary owes to that other entity the duties of good faith and trust. The highest legal duty of one party to another, being a fiduciary requires being bound ethically to act in the other’s best interests.

This term “fiduciary” is a very good thing to hear if you’re searching for a financial advisor. It means the advisor is “legally required” to put your interests first, rather than enhancing their compensation. Fiduciary duty eliminates conflict of interest concerns which makes advice more trustworthy. Not all financial advisors are fiduciaries. All investment advisors registered with the SEC or a State securities regulator (Registered Investment Advisors or RIA) must act as fiduciaries. Broker-dealers, stockbrokers and insurance agents are only required to fulfill a “suitability obligation”. This means that while the advice they give you may be suitable to your situation; they may substitute a higher cost product that pays them more for a similar product that better aligns with your interest at a lower cost. This same conflict exists – albeit in a less visible way – with a group of advisors known as “Hybrid” advisors. These advisors work for large firms that offer both “fee-based” services and brokerage services and manage some of your money on a Fee-based basis but also put some of your money in products where they receive a commission. Fee-only advisors are sometimes seen as operating with less of a structural conflict of interest than brokers or other advisors who earn commission, which can vary from one product to another. However, in that mode, the advisor might have the incentive to engage in excessive trading activity or favor a specific investment that will net the largest commission or fee.

What about automated / on-line or “Robo-Advisors” which advertise as RIAs? They insist that they are fiduciaries. They are registered investment advisors, but are they fiduciaries? They typically only offer advice based on a relatively short risk questionnaire, but rarely get a full financial picture or understanding of goals. An back and forth discussion of goals and attitudes toward risk seems critical to providing fiduciary services and cannot be adequately addressed by checking a few boxes.

Choosing a fiduciary financial advisor can give you greater peace of mind. With a fiduciary financial advisor, you’ll know that the person managing your money is legally obligated to make decisions in your best interest. While non-fiduciary advisors are not necessarily bad actors, it’s easier to ensure that you’re working with someone who has your best interest at heart if you opt to work with a fiduciary.

Please contact us if you’d like to discuss a plan for you:

Yes Wealth Management:

651-426-5854

Financial Care That’s Refreshingly Human. ®

Financial Care That’s Refreshingly Human. ®

By: Robert Schneeweis, Chief Executive Officer

Recently I was speaking with a young local woman who I’ve known for some time, and she asked me, “What exactly do you do at Yes Wealth?”.  While we have recently changed our name to Yes Wealth Management and moved to our own building in Mahtomedi, we’ve been successfully providing investment and financial advice for over 30 years.  Today people can feel surrounded by the white noise of advertising and marketing from mega companies who have unlimited budgets and by small companies trying to make their mark on TV, internet pop-ups etc.  On the other hand, we have served our clients since 1990, growing through word of mouth without TV, or filling up your mailboxes or email addresses. With so many pitches today focused on getting people’s attention, to call or log-in for some special need through so many different communications, it’s understandable that investors do not have a lot of trust that there is someone out there to help them with their questions.  That is why we work so hard to provide “Financial Care that’s Refreshingly Human®”.  That means turning industry white noise and terms like “Digital Currency”, “Indexed Returns” “ESG (Environmental and Social Governance Investing)” and “Robo Advising” into real human terms that clients can understand and help them distinguish how it may fit for them.  We help our clients get answers to their important financial questions.  How will inflation affect me?  How do I reach my family’s goals or help future generations?  How will tax changes affect me? We help you get to clarity on your financial future and provide you with solutions that relate to today’s changing world.

Our founders and management are recognized nationally, internationally and locally for their backgrounds and expertise.  We use our knowledge and insights to help you develop plans to accomplish your goals.  While we continue to create new ideas in ESG investing and managing investment risk, our continued focus is to bring modern, institutional investment ideas to all individuals at every stage of life. Know that we are here for you in both good and challenging times, to give you our perspective, to discuss your options, or simply to talk things through.

Please contact us if you’d like to discuss a plan for you:

Yes Wealth Management:

651-426-5854

info@yeswealth.com

What To Do About Market Volatility?

What To Do About Market Volatility? 

By: Robert Schneeweis, Chief Executive Officer

It’s not investor mania but Investor complacency about big stock and bonds moves that concerns me.

If you are not confused right now about what investment direction to take, you should be! Even market experts are uncertain about future market direction and volatility. A WSJ article from the other day said “Investors should get used to big stock-price moves, like Monday’s 600 point drop in the Dow, because they’re here to stay”. Well, after that Monday drop, we had VERY FEW calls of concern about the market. Now that may be because we have done a wonderful job creating confidence in our customer base, or possibly, people have already become “used to big-stock moves”.

The S&P 500 was down 13.5% in the fourth quarter of 2018. It had people panicking. So much so that on December 21st the SPDR S&P 500 ETF “DREW IN” the most money it had since February of that year (another dip period). And after the Monday May 13th 617 point drop, the market promptly went up by an almost identical amount over the next three days. So what’s to make of this?

After the Q4 correction of 2018, famous bond investor Jeffrey Gundlach of DoubleLine funds reflected on new money flows and said “… People have been so programmed, and feel so frustrated by selling when we get dips that this time they weren’t going to be fooled. This time they were going to buy the dip. I worry about that, though, because it reminds me a little bit about how the credit crisis developed in 2007 and 2008.” Whoever bought in December is “feeling good today” no doubt, but does the upward trajectory of the market continue?

So what’s an investor to do? On one hand, serious questions about global growth and geopolitical events are creating uncertainty which can make us want to sell on dips. On the other hand, the strong US economy and the Federal Reserve’s easy money policy make us want to take advantage of market dips! Well, Robert Shiller, the Yale University economist who shared the Nobel Prize in economics in 2013 reminds us “The professionals may be better at reading balance sheets and income statements and the like, but not at evaluating whether this is 1929 all over again” (or 2008).

So, as I said, we should all be confused. As articulated by Peter L. Bernstein, an economic historian and a widely read popularizer of the efficient market theory: “Understanding that we do not know the future is such a simple statement, but it’s so important. Investors do better where risk management is a conscious part of the process. Maximizing return is a strategy that makes sense only in very specific circumstances. In general, survival is the only road to riches. Let me say that again: Survival is the only road to riches. …. The riskiest moment is when you’re right……. As incredible as it sounds, that makes you comfortable with not being diversified.” And he goes on to say “I view diversification not only as a survival strategy, but as an aggressive strategy, because the next windfall might come from a surprising place. I want to make sure I’m exposed to it.”

Combining survival and growth requires real diversification (which is no longer provided by traditional stock /bond portfolios alone – a story for another day). What are the future growth drivers, Alternative Energy or Environmental and Social Governance (ESG)? And how do you survive economic contractions? We find that real diversification requires us to utilize market neutral, risk controlled and risk protected alternative funds in our portfolios to protect our clients during market volatility and from dreaded “market corrections”. In short, prepare yourself for market downturns before they happen, not after. That is how we manage volatile times like these.

Meet Our New Neighbor!

The Roelofs Insurance Agency is an independent insurance agency with over 22 years of experience.  We specialize in Auto, Home and Business insurance.

 

I believe our Mission Statement sums up what we do perfectly: “ Providing and servicing insurance products for you, your family, and your business; that I would want for myself, my family and my business.

 

When not in the office Brian and his wife Tina are busy keeping up with their two sons Hank and Willie.  Who both are very active in the Mahtomedi Basketball and Lacrosse programs.

 

We are very excited to now be sharing this beautiful office space with Yes Wealth Management.  We feel it is the perfect long term fit in downtown Mahtomedi.

 

We look forward to continuing to help support our community together with them.  – Brian Roelofs