We’re getting close to the end of another year. This one has been wild, for sure. The economy is sending mixed signals viewed through the lens of highly-charged emotions. It’s no wonder investors are having trouble finding their footing. You can put me in that camp. Publicly admitting that as a pro takes a healthy dose of humility. That’s called experience.
I’m obviously watching the economy pretty closely. The job market is always a focus. Hiring has clearly slowed and – despite what President Trump wants to believe – it’s not due to a Biden appointee or a cabal of government employees cooking the books just to make him look bad. That’d be delusional thinking.
At the same time, tariffs are still a big deal, despite the fact that the stock market has more than recovered from the sheer panic in early April. The Supreme Court won’t decide on the legality of the Trump tariffs until some time in November. They look illegal to me. After all, trade deficits are not a national emergency. This whole tariff debacle is yet another sad case of Republicans in Congress willing to abdicate their constitutional duty out of political fear or opportunism.
Speaking of political heat, the Federal Reserve is feeling it. They finally cut rates by a quarter point as they also see our economy slowing. We can expect another cut in a few weeks and again in December. After that meeting, it’s kind of a coin toss. The current government shutdown can now be added to their list of concerns. The shutdown seems like bad politics for both sides. One thing is certain, it reinforces the general view that our political system is broken.
Then there is artificial intelligence. It’s hard to remember another technology that has impacted things as quickly as AI has. Undeniably, it’s a game-changer for so many workers and businesses. But it’s also fueling a wave of investor enthusiasm that feels like either too-good-to-be-true or too-much-too-soon. Once again, in the name of humility, I won’t call it a bubble just yet. What I do know is AI has far-reaching implications that our elected officials are – yet again – failing to address. The tech titans are running circles around them and likely lining their pockets.
In face of these cross-currents, the markets have weathered it incredibly well so far. For the year, stocks are up around 15% and bonds have delivered about 7%. It’d be naive to think things will continue at this pace.
This means some portfolio rebalancing is wise to consider. Yes, it might require the realization of some capital gains before the end of the year. But, with thoughtful planning, the tax bite can at least be minimized. What to do with the cash? Well, that’s a problem best left for another day.
