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7 Market Movers | January 30, 2026

Anne Harris — Fri, 30 Jan 2026 15:09:46 +0000

7 Market Movers | January 30, 2026 Anne Harris Fri, 01/30/2026 - 09:09

This week was dominated by monetary policy and Microsoft. Gary analyzes the Fed’s decision to keep interest rates steady for the first time since July. Microsoft had a difficult week, losing around $400 billion in market capitalization when their shares fell 12% after their latest earnings report. Watch the video below for the full analysis.

FULL TRANSCRIPT:

Hello, everyone. Welcome back to 7 Market Movers. My name is Gary Quinzel with Wealth Enhancement. The Fed held rates steady this week, which was widely expected, but the real story isn't about the decision itself. It's what changed beneath the surface. Today, I'm going to focus on three key investment takeaways from the Fed's January meeting and how our investment team is interpreting those shifts. The first and most important takeaway is that the Fed has clearly shifted from cutting to calibrating.

If you compare the statements from the last meeting to the most recent, the language tells the story. The Fed removed references to rising downside risks in the labor market and instead noted that unemployment has shown some signs of stabilization.

Chairman Powell reinforced in his press conference, emphasizing that after 175 basis points of rate cuts, the policy is now close to neutral and not meaningfully restrictive. We observed multiple sources sources of independent research, which broadly agrees with this sentiment.

The Fed believes that it's done most of the heavy lifting already and now wants to pause, reassess, and let the data guide the next move. This is no longer a race to the next cut. It's a wait and see environment.

The second takeaway centers on the labor market, and this is where opinions start to diverge. The labor market is going to be the swing variable at upcoming FOMC meetings. Chairman Powell acknowledged that job growth has slowed, but argued that labor demand and labor supply have cooled at the same time, leading to stabilization rather than outright deterioration.

Now, independent research providers agree, suggesting that the economy may be experiencing a jobless expansion or productivity gains support growth even as hiring slows. Yet others are more cautious. Some argue that the Fed may be declaring victory too soon, pointing to weaker private hiring, elevated uncertainty for small businesses, and borrowing costs that remain restrictive for parts of the economy. This disagreement matters because if labor conditions stabilize, the Fed can stay on hold. But if labor weakens again, rate cuts could return very quickly. For for investors, that makes labor data the single most important catalyst in the months ahead.

The third takeaway is all about growth, which will have a direct impact on what the Fed does next. The Fed upgraded its assessment of economic activities from moderate to solid. Now Chair Powell emphasized that resilient consumer spending, improving productivity, and ongoing investment tied to artificial intelligence and data centers all matter.

Now research again echoes this view noting that growth has remained stronger than expected even as the full impact of fiscal policy has felt. So strong growth is good news for the economy, but on the other hand, it also caps how dovish the Fed can be.

When growth is solid and inflation risks are better understood, there's less urgency to ease aggressively. That's going to shift market leadership away from Fed speculation and back towards earnings, cash flows, and fundamentals. So to sum up, the Fed is no longer cutting preemptively. The labor market is the key swing factor. Growth remains solid, and the markets are becoming more selective.

Now before we close, it's worth touching briefly on Thursday's significant move in Microsoft, which recently reported earnings. Shares fell roughly 12%, wiping out more than $400 billion in market value, which was one of the largest, actually the second largest, single day losses of market value in one day, after earnings showed that record AI spending but slower growth in its cloud business. This wasn't about Microsoft suddenly becoming an ineffective company. It was about expectations, valuation, and concentration.

When markets and portfolios are heavily concentrated in a small number of mega cap names, volatility can emerge quickly, even in high quality businesses. It's just yet another timely reminder that diversification isn't about filling up a style box, it's about managing risk when leadership becomes narrow. So please remember, in this environment, discipline, diversification, and fundamentals matter more than trying to time the next policy move or predict winners from the AI tailwind. Thanks for joining us. We'll see you next time on 7 Market Movers.

This information is not intended as a recommendation. The opinions are subject to change at any time and no forecasts can be guaranteed. Investment decisions should always be made based on an investor's specific circumstances. Investing involves risk, including possible loss of principal. There is no guarantee that asset allocation or diversification will enhance overall returns, outperform a non-diversified portfolio, nor ensure a profit or protect against a loss.

2026-10865

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Gary Quinzel

December 2025 Market Commentary

Tom Bidinger — Thu, 04 Dec 2025 15:20:32 +0000

December 2025 Market Commentary Tom Bidinger Thu, 12/04/2025 - 09:20

For the period November 1 – November 30, 2025.

Executive Summary

Markets oscillated in November as investors debated two issues: The likelihood of a December Fed rate cut and the current state of the AI revolution. Although market volatility was heightened during the month, November was a time of digestion rather than disruption.

What Piqued our Interest

The Government Restarts

The longest government shutdown on record, lasting 43 days, came to an end on November 13. Despite the reopening, not everything is back to normal, especially when it comes to economic data releases. During the shutdown, releases were either canceled or delayed, and, importantly, no new statistics on prices or jobs were collected, leaving policymakers and investors with a data gap. Some alternative data has been used to fill the gaps, but official government data will still carry weight when released. While there continues to be debate over how much the shutdown impacted the economy, the stock market mostly shrugged it off.

The K-Shaped Economy and Fed Policy

Views on spending, affordability, and economic growth vary depending on who you ask and what data you look at. The varying growth rates resemble the letter K, where some segments are seeing growth while others are seeing slowing. Recent data from the Fed’s Beige Book, a report that gathers anecdotal evidence on current economic conditions, showed that higher income spending was strong but lower and middle-income households were seeking more discounts and promotions. We see bifurcation from a sector standpoint as well, where spending remains robust by companies in the Technology sector, especially those that are tied to AI. On the other hand, other sectors such as manufacturing, residential construction, and trucking are struggling and pulling back on hiring.

The Fed will meet for its final meeting of 2025 on December 10 and markets are expecting another 0.25% cut, which would bring the target Fed Funds rate to 3.50-3.75%. As usual, investors will be focused on the forward guidance and accompanying commentary more so than the rate cut itself. If inflation risks are expected to linger, markets may need to digest and recalibrate the pace of expected cuts in 2026.

The AI Debate

The debate surrounding whether we are in an AI bubble raged on during the month, especially as investors wrestled with lofty valuations and a slight shift in how the build-out for AI would be financed. Thus far, Mega Cap Tech companies with great balance sheets and strong operating cash flows have been doing the heavy lifting, but the last few months have introduced some incremental debt issuance that brought back fears of a dotcom era bust. For many Technology companies, the risk is spending too little, falling behind, and missing out on the next big shift in computing.

For investors, the risk is that the companies they have invested in have poor returns on this invested capital. It is a concern because the future monetization of AI is not yet concrete and competitive dynamics for many AI models and platforms can shift rapidly. In November, the markets paused and digested the new narrative, but most investors remain cautiously optimistic.

Market Recap

Equities Oscillate

Volatility was elevated during November, but the S&P 500 Index saw a late recovery heading into the Thanksgiving holiday. Growth stocks, heavily concentrated in the Tech sector, weighed on returns. The Technology sector in the S&P 500 Index declined -4.3%, and the Growth-oriented Nasdaq 100 Index declined -1.5% for the month. U.S. Large Cap Value stocks outperformed during the month, up 2.7%, but are still behind Growth stocks on a year-to-date basis.

U.S. stocks grab a lot of attention, but this year ex-U.S. returns are outperforming. Emerging Market stocks pulled back by -2.4% during the month, but the MSCI Emerging Markets Index is up close to 30% for the year. Developed International stocks aren’t far behind, posting a positive 0.6% return in November and taking the year-to-date return to 27.4%.

Fixed Income Markets Remain Stable

Lack of economic data, numerous Fed governor speeches, and speculation surrounding who the next Fed chair would be kept the bond market active, but returns were steady in fixed income during the month of November. The 10-year Treasury yield declined, ending the month with yields near 4.0%. The Bloomberg U.S. Aggregate Bond Index rose 0.6%, while the high-yield index posted similar gains. In municipals, there is anticipation that new issue supply will be short of demand, providing a tailwind into December, where returns have historically been positive, averaging returns of 0.54%.

Wealth Enhancement Perspective

November reminded us that narratives can change quickly. Concerns over AI and Technology stock valuations, alongside cautious Federal Reserve governor speeches, gave way to renewed excitement around improved AI models and growing confidence in a December rate cut. While fundamentals remain constructive, sentiment shifts can occur and impact short-term returns.

For long-term investors, this is a time to stay disciplined, diversified, and opportunistic. Portfolio maintenance may not be high on a Holiday to-do list, but it can be a time to rebalance portfolios that may have drifted away from initial allocations, tax-loss harvest to offset gains, and selectively deploy cash to assets that can help you reach your objectives.

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November 2025 Market Commentary

Tom Bidinger — Wed, 05 Nov 2025 17:04:39 +0000

November 2025 Market Commentary Tom Bidinger Wed, 11/05/2025 - 11:04

For the period October 1 – October 31, 2025.

Executive Summary

Equity markets extended their rally in October, once again closing out the month near record highs. The Fed’s second rate cut of the year helped reinforce optimism across risk assets, even as policymakers signaled a more measured approach ahead.

What Piqued Our Interest

Global equities continued their climb in October, once again led by Large Cap Growth stocks—particularly the “Magnificent Seven,” which remain the primary beneficiaries of the ongoing artificial intelligence (AI) tailwind.

AI continues to be one of the most powerful forces driving both corporate spending and investor enthusiasm. Recent estimates suggest that AI-related capital expenditures accounted for more than 90% of U.S. GDP growth in the first half of 2025, with “hyper-scaler” investment projected to exceed $1.4 trillion between 2025 and 2027.

At the same time, some analysts have expressed concern over “circularity” in this spending cycle—where technology firms, suppliers, and financiers are increasingly reliant on each other’s capital to sustain growth. This dynamic has raised questions about profitability, returns on investment, and the long-term durability of AI-driven business models, especially as infrastructure spending outpaces realized revenue.

We continue to view AI as a long-term productivity catalyst, with the potential to lift U.S. labor productivity by as much as 15%. However, we remain mindful that concentrated capital flows and lofty expectations can create vulnerabilities if liquidity tightens or earnings growth slows.

The Fed Cuts Rates—Again

The Federal Reserve reduced the federal funds rate by 25 basis points in October, marking its second cut of the year. Policymakers cited softer labor data and further progress on disinflation, with headline CPI at 2.9% and core PCE near 2.8%.

The decision was largely expected and reinforced the view that the Fed may be nearing a “soft landing.” Lower borrowing costs supported both equities and fixed income, with the Bloomberg U.S. Aggregate Bond Index gaining 0.62% for the month. Fed Chair Jerome Powell emphasized that future policy moves will remain data-dependent, suggesting a cautious pace of easing until inflation settles closer to target.

Market Recap

October was another strong month for equities. Despite a brief mid-month pullback, the S&P 500 rose 2.34%, the Dow gained 2.59%, and the Nasdaq 100 surged 4.81%, extending its year-to-date gain to nearly 24%. Large Cap Growth stocks remained the primary drivers of performance, while Small Caps and Value-oriented sectors saw more modest gains.

International markets also posted solid returns, with the MSCI ACWI ex-US up 2.02%, and emerging markets outperforming developed peers. The MSCI EM Index climbed 4.18% and is now up more than 32% year-to-date, buoyed by currency strength and improving liquidity conditions abroad.

Wealth Enhancement Perspective

Markets continue to balance optimism around monetary easing with recognition of structural risks. The Fed’s pivot toward rate cuts provides a supportive backdrop for asset prices, but it also reflects a slower underlying economy. This comes as the government shutdown is now the longest on record, impacting everything from food stamps, economic data releases, air traffic controllers, and much more. Fiscal uncertainty, tariffs, and geopolitical tensions remain unresolved, all of which may influence market dynamics in the months ahead.

Valuations are difficult to ignore. The S&P 500 now trades at roughly 23 times forward earnings, well above its five-year average of 20, while the Nasdaq 100 commands a multiple near 28, signaling elevated expectations. While valuations are a poor predictor of short-term performance, they can temper long-term return potential if earnings growth moderates.

For investors, discipline and diversification remain essential. As we approach year-end, maintaining balance between risk assets, quality fixed income, and other diversifying assets—while avoiding overconcentration in any one sector or theme—will be critical to navigating the next stage of the market cycle and positioning portfolios for long-term success.

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7 Market Movers | October 31, 2025

Tom Bidinger — Fri, 31 Oct 2025 12:54:09 +0000

7 Market Movers | October 31, 2025 Tom Bidinger Fri, 10/31/2025 - 07:54

This week on 7 Market Movers, Wealth Enhancement Deputy Chief Investment Officer Doug Huber discusses the latest economic and market headlines. Topics include the Fed surprising us all with a second interest rate cut despite ambiguous signals and the ongoing government shutdown, strong corporate earnings, and equity markets remaining broadly positive.

Please contact our office if you have any questions you’d like to discuss.

There is no guarantee that asset allocation or diversification will enhance overall returns, outperform a non-diversified portfolio, nor ensure a profit or protect against a loss. Investing involves risk, including possible loss of principal.

2025-9873

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Our Perspective on Recent Market Events

wegmigrate — Tue, 04 Mar 2025 06:00:00 +0000

Our Perspective on Recent Market Events wegmigrate Tue, 03/04/2025 - 00:00

The Investment Management Team

Markets are reacting to the rapidly evolving news around tariffs on Canada and Mexico.

The stock market rallied on March 5 after President Donald Trump gave a one-month tariff exemption to automakers. The previous day, when the impending tariffs went into effect, the S&P 500 dropped by roughly 5% versus its recent all-time high on Feb 19. The United States’ major trading partners are now set to impose reciprocal tariffs, potentially impacting growth and putting upward pressure on prices.

Data collected by Bloomberg Intelligence notes that the recently announced tariffs lift the average U.S. levy from 2.3% to 11.5%, raising the risk of both a drag on gross domestic product (GDP) and an increase of 0.8% to the personal consumption expenditures (PCE) index—the Fed’s preferred inflation gauge.

Despite the near-term stagflation worries, the odds of Fed easing this year have notably increased. While a March cut is not predicted at this point, a cut in May is now close to a 50% probability (versus 25% 1 week ago). Stocks that have outperformed the most recently (like the Magnificent Seven, technology, and momentum) are amongst those leading the declines. Small caps are also falling due to the perceived impact from tariffs.

Marker Reaction

Treasuries rallied again Tuesday March 4, as the policy-sensitive 2-year yield fell below 3.90%, its lowest since October 4. Meanwhile the 10-year touched 4.10%, its lowest since October 21. Going into the March 4 market day, Treasuries have outperformed stocks since the November 6 election, with Bloomberg's U.S. Treasury total return index up 2.1% since November 6, outpacing S&P 500 gain of 1.6%. The CBOE VIX index, which measures equity volatility, has spiked to ~25. This is its highest level since last December, which indicates heightened investor uncertainty.

Investment Management Team Observations & Perspectives

Most economists surveyed believe that tariffs will negatively impact gross domestic product (GDP). The Atlanta Fed's latest GDPNow update shows 2.8% contraction for Q1, cutting real personal consumption expenditures (PCE) and real private fixed investment outlook from 1.3% and 3.5% to 0.0% and 0.1%, respectively. In the near term, tariffs will likely increase prices to consumers. Piper Sandler estimates a roughly 1% increase, which will have outsized impact to small businesses and low-to-middle income consumers. The long-term implications to inflation remain unclear. If tariffs are kept in place and reciprocal tariffs implemented, odds of a recession increase, putting downward pressure on pricing.

The odds of Fed easing have increased. At the beginning of 2025, futures markets priced in around one and a half fed funds rate cuts by year-end. Today, markets are pricing in around three and a half rate cuts by year end, bringing the fed funds rate from ~4.25% today to ~3.5%.

Capital markets can shift rapidly in response to changes to fiscal policy. The implementation of tariffs has increased the likelihood of an economic slowdown, necessitating more accommodative monetary policy.

Final Thoughts

Sweeping tariffs on China, Canada, Mexico, and Europe could have significant economic and market implications. Sectors such as automobiles, apparel, technology, consumer goods, and agriculture (amongst others) could be some of the most exposed industries. The potential of a prolonged trade war increases the probability of recession, particularly for Canada and Europe.

The current environment is similar to 2018, when President Trump imposed new tariffs during his first term. That year, the S&P 500 experienced multiple market corrections, including a ~12% pullback in January/February and a ~20% decline in Q4. If the trade war rhetoric continues in the coming weeks, we could be in store for more volatility as the cloud of uncertainty prevails.

This serves as yet another reminder of why we diversify risk factors, as we employ a systematic approach to achieve long-term investment objectives. Even in strong years, intra-year double-digit percentage losses are more common than not, so we construct our portfolios to be resilient while tactfully positioning for mispriced opportunities.

2025-6948

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February 2025 Market Commentary

wegmigrate — Thu, 06 Feb 2025 06:00:00 +0000

February 2025 Market Commentary wegmigrate Thu, 02/06/2025 - 00:00

For the period January 1 – January 31, 2025

Executive Summary

Despite splashy headlines, equity markets again hit an all-time high in January and finished the month with positive returns. Looking ahead, markets now face a fluid backdrop, where new uncertainties introduce added complexity and volatility.

What Piqued our Interest

As we look back on January, it feels like the market has maneuvered a year’s worth of news in the span of 31 days. Although investors expected a higher degree of uncertainty related to the start of the second Trump administration, many were caught off guard by the emergence and rapid rise of a new AI platform out of China, as well as the potential tariffs on allies such as Canada and Mexico. However, it is noteworthy that despite the headlines, the S&P 500 Index hit another new all-time high, and most markets saw positive returns for the month.

One of the most powerful themes in the market for the last few years has been the promise and power of artificial intelligence. The new Trump administration even announced project Stargate, a proposal where the U.S. government would spend up to $500 billion on AI infrastructure for AI model development and deployment. However, just a few days later, equity markets were rattled by the emergence of DeepSeek, an AI company out of China. DeepSeek touted its cost efficiency in creating its app, causing investors to question the capital spending trajectory needed to build out AI. Over the last 18 months, major U.S. tech companies have increased their capital spending budgets to buy the necessary chips and build out the data centers needed to support the computing power for AI and keep the U.S. in pole position. With DeepSeek’s claim that they were able to build their chatbot with a fraction of the cost that it took OpenAI to create ChatGPT, investors wondered if they had overestimated the demand for AI hardware.

All of this came alongside a less surprising pause from the Fed, which had telegraphed its stance at its December meeting and reiterated that they were not in a hurry to cut rates, despite the fact that they believe that current interest rate policy is “meaningfully restrictive.” Markets took this pause in stride as the Fed indicated that the current pause in rate policy did not mean that they were done cutting. Fed Chair Jerome Powell also noted at his press conference that they are “very much in the mode of waiting to see what policies are enacted” by the new administration. Timing for the next rate cut remains uncertain, but the fact remains that the next action is still likely a cut to interest rates, which would be beneficial for both the economy and equity markets.

The Fed’s stance was justified as the U.S. economy continues to grow, posting fourth quarter 2024 GDP growth of 2.3%. Inflation is still a bit of a concern as we saw core CPI and core PCE readings hover near 3%. Additionally, the Trump administration announced plans to impose tariffs on Canada, Mexico, and China on February 1, but as of February 3, the planned tariffs on Canada and Mexico have been temporarily put on hold. These tariffs may introduce upward pressure on inflation and moderate global economic growth, adding additional uncertainty to an already noisy market.

Market Recap

Equity indices bounced back from the December pullback with solid returns. For the month, Growth indices and the Tech-heavy Nasdaq took a backseat to U.S. Large Cap Value and Developed International stocks. However, as noted earlier, the positive returns in January mask the day-to-day volatility we experienced in markets. Turning our focus to longer time periods, we can see that a global index like the MSCI All Country World Index has annualized at 8.4% over three years, with U.S. equities contributing most to those returns.

In fixed income, bonds were a beneficiary of increased equity market volatility. The Bloomberg Barclays U.S. Aggregate Bond Index posted positive returns as yields declined from their December highs. Another positive sign for markets was the positive performance out of high-yield corporate bonds, with the index up 1.4% for the month. Commodities and REITs also posted positive returns in January.

Closing Thoughts

With a new year comes a new market backdrop, highlighting potential risks. Even though we continue to expect another year of moderate economic growth, disruptions, both expected and unexpected, will occur. The recent developments of potential tariffs are somewhat concerning and will continue to garner headlines in the weeks to come.

Regardless of how this plays out, it’s important to make informed decisions as new information can be aggregated and evaluated. At this time, we do not believe the impact of new tariffs will be a catalyst for a marked deterioration to the current economic situation, but we will closely monitor how these policies affect key leading indicators for short-, medium-, and longer-term trends. If a trade war does escalate, there could be negative impacts to both the economy and financial markets. Even so, having a solid financial plan that aligns with your goals can help investors weather the volatility in any market environment.

2025-6635

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5 minutes

Ayako Yoshioka

What Is Compound Interest?

wegmigrate — Mon, 03 Feb 2025 06:00:00 +0000

What Is Compound Interest? wegmigrate Mon, 02/03/2025 - 00:00

Every investor is unique, which is why a good financial planner will help you tailor your investment strategy to your personal goals. However, there is one principle of investment that applies universally: the power of compound interest to help you build wealth over time.

Often described as “interest on interest”, compound interest plays a critical role in growing your investment returns or increasing your debt. To make sure you get compound interest working in your favor, it’s important to understand how compound interest works, how it is calculated, and how you can take advantage of its power to enhance your financial potential.

If you’re looking to make more informed saving, investing, borrowing, and spending decisions, you can also use our compound interest calculator to jumpstart your financial planning.

Simplify your calculations with our compound interest calculator

What Is Compound Interest?

Compound interest is interest applied to both the principal balance of an investment (or loan) and the interest already accrued on that principal balance. Unlike simple interest, which accrues only on your original principal balance, compound interest applies to your ongoing investment earnings. This creates a snowball effect, where interest is continuously earned on an ever-growing balance to accelerate the growth of your money over time.

To understand the difference between simple and compound interest, consider this example. Let’s say you invest $5,000 at an annual interest rate of 5% compounded yearly. In this case, you will earn $250 interest in year one. The following year, however, you earn 5% on both the initial $5,000 and on the $250 interest, resulting in greater overall returns which expand exponentially with each passing year.

In contrast, simple interest applies a flat rate to the principal amount without considering any accumulated interest. As a result, your annual earnings will cap out at $250 per year. Here’s what it might look like in practice:

How Is Compound Interest Calculated?

While simple in theory, calculating compound interest is somewhat more complex. Several different formulas exist but the most common one looks like this:

A = P (1 + r/n)nt

Where:

A = The total amount you will have earned (or will owe) at the end of the period
P = The principal amount
r = The annual interest rate, expressed as a decimal
n = The number of times interest compounds each year
t = The amount of time over which the money grows, in years

Prefer not to use pen and paper? Use our compound interest calculator.

Another useful tool for estimating compound interest is the Rule of 72. Under this rule, you would divide 72 by the annual interest rate to find out how long it will take for your investment to double. Using the example above, if you divide the 5% return on your $5,000 investment by 72, you see it would take roughly 14.4 years to double.

The Impact of Compounding Frequencies

As the formula above shows, you need several variables to properly calculate compound interest. One of the most critical is the frequency at which interest is earned.

Interest can compound on various schedules, such as daily, monthly, quarterly, or annually. The more frequent the compounding, the greater the total interest earned. Let’s revisit the earlier example but include different compounding frequencies in the mix.

After one year, an investment of $5,000 at a 5% interest rate would yield:

$5,250 if interest compounds annually
$5,255 if interest compounds monthly
$5,556 if interest compounds daily

While the differences may seem minor over a year, they become significant over longer periods. For instance, if this same investment were left to grow for 30 years, you would have $21,609 with annual compounding versus $22,406 with daily compounding.

Compound Interest in Financial Planning

It’s worth mentioning that all the calculations so far track the growth of an initial investment only, without considering the impact of making ongoing investments. Not surprisingly, regular contributions further amplify the power of compounding by boosting your principal balance. Even modest consistent investments can grow substantially over time, enabling you to build long-term wealth and mitigate the impact of inflation.

This underscores the role that compound interest can play as part of your financial planning strategy. By investing regularly in retirement accounts, such as 401(k) plans or individual retirement accounts (IRAs), you can potentially reap the benefits of compound interest over decades, enhancing your ability to maintain your lifestyle into your retirement years.

Another way to maximize compound interest is to start saving early. Setting aside even small amounts every month can result in significantly higher savings over the course of years. For instance, if you save $100 per month starting at age 25 with a 5% annual return compounded monthly, you will have accumulated roughly $153,975 by age 65. At the end of that time, your principal investment will have been only $48,000.

Conversely, if you try to catch up by investing $350 per month starting at age 45 with the same 5% annual return compounded monthly, you will only have $145,410 at age 65, despite having invested a principal amount of $84,000.

By investing early and often, you can harness the power of compound interest to effectively turn your investments into a passive stream of income over the long term.

Keep in mind, however, that the same logic applies to debt. If you owe high-interest loans or are carrying a credit card balance, the power of compound interest would work against you, increasing the amount of interest you owe over time.

The Bottom Line

Compound interest is a cornerstone of wealth building and financial security. By understanding how it works and applying it strategically, you can grow your savings, plan for retirement, and reduce your debt burden.

Whether you’re a seasoned investor or just starting out, we can show you how to leverage the power of compound interest to reach your long-term financial goals. Reach out to your financial advisor today to discover how to get compound interest working for you.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

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Joel Callagan

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Investing

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wealth planning

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5 minutes

Joel Callagan

January 2025 Market Commentary

wegmigrate — Mon, 06 Jan 2025 06:00:00 +0000

January 2025 Market Commentary wegmigrate Mon, 01/06/2025 - 00:00

For the period December 1 – December 31, 2024.

Executive Summary

While the Santa Claus rally failed to materialize, the S&P 500 finished the year 23.1% higher, the first back-to-back annual 20%-plus gains since 1998. The outlook for 2025 remains broadly optimistic, but several wildcards could dampen the mood.

What Piqued our Interest

Despite the modest pullback in the final weeks of December, the 4th quarter of 2024 was strong for U.S. equities overall, capping off two second consecutive years of historically significant gains for the major large cap indices. It would have been difficult to best November’s massive post-election rally, so instead, most markets took somewhat of a breather as 2024 came to a close. We now look toward 2025 and what the incoming administration means for the economy as well as both stock and bond markets.

There is a lot of optimism among the universe of sell-side analysts and various financial practitioners. Bank of America’s December Fund Manager Survey reflected a super-bullish tone, based upon further rate cut expectations and a pro-business Trump 2.0 agenda that could include deregulation and tax cuts. The survey indicated that the average cash holding for allocators fell to just 3.9% of assets under management, the lowest since June 2021, showing that portfolio managers are in a “risk-on” mood. It should be noted however that cash levels below 4% can be viewed as a contrarian sell-signal as investors become overly complacent.

Another key takeaway from the survey was the surge in investors’ U.S. bias. U.S. equities have notably outperformed both developed and emerging markets for years, but in December the net percent of asset allocators who indicated they were overweight U.S surged to 36%, the highest level on record (and two standard deviations above the long- term average). In addition to a favorable business environment in the U.S., sentiment on European equities has deteriorated as of late, which, along with continued strength of the U.S. dollar, has created headwinds for international stocks.

Despite the optimism surrounding U.S. stocks, and technology stocks in particular, there are several potential catalysts that could be a source of increased volatility in the new year. The mid-December pullback was initiated by hawkish comments from the Fed following the most recent Federal Open Market Committee meeting, signaling fewer rate cuts in 2025 than previously expected. Persistent inflation (driven by resilient consumer spending, a shortage in housing supply, and years of fiscal excess) still remains well above the Fed’s target and could increase in the year ahead. While too soon to know for sure, the potential for higher tariffs and decreased labor could put upward pressure on prices in the short term.

The threat of a possible resurgence of inflation has the Fed rethinking their plans for rate “normalization” in 2025. Back in September, the Fed’s dot-plot (which graphically depicts the median expectation for rates in the future) called for rate cuts to 3.25%-3.5% by year end. After cutting rates by a quarter percent at each of the last two meetings, the December 2025 dot plot now calls for year-end rates at 3.75%-4.0%, a half percentage point higher than three months ago. Fed futures also show only one 25 basis point cut fully baked in, reflecting the uncertainty that awaits as the new administration’s policy unfolds.

Market Recap

As the chart depicts, most equity indices pulled back in December but still produced solid gains for the year. Bucking the trend last month were both the Nasdaq 100 and Russell 1000 Growth, two indices with notable and significant overlap. For the year, the large cap growth index outperformed its value counterpart by roughly 19% and has averaged nearly 5% higher returns over the past three years. We note that the Russell 2000 (small cap index) took a notable step back last month, after surging in November, but still finished at +11.54% on the year. The blue-chip Dow Jones Industrial Average ended the year at a very respectable +14.99%, but trailed the S&P 500 by just over ten percentage points.

International stocks modestly declined in December to finish off a mostly mediocre year, especially when compared to the results here in the U.S. The MSCI Emerging Markets index finished at +7.5%, roughly double that of the MSCI EAFE (which tracks developed countries), which returned only +3.82%. U.S. dollar strength was a continuous headwind for many international stocks, as the ICE U.S. Dollar index gained about 6% against a basket of major currencies. Finally, it was yet another challenging month for fixed income overall, as the Bloomberg U.S. Aggregate Bond Index finished the year at +1.25% from a total return perspective.

Closing Thoughts

Building upon the fixed income recap, bonds suffered losses in December as the yield curve meaningfully un-inverted, as rates on 1-year bonds all the way out to 30-year increased up as much as 0.40%. While the curve is still inverted out to one year (which correlates with Fed rate cut expectations), yields for maturities that are further out on the curve reflect the market pricing in expected growth, and potentially, higher inflation.

Source: FactSet, as of 1/6/2025

This is meaningful in the sense that the yield curve is now positively sloped for the first time since late 2022, which bodes well for investors looking to ladder their bond portfolios. Higher yields on the longer end of the curve look attractive to investors looking to source income or looking for protection against unanticipated volatility. As many investors know, the yield curve is a very poor tool when it comes to timing the market. And it's worth noting that historically, economic recessions don’t occur when the curve inverts, but rather several months after it un-inverts. This, of course, is not our way of calling for a recession, but rather a timely reminder of why investors should be cautious amongst the abundant optimism prevalent today. Along with many practitioners and economists, we foresee another year of modest but healthy economic expansion, but that doesn’t mean we won’t see a few market disruptions along the way.

2025-6298

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7 minutes

Gary Quinzel

December 2024 Market Commentary

wegmigrate — Sun, 08 Dec 2024 06:00:00 +0000

December 2024 Market Commentary wegmigrate Sun, 12/08/2024 - 00:00

For the period November 1 – November 30, 2024.

Executive Summary

With the US presidential election in the rearview mirror, US equities climbed higher in November and bond yields declined. Risk assets continue to be supported by a positive macroeconomic backdrop, solid earnings growth, and an accommodative Fed.

What Piqued Our Interest

In 2024, markets climbed the wall of worry, which consisted of inflation, elections, central bank action, and market concentration. The decisive US presidential election outcome removed an overhang in markets which has now coincided with favorable seasonality for US equities and other risk assets through year-end.

Investors embraced these “animal spirits,” leaning into the potential for further economic growth despite inflation remaining above the Federal Reserve’s target of 2%. As we approach year-end and look towards 2025, we anticipate changes to fiscal policy which are likely to impact certain areas of the market. On one hand, the new fiscal backdrop could be supportive, as tax cuts and deregulation lead to additional economic activity and above-trend GDP growth. On the other hand, changes to trade policy could keep inflation elevated for longer and increase market volatility as new tariffs are announced. Additionally, the new administration’s focus on government efficiencies and reducing the deficit could lead to tighter fiscal policy, turning fiscal policy into more of a headwind.

The US has experienced exceptionally strong economic growth since the pandemic, and economists expect economic growth to broaden more globally in 2025—supporting global GDP growth near 3%. The US is likely to remain a prominent contributor to this global growth with the help of a healthy labor market, strong credit backdrop, and increased AI-related spending and productivity enhancements. However, for the US economy, increased trade tensions could dent GDP growth as prices increase at a time when inflation remains a significant concern.

From a monetary policy perspective, the Fed will likely continue to err towards recalibrating interest rates lower in 2025. The pace and magnitude of cuts are still up for debate as we look for the Fed to navigate interest rates toward a neutral stance—where the level is high enough to keep inflation at bay but low enough for the economy to continue to grow. As rates come down, mergers and acquisitions activity is also likely to increase and further support earnings growth across the corporate landscape. However, with that economic strength, inflation may reappear as the economy reaccelerates.

Market Recap

In November, the S&P 500 saw its biggest monthly gain of 2024, posting a 5.9% increase for the month, and bringing year-to-date returns close to 30%. Consumer Discretionary stocks posted the best sector returns, up 13.2% for the month. Other pro-cyclical sectors also saw strong performance with the Financial sector boasting the second-best performance (up 10.2%), followed by Industrials, up 7.3%. Real Estate also saw a nice rebound as the MSCI US REIT index increased 4.3% for the month. US Small Caps surged nearly 11% in November, as the election was a larger overhang for smaller businesses. With the removal of this uncertainty investors celebrated, as the potential for lower corporate taxes, deregulation, and increased M&A activity benefits smaller companies the most. Outside the US, stocks declined in November, coinciding with a strengthening US dollar. Emerging Market stocks were hit especially hard, down 3.6% for the month.

Fixed Income markets witnessed a rebound in November as yields declined. The Bloomberg US Aggregate Bond index was up 1% while municipal bonds were up almost 2%. Deficit and inflation concerns drove yields up recently, providing attractive entry points for fixed income investors. Bonds have been on a bit of a roller coaster ride in 2024, as the market navigated expectations for rate cuts alongside stickier inflation. However, bonds are back to being negatively correlated to equity markets (as seen in the chart), which can be beneficial for those who are concerned about high valuations and market concentration within equity markets.

Closing Thoughts

With the economy on solid ground, the overall narrative for markets remains constructive, even as elevated valuations suggest growing investor complacency. Although these good times may continue, outsized risks can appear and create bouts of volatility. Policy changes from the incoming Trump administration may be the market’s current area of focus as potential risks, but geopolitical, inflation, and growth risks have not disappeared. The disparity in stock-bond returns may not be as stark as it has been over the last few years, which may dampen volatility in balanced portfolios as investors navigate markets in 2025. Our focus remains on evaluating the fundamental strength of the economy and markets, monitoring for potential risks, and looking for opportunities that will align with our clients’ long-term financial plans.

2024-6043

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3 minutes

Ayako Yoshioka

Webinar: Markets Monthly – October 2024

wegmigrate — Wed, 30 Oct 2024 05:00:00 +0000

Webinar: Markets Monthly – October 2024 wegmigrate Wed, 10/30/2024 - 00:00

In the October session of our ongoing webinar series, “Markets Monthly: Strategies & Perspectives,” our panel of Roundtable™ specialists, including Jim Cahn, Doug Huber, Gary Quinzel, and Aya Yoshioka, discuss investment market performance in the third quarter, including:

The Fed’s first interest rate cut and what it means
Surging equity performance
Election preview

To learn more about some of the topics discussed, request a meeting today!

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35 minutes

Jim Cahn