“AI, AI, AI” – Keeping the Market Resilient
As we enter the final quarter of 2025, markets continue to be remarkably resilient, navigating global tensions in the middle east, shifting monetary policy, and the beloved overused term “uncertainty”.
The third quarter set a strong recovery with the S&P 500 Index delivering a solid return of 8.1% for the period. This shows that timing the market for short term themes, like tariffs is challenging to do. Technology and Communication Services were the primary engines, climbing over 12% each, as the sole theme of the market is still “AI, AI, AI”.
Heading into the Q3 earnings season, analysts changed their tone and raised earnings estimates. Forecasts projected an 8.0% year-over-year earnings growth rate for the S&P 500, marking the ninth consecutive quarter of expansion. Information Technology is expected to lead with over 20% earnings growth, reinforcing the AI theme is all encompassing.
Monetary policy provided support to the market as the Federal Reserve delivered its first 25-basis-point rate cut in September. They were responding to signs of a cooling labor market, which helped ease financial conditions and supported market valuations. Looking ahead, the market predicts a 96% chance of a rate cut in October and a 95% chance of rate cut in December, per the CME Group, which should continue to stabilize borrowing costs. Granted when there is this much confidence in a cut, it could lead to disappointment. If this comes to fruition, the accommodative stance, combined with strong corporate fundaments and lower energy prices, can help the markets’ ability to absorb negative surprises.
With all those positive headwinds, we don’t discount the concerns of valuations, softer labor markets and slower consumer demand as inflation is impacting everyday spending. It’s the reason we continue to stay growth oriented with long term investments, protect near term dollars with cash and CDs and revisit the allocations on a regular basis.
Not All Assets Are Created Equal: Why Tax Discounts Matter in Divorce Settlements
When dividing assets during a divorce, it’s important to recognize that equal dollar values don’t always mean equal value. For example, a $500,000 home, a $500,000 investment account, and a $500,000 retirement 401(k) plan may appear equivalent—but they carry very different tax implications.
This is where a Tax Discount can play a crucial role.
A Tax Discount is an adjustment made to account for the future tax liability embedded in certain assets. It helps ensure a more equitable division by recognizing that some assets will be taxed upon withdrawal or sale, while others may not.
Before finalizing any settlement, consider discussing Tax Discounts with your attorney to help level the playing field and avoid unintended financial consequences.
If you’d like to learn more about how Tax Discounts can impact your settlement strategy, please reach out to Ashley Brown who holds a CDFA - Certified Divorce Financial Analyst, she is happy to help!
Tax Strategies to Implement before Year End
- Following back-to-back strong years in the market, it will be challenging to find a lot of investments at a loss, however if you have them, selling them can improve your tax situation. Stocks at a loss can be sold to offset stock you have sold at a gain. In addition, if you end up realizing more losses than gains, up to $3,000 worth of long-term losses can be used to offset your income. Any unused losses can be carried forward into future years to offset future gains or income.
- Charitable gifts may be completed before December 31st! So don’t wait until Christmas to make that stock donation or issue your checks to your favorite charities.
- Qualified Charitable Distributions are available for those over 70 ½ and have pre-tax IRA assets. This is where you issue a check directly from your pre-tax IRA paid directly to a charity and the distribution will not be taxable to you. If you are at the age of RMDs these charitable distributions can count against your RMD.
The BVB Group is Back
This Summer our team spent a considerable amount of time being nomadic as our office space was going under a long overdue remodel. The remodel forced our team to work remotely nearly all summer, and we are happy to report that the new space (for our offices) is complete.
While the bigger office space won’t be completed until year end, we have a new conference center space with state-of-the-art technology, multi-use office space and a nice little welcome beverage center for our in-person meetings.
We look forward to welcoming you to our new space at our next in-person meetings.
*The information offered is provided to you for informational purposes only. Past performance is not indicative of future results and diversification does not ensure a profit or protect against loss. All investments carry some level of risk, including loss of principal. An investment cannot be made directly in an index. Robert W. Baird & Co. Incorporated is not a legal or tax services provider and you are strongly encouraged to seek the advice of the appropriate professional advisors before taking any action. VK2025-1022