2025 Market Comments

“We would all be better investors if we just made fewer decisions.”

-Daniel Kahneman, Behavioral Economist (1934-2024)

We are happy to report another successful year in our plan for the pursuit of your most cherished financial goals. Our plan, and therefore your portfolio, continues to be driven by these goals, rather than by any prognostication around the economy or the markets. That will always be the case, throughout the coming year, and beyond.

We’ll start by restating some of the core beliefs that guide our planning and investment approach and then offer a few comments about the economic/financial backdrop.

General Principles:

• We are long-term, goal-focused, plan-driven investors. Our core investment policy is to pursue your goals by investing in broadly diversified portfolios of quality securities.
• We believe that the economy cannot be consistently forecast, nor the markets consistently timed. Moreover, we find no predictable pattern in how markets react or choose to ignore—economic developments.
• We conclude from these beliefs that the only way to be reasonably confident of capturing the full premium return of equities is to ride out their frequent, sometimes significant, but historically always temporary declines.
• We do not react to, much less try to anticipate, economic and/or market events. As long as your long-term goals remain unchanged, so will our plan for their achievement. And as long as our plan remains constant, so (except for annual rebalancing) will your portfolio.
• We believe that long-term compounding of quality equities is the most important force guiding us toward the achievement of your goals. And we're obedient to the late Charlie Munger's dictum, “The first law of compounding is to never interrupt it unnecessarily.”

Current Commentary:

• In 2025, the broad equity market completed its third straight year of double-digit returns, driven by a strong economy and significantly increased corporate earnings. The S&P 500 ended the year up 17.8%.
• The consensus of analysts' forecasts is for even stronger earnings gains approaching 15% in each of 2026 and 2027 (source: Yardeni Research).
• Somewhat remarkably, profit margins have continued to expand—to 13.1% in the third quarter of 2025, the highest in 15 years (source FactSet). One would have thought that inflation in companies' costs colliding with a straitened consumer's resistance to price increases would have been a significant headwind here. So far, at least, one would have been quite wrong.
• The single important weak spot has been the employment picture, which has continued to soften. But even this has a significant bright side: strong economic growth and a flattish employment situation mean that per capita productivity has been rising strongly. Unemployment may have recently ticked up to 4.7%, but the other 95%-plus of the workforce is producing significantly increased products/services per hour, allowing companies to raise wages without triggering inflation.
• After six straight rate cuts, Federal Reserve monetary policy is 175 basis points (1.75%) looser than it was a year ago, even with sticky CPI inflation still pushing three percent. It seems more than reasonable to expect the lagged effects of all this easing to begin to show up in 2026.
• The middle class in particular is set to enjoy tax refunds this filing season, which have been variously estimated at around $150 billion, or a half a percentage point bump in GDP. The main engines of this are a higher standard deduction and (especially) a temporary restoration of the SALT tax deduction cap to $40,000 from $10,000. This appears to be a potentially meaningful near-term economic tailwind.
• It would not surprise us in the least if much or most of the above salutary data come as news to you—except, of course, the part about the softening labor market, which journalism has trumpeted to the skies. In our opinion, there's good information in this for us. To wit, the economic/financial “news” we receive tends to skew overwhelmingly negative, by conscious design.
• The fact remains that a very strongly rising equity market may (and indeed should) have taken these data into account—and maybe then some. Thus, the burning question all year long was “Are we in an AI bubble?” This replaced the previous year's burning question, “When and by how much will the Fed cut rates?” Which in turn replaced 2023's “Will there be a recession?”
• There was no recession, but that's beside the point. Which is that the universal burning question is usually, if not always, the wrong question,and a distraction to the well-diversified long-term investor—like us.
• There can be no question that the broad equity market is more heavily concentrated in a few huge tech stocks—which can't all be going to win the AI race—than it's ever been in our investing lifetimes. And that this concentration has the Index selling at a price/earnings multiple in the neighborhood of its historic peaks.
• Our response to this is twofold: (a) Valuation is not, never was, and never will be an effective market timing tool. And (b) your imminent portfolio rebalancing will address this issue forcefully.
• All of this suggests to us that the next significant market shock—and there always is one; they come along with almost the frequency of the crosstown bus—will probably come out of deep left field. And like all the shocks past, and all those yet to come, it will have very little to do with us, other than as a potential bargain-hunting exercise.
• We are following a plan that has “worked” in the very long run, in that it has ultimately achieved the goals of investors like us. We do not accept that “this time is different,” regardless of what “this” may be at any given moment. Thus, we don't adjust our strategy to accommodate the fads or fears of the moment. We don't go to cash during market panics, and we don't bet the ranch on “new era” miracles…like AI.

We wish all our friends and clients—because to us they're the same thing—a healthy, happy, and prosperous 2026. We're always here to address your questions and concerns. Thank you for being our clients. It is a privilege to serve you.

Thank you for the trust and confidence you have placed in us and for giving us the opportunity to provide education to you on your financial journey.

As always, thank you for the introductions to your friends and family that many of you have made. We are honored to serve you! As a service to our clients, we are happy to act as a sounding board for your friends and family. If any of them should need a second opinion on their financial situation, introduce them to www.striblingwhalen.com or call us at 678-989-0048.

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Regards,

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Brian Whalen and Warren Stribling and not necessarily those of Raymond James. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members. Raymond James Financial Services, Inc. does not provide advice on tax or legal issues. These matters should be discussed with the appropriate professional.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment Advisory services offered through Raymond James Financial Services Advisors, Inc. Stribling~Whalen Financial Group is not a registered broker/dealer and is independent of Raymond James Financial Services, Inc.

The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The NASDAQ Composite is a stock market index of the common stocks and similar securities listed on the NASDAQ stock market. VIX is the Chicago Board Options Exchange (CBOE) Volatility Index, which shows the market's expectation of 30-day volatility. It is constructed using the implied volatilities of a wide range of S&P 500 index options. It is a widely used measure of market risk. The Dow Jones Industrial Average (DJIA), commonly known as "The Dow" is an index representing 30 stock of companies maintained and reviewed by the editors of the Wall Street Journal Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns.

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