Before I get started, I wanted to add my line from our September CIO report since I feel we are getting so close to a normal market cycle correction and/or a buying opportunity.

So, What Do We Do Now?
Even with this broader market participation, it’s wise to take a balanced approach.

• For those fully invested: consider trimming positions where appropriate, especially if in a retirement plan to avoid capital gains. Realizing gains in 2025 might prepare you better for opportunities in 2026 and beyond as you have funds to add to any asset class that may be on sale not just stocks.
• For those with high cash positions: we’re happy to help you reallocate strategically. With markets near all-time highs, we prefer using below-market limit orders to buy quality names and sectors at better value.  The focus would be in industry groups or international markets you may be underweight in.
• For retirement accounts: You have the flexibility to adjust risk without worrying about tax consequences—take advantage of it.

What I want investors to try and do now is to be disciplined.  If a 10 to 20% drawdown in stocks is going to keep you up at night or change your long-term financial planning goals, then lower risk now.  Do not wait until after the market is dropping since that is a compounding effect as institutions and individual investors have a history of selling into weakness after the fact.  We have been very tax sensitive in our portfolios this year. Taking some gains in taxable accounts may be the right thing to do for some investors. If not, making a capital gains budget for 2026 can be a good strategy.  The best idea is to wait until January and prolong the capital gain tax for another 16 months but, calling the market short term is near impossible.

Plan on how to handle a down year or two in the markets.  We just had 3 nice years in a row so having a down year or two in a row would not be unheard of.   Most of you know I have been tired of hearing about the MAG 7 and their dominant performance on the S&P 500, well now just replace that term with AI.  Artificial Intelligence is part of all our futures but the incredible capital commitment from the top 10 companies is worth watching.  Plus, now they are raising money through debt to fund this investment so their balance sheets will not be as strong. AI hyperscalers have issued nearly $90 billion of investment-grade bonds according to Dealogic. Some are saying the U.S Economy has become hooked on AI Spending.

Don’t get me wrong, AI will be great for many industries not just tech, but getting there it can get over its skis in a hurry, so be patient.  Use fundamentals when investing and do not follow the herds.  If you think power companies will benefit from all the energy AI companies and data centers will need then do the research.  Would I buy that company on fundaments, good management, cash flow, and history of performance?  That is what we are doing every day for your portfolios.

If the market rally continues in 2026 you have quality companies that will continue to grow. If the market corrects and the economic cycle ends, you will have cash to deploy in other asset classes or stocks at better values.

2026 will be the second consecutive year of rate cuts.  Historically in the second year there is some outperformance:

• Financials up 23.1%
• S&P Midcap  up 18%
• Healthcare up 14%

The research firm, CFRA has 3 overweighted sectors for 2026

• Communication Services- Ongoing shift to digital ad spend, 2026 events: Winter Olympics, mid-term elections, World Cup, AI monetization.
• Financials- Lower rates continuing through 2026; Improving credit quality; Expected M&A turnaround; Declining credit spreads.
• Information Technology- Compelling valuations, strong EPS growth improving CapEx visibility, plus beneficiary of lower rates and rising M&A

I do think healthcare and value stocks will be important in 2026.  Energy valuations are good, and dividends are high but will need some catalyst to drive returns so will need some patience.  If the AI machine continues to rule, then industrials could have another excellent year.

Cash rates are going to be lower.  Money market funds were getting near 5% in 2025 and around 4% most of the year, now they are in the mid 3% range.  Rates may go lower.  One strategy would be CDs and Treasuries.  If rates do fall, the value of bonds and treasuries will rise.

A recession is looking a little more unlikely than earlier in the year.  Indicators look to slight economic slowdown but no recession with first Q GDP and maturity of 2026 in the 2.2% range.

Putting my CFP hat on please reach out if you have any year-end tax questions.  One thing I do want to point out is charitable giving and less favorable rules for 2026.  Deductions will be subject to .05% of AGI if you itemize so check with your CPA on bunching multiple donations this year then spread out those donations in future years.  Donor Advised Funds are a good option here but check with your tax professional.

One last thought on AI is that Open AI’s ChatGPT is still the most popular with 800 million users per week, compared to Gemini’s 650 million monthly users but Gemini 3’s advances last week may change things.  And as far as shareholder participation, if you are reading this you either own Alphabet/Google directly or indirectly in your retirement plans and the stock performance year to date and last week is supporting this leadership position.   Open AI is not a publicly traded company the same as Anthropic.

To quote Salesforce CEO Marc Benioff  “I’ve used ChatGPT every day for 3 years and just spend 2 hours on Gemini 3.  I’m not going back. The leap is insane- reasoning, speed, images, video…everything is sharper and faster.  It feels like the world just changed, again.”

Wishing you a lovely Thanksgiving week and a joyous holiday season!

Bill

After a very tough first quarter and brutal start to April, the markets have recovered and at some levels are near all-time highs.  The S&P 500 bounce back in the second quarter still only brought it to a plus 5.2% gain.  Lagging the rest of the world by over 10 percentage points. 

Much of the performance in the S&P 500 is weighted to the Magnificent 7 stocks. We have been encouraging investors to diversify some to the other 493 companies and international markets to find more opportunities.  

Year to date US stocks were up about 6%, developed markets Ex-U.S. were up 19%.   Bonds had a good first half with investment grade corporates up 4.2%.  The top performing sector was Industrials +12.5% with Consumer Discretionary bringing up the rear performing at -4%.

My thinking on the second half is very much the same as the beginning of 2025.  Caution.  Raise some cash, trim larger concentrated positions, then use that cash during market disruptions or corrections to add new companies to your portfolio.  Early April was one of those situations.

There are 9 Key tax law changes for individuals to make note of.  Please see the article from the CST Group of CPAs for some changes coming in 2026 and beyond.

I thought my counterpart CIO, Kara Murphy with our friends at Kestra had a nice summary of what happened in the first half of 2025 in the markets. From Bear Scare to Record Highs – A Resilient Q2 Recap.

All the best for your summer.

Did the rally of about 20% off the early April bottom give us a second chance to reduce risk if we did not early in 2025?  In early April, about 2/3 of the S&P 500 were down 20% or more from their highs in bear market territory.  The entire market has entered a bear market about every 6 years for the last 150 years.

Two things come to mind when seeing these violent swings in the markets with policy, recession, economic uncertainty.   One, we now see how quicky markets can turn both up and down, so we should be more prepared for the rest of 2025. I think we will see a few more of these dramatic swings over the next 6 plus months. Secondly, it gives us a second change to rebalance portfolios at market levels that are basically even for 2025 vs down 10, 15 or 20%.  So, if you knew the market was going to fall a certain percentage this year or next what can you do now.

Getting back to my recurring theme over the last 12 months it would be for investors and the market itself rely less on the Magnificent 7 for returns.  In 2023 and 2024 the S&P 500 was about 25% in each of those years.  So, a normal cycle of consolidation is quite normal and can last a year or two so best to be prepared in case that does happen.  I am always suggesting trimming winners and concentrated holdings in retirement plans first for tax reasons, but this year may be the time we are ok trimming winners in taxable accounts.  For the Mag 7 earnings growth over the next 12 is expected to be about 8% vs about 9% for the other 493 companies according to Rich Bernstein of Bernstein Advisors LLC.

If your top 3 or 4 holdings account for 20% of more of your total portfolio that is quite top heavy as so many noticed in early April. Say your top holdings is up 600% since you bought several years ago.  Selling some and paying 20% or 23.8% capital gains may make sense.  Especially if you see that company drop 20-40% in a year and then you wish you would have.

I am constantly doing these things in the portfolios I manage for you but want you to know my thoughts on this market and that I am more cautious then bullish the rest of 2025.  

For the major asset classes I would categorize them as:

Stocks – Bullish- especially for long term investors- 5 years or more.  Build your lists of companies or industry groups you do not own then buy them on market pullbacks.  Trim your largest or concentrated holdings and hold that in cash to use for purchases later.

Bonds –Neutral- The Fed is and plans to lower rates.  The bond market has its own idea and yields have been moving up.   The I Shares Core US Bond Index ETF is up .29% this year and current yield about 3.8%.

Cash – I would say positive but not bullish.  Positive in that 3.5% to 4% range for money market funds today is not more than inflation so you are losing purchasing power on your cash, but it is something positive and gives you cash to buy stocks or bonds if the values improve.

The GLD or Gold index is up 23% year to date about the same as the 23.5% gain for the SPDR Euro Stox 50 index.  Most of your international and European investments should be having a good year so far.

We do utilize IBIT (iShares Bitcoin ETF) and ETHA (iShares Ethereum ETF) in some portfolios. I prefer to trade them vs long term holds of an asset class without a long-term track record.

I do want to thank everyone for their continued support of Campus Private Wealth.  I think our model buildout is several months ahead of schedule.   Our statements are transparent and have excellent detail (especially retirement plans).  Our trading and research partners I have selected so far have been excellent and we are finding good companies that many firms do not even cover that are doing extremely well.   The one last piece we are perfecting is performance reporting.  We have very high standards so are finalizing an excellent model with industry leader Black Diamond. Expect those reports to be available at your next meeting or Zoom.  On the financial planning side, we are fully operational and even rolling out a planning model for family or emerging investors who may not have enough assets to qualify for a wealth management relationship, but it important to start planning now.

Thanks to many of you we have received more referrals and introductions in our first 6 months than I did in my last 15 years at my previous firm.  Our success and growth allow us to expand the services and model that you design.

If you made it this far congratulations and thank you since I just get on a roll sometimes. 😊

As many of you have heard me say over the last many years, it is best to view stocks and risk in advance before things happen.  So, each year or at any point in time you take all your stock market assets in 401k, at CPW, or any other provider and add up that value.  Then you multiply by .8 and that is what a 20% correction feels like.  It will not feel good just like it does not feel-good today.  Then you say would I panic, change my financial plan, or sell after the fall and sell at the bottom?  If the answer is no, then you look at the last number of 5.  If you hold those same companies and asset allocation for 5 years market returns tend to return to the mean.  

So, while it is too late to take risk off in advance, it is time to focus on the notion that you do not need the funds in the next 5 years. This is just a temporary disruption and owning quality companies over the long term have been one of the best returning assets over the last 100 years.  I expect that to continue.

Surviving a correction or market disruption is ok.  Rebalancing or taking capital gains after the fact usually doubles the pain come tax season.   Most of you are sitting on very large capital gains of quality companies you have owned for many years.  Those companies and their management teams have survived and thrived in 2008 financial crisis, Covid, 2022 when the Nasdaq was down 32% and much worse drawdowns than this current Tariff threat environment.  So, selling, rebalancing, or changing risk profile especially in taxable accounts is something I would be very wary of.  If you must reduce risk after the correction you, do it in your retirement accounts to prevent capital gains.  We are constantly reviewing and adjusting your asset allocation based on your goal, risk and sensitivity to taxes.

My last line in January was “Cash is not quite King but still a nice place to park some assets at around 4% yield down from 5% last fall.”   Most of you know my philosophy on cash is I tend to hold more of it in portfolios than most and more of an allocation to bonds almost 100% of the time.  Cash is for today and yesterday.  You can buy additional quality companies at much better valuations.  Use the cash for helping a family member or home project. Or just continue to collect that 3.5% to 4% interest with daily liquidity.   Cash not only cushions the blow, but it is also the key to have a great recovery year following a disruption by adding some risk assets at good prices.

As I have been saying in most of my pieces in the last 9 months the Magnificent 7 were due for a correction and it had to happen to get valuations in the market more to match earnings and the economic environment.  The Mag 7 is down 25% year to date. Technology has speeded up market corrections the last few times and that may be a good thing.  Covid was extreme and about 1/3 of the market disappeared in 40 days in 2020 to recover by the year end to positive 16% so that is an important thought to consider as this market continues to correct.

Just recently in 2022 the S&P 500 was down over 19%, followed by up years of 24% in 2023 and 23% last year (I know that feels like a long time ago).

What should you do now?

• Take a deep breath and know you own quality companies not the stock market.
• As recently as 2022 it was much worse, and you and your financial plan survived and thrived the following years.
• With excellent returns in 2023 and 2024, even with this difficult quarter and start to the year, your 27-month return would probably surprise you.
• We recommend we run your financial plan and look at results over the next 10 to 20 years.  We are doing that now and the majority of results show you are still on track.
• Look at other parts of your financial plan besides stocks and the market.  Cash returns at banks still near zero.  They should be 3.6% or more.  Estate planning documents, trusts and wills – Update those now.  The majority of estate planning professionals that I have been speaking with do not expect many rule changes this year but your family dynamic does change each year so important to do a review with your CFP and attorney.
• Review your cash flow portion of your client review documents.  Note the dividends and interest your portfolio still kicks off each month and quarter.  Consider reinvestment of dividends to capture some additional shares at lower prices.

Starting next week will be post tax season and want to start setting up in person meetings, Zooms and getting your financial planning goals and details up to date.  So please reach out with any questions and we look forward to getting together soon.

Until the last 24 hours I was the only one I can remember that mentioned recession this year as I did in my January 31 piece I wrote. (attached)  I will get to that in a moment.

When you have a violent selloff in the markets like we have had in the last 35 days it is best in my opinion to first put it in perspective on the big picture as it relates to your financial plan.  Look at your starting balance in January 2023 until close of business today.  That 26 months and 4-day return may be your best ever. 

Unlike so many CIOs and talking heads in the markets I always try to end my pieces with some action steps as I did in January.  Hope is not a strategy.

So, what to do now and is politics or market cycles going to lead the day?  Presidential politics have historically not been disruptive in the long term but as we are learning today can be quite disruptive on the short term.  Getting back to what I wrote after the election and again in January it the market risks that matter the most.  Valuations are still very high, so earnings must be perfect for the bull market to continue.  (see attached Tariff and market piece from our friends at Kestra Investment Management).

While these tariffs are very inflationary what is not inflationary is job loss, investor and economic confidence declines and a weakening housing market. While a recession may or may not be in the works, even the discussion of one can bring down prices.

While it may feel to some the markets are really selling off, in 2022 the first half of the year the S&P 500 was down 21% and ended the year down 19%.   As of today, the S&P 500 is down about 2.5% this year so far and the Nasdaq is down about 6%.

From a strategy perspective my desire to hold cash the last half of 2024 until now has been cautionary and for those wanting to add quality companies to your portfolios this has been the best entry point in quite some time.

Please call with any question and know we are on this and focused 100% of the time.