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As we move toward the close of 2025, markets continue to confound the skeptics. Earnings remain solid, productivity is improving, and inflation pressures have eased — yet investors are still navigating a backdrop of political noise, global uncertainty, and questions about how much further this cycle can run.
At our recent Market Update event, Cormac Murphy, CFA (Chief Investment Officer) and David Kastner, CFA (Managing Director - Wealth Management & Investment Strategy) shared their outlook for the months ahead. Their message was both optimistic and measured: fundamentals remain healthy, but discipline still matters.
Policy Uncertainty: Down, but Not Gone
David opened by noting that policy uncertainty has fallen sharply from its post-pandemic highs — and that decline has been one of the quiet drivers of market strength this year.
“Uncertainty is still the enemy of good markets,” he said, “but the level of unpredictability we saw in 2020–2023 has normalized. Markets can handle almost anything — they just can’t handle surprise.”
That easing of policy risk has supported both equities and credit markets, even as headlines around tariffs, debt, and elections dominate the news cycle. Cormac added that while political soundbites may swing sentiment short-term, they rarely alter long-term portfolio outcomes.
“We’ll continue to see volatility around election rhetoric, but it’s mostly noise. The real drivers are earnings, productivity, and liquidity.”
Gold, Bitcoin, and the Search for ‘Safe’ Assets
The discussion turned to gold’s recent strength and whether it signals deeper market anxiety. David addressed this head-on.
“Gold isn’t a vote against the dollar — it’s a vote for stability,” he said. “It’s functioning more as a store of value in uncertain times than as a hedge against some kind of sovereign collapse.”
Cormac drew a distinction between that behavior and the rise of Bitcoin:
“Bitcoin is still a speculative risk asset. It trades with growth equities, not against them. There’s no cash flow, no intrinsic value — it’s a momentum trade, not a monetary system.”
That candor resonated with the audience and set the tone for a pragmatic session focused on what actually matters in portfolios.
The AI Rally: Not the Dot-Com Bubble (and Here’s Why)
A common client question this quarter has been whether today’s tech-driven market resembles the late-1990s bubble. David’s answer was clear:
“This isn’t the dot-com era. The big difference is earnings. The top technology names today have real profits, real margins, and real balance sheets. Valuations are elevated, but nowhere near the extremes we saw in 1999.”
Cormac added that while the “Magnificent Seven” companies have dominated headlines, the earnings recovery is now broadening across sectors — a sign of healthier market breadth.
“We’re finally seeing participation outside the mega-caps. Industrials, health care, even parts of Europe are contributing to earnings growth. That’s what a more durable rally looks like.”
Both emphasized that productivity gains are underpinning much of that strength — and that AI, automation, and efficiency are reshaping the economy faster than most realize.
Productivity Gains: Doing More with Less
One of the central themes of the presentation was the surge in productivity — the ability for companies to produce more output with fewer workers.
“When you see corporate profits rising while hiring slows, that’s productivity at work,” David explained. “It’s one of the most encouraging developments we’ve had in years.”
Cormac linked this directly to portfolio positioning:
“It’s not just about who’s building AI models — it’s who’s selling the chips, providing the infrastructure, and using these tools to operate leaner. That’s where we see opportunity.”
In other words, Adams Wealth isn’t chasing the trend; it’s investing in the “picks and shovels” — the foundational technologies supporting the broader digital transformation.
Portfolio Positioning: Participate, Don’t Chase
Cormac outlined how the firm is currently balancing participation in market upside with a focus on risk control.
Key themes in portfolio construction:
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Technology and Defense: Core allocations in sectors benefiting from global digitization and re-armament trends.
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International Opportunities: Increased exposure to regions like Vietnam and South Korea, which are gaining from supply-chain diversification and trade realignment.
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Fixed Income: High-quality bonds yielding around 6–7% remain an attractive defensive anchor.
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Collateralized Loan Obligations (CLOs): Select positions offering strong risk-adjusted returns and historically resilient credit performance.
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Avoiding Private Credit: “It’s one of the frothiest areas of the market,” Cormac noted. “We’d rather earn similar yields in structures with better transparency and liquidity.”
“The goal,” he summarized, “is to participate in growth without overpaying for it — to be in the game, but not overexposed.”
Q&A: Real Questions, Real Conversations
Clients raised thoughtful questions about everything from election outcomes to the cost of living. David and Cormac answered each with clarity and data rather than prediction.
On tariffs:
“Tariffs are essentially taxes. They’re not pro-growth — they’re a short-term policy lever that often raises costs more than it protects industries.”
On national debt:
“It’s a structural headwind, not an immediate crisis. The U.S. still benefits from reserve-currency status and global demand for Treasurys. Long-term, it limits flexibility — but it’s not tomorrow’s problem.”
On cost of living:
“Inflation has cooled on paper, but groceries and everyday costs are still biting. That disconnect between data and experience is real — and we acknowledge it in every plan conversation.”
That last point drew nods around the room — a reminder that personal finance is lived in households, not in spreadsheets.
Looking Ahead: Cautious Optimism for 2026
As the discussion closed, both speakers circled back to the bigger picture: a market supported by fundamentals but likely to face renewed volatility.
“We don’t build portfolios for a headline,” Cormac said. “We build them for cycles. And right now, the cycle still supports growth — with room for defense.”
David agreed, noting that even as the Federal Reserve remains cautious, the broader setup looks constructive:
“We expect moderate inflation progress, continued earnings strength, and policy that gradually becomes less restrictive. It’s not a boom, but it’s not a bust either.”
In Case You Missed It
If you couldn’t attend the session, and you want to watch the full recording, please email us today!
Our next Market Update will be held in early 2026 — and we’d love to see you there. These sessions are open to clients and guests who want to stay informed about what’s happening in the markets and how we’re navigating it together. To be added to the invite list, please contact our office.
