Hi there – 

As we enter the final quarter of 2025, I wanted to share some important updates on our investment positioning. The Federal Reserve's recent shift toward easier monetary policy, combined with evolving labor market conditions, has opened up new possibilities that we're positioning portfolios to benefit from.

What's Happening with the Economy

The Federal Reserve cut interest rates by 0.25% after keeping them elevated for an extended period. Chair Powell's recent comments indicate that the Fed is now more focused on supporting employment while acknowledging inflation continues to bear monitoring. While unemployment remains low at 4.3%, job openings have decreased and fewer people are actively participating in the workforce compared to pre-pandemic levels.

This cooling job market gives the Fed room to lower rates without signaling economic trouble. We expect possibly two more cuts before year-end.

Sources: BlackRock, Bloomberg, CME Group, as of 9/12/2025. Bloomberg Economics Federal Reserve Sentiment Natural Language Processing Model Index. Rate cut expectations reflect CME FedWatch probabilities of changes to the Fed rate, as implied by 30-Day Fed Funds futures prices. Photo shows Fed Chair Jerome Powell in Jackson Hole, 2025.

How We're Adjusting Your Portfolios

Adjusting the Strategic Allocation: Although our strategic allocation towards equities is 1% higher than it was previously, due to how well the market has done this year the effective change in portfolios is an approximate 1% reduction in equity exposure.

Favoring U.S. Companies: American companies continue demonstrating much stronger earnings growth than their international counterparts. While U.S. company profits are growing robustly, European company earnings have actually declined this year. This validates our continued preference for domestic investments.

Technology and AI Focus: We're adding exposure to companies building the infrastructure that powers artificial intelligence. The demand for high-performance computing continues to accelerate, creating opportunities for companies across the technology value chain.

Defense and Security: Rising government spending on defense, cybersecurity, and national infrastructure presents investment opportunities we're positioning to capture through targeted allocations.

Fixed Income and Alternatives

Our bond strategy remains flexible as we monitor Fed policy changes. We're adding some convertible bonds in conservative portfolios, which allow participation in stock market gains while providing downside protection.

We're also increasing our existing gold exposure, funded by reducing some bond positions. Gold historically performs well when interest rates fall and can serve as insurance against policy uncertainty and geopolitical tensions.

Why These Changes Make Sense

The gap between U.S. and international markets has become stark. American companies have earned their stock price gains through actual profit growth, while international markets have risen via expanding multiples. This supports our strategy of emphasizing U.S. investments.

Within U.S. stocks, large companies with strong balance sheets continue outperforming. The artificial intelligence boom isn't just hype, it's driving productivity gains, real infrastructure spending, and creating recurring revenue streams for well-positioned companies.

Labor Market Reality Check

Despite headlines about job market weakness, the fundamentals remain relatively healthy. Yes, there are fewer job openings than during the pandemic boom, but unemployment remains low and recession risks appear contained. The job market seems to be normalizing, not collapsing.

This balanced employment picture gives the Federal Reserve flexibility to ease policy without appearing to panic about economic conditions. The following graph shows that job openings and the number of unemployed appear to be in approximate equilibrium which has historically been a healthy level. 

Year-End Positioning

Current conditions may support the market through the end of the year. Easier monetary policy, solid corporate earnings, and continued technological innovation could benefit multiple asset classes.

We're maintaining our long-term perspective while making tactical adjustments to evolving conditions. The recent market strength has provided an excellent opportunity to rebalance portfolios effectively, trimming some gains while remaining slightly overweight toward equities.

These adjustments reflect our ongoing analysis of changing market conditions and opportunities. As always, please reach out with any questions about how these changes may affect your specific situation or long-term financial goals.

Certus Wealth Management