Hi there – 

As we approach the final weeks of 2025, I wanted to share some important insights about current market conditions and explain recent adjustments we've made to portfolio positioning. The economic landscape has evolved considerably, and our strategy reflects both the opportunities and considerations that lie ahead.

Economic Overview

The U.S. economy continues to demonstrate notable resilience. While official Q3 2025 GDP data has been delayed due to the government shutdown, the Atlanta Federal Reserve's real-time GDPNow model estimates growth of approximately 4.1% for the third quarter. These real-time readings significantly exceed consensus economist forecasts, suggesting the economy may be performing better than many market participants currently recognize.

Inflation trends have shown encouraging progress, with an increasing number of consumer price components declining from their peaks. This broadening disinflationary pattern strengthens the case for continued monetary policy adjustments from the Federal Reserve potentially resulting in lower interest rates.

Employment conditions remain balanced. The latest employment report showed 119,000 jobs added in September, indicating the labor market remains at a healthy level. While job openings have moderated from previous highs, overall employment stability and job creation continue to point toward a labor market that's cooling to a healthier level - an important distinction as we evaluate economic health.

Fiscal policy developments are taking shape with the passage of major tax legislation (the "One Big Beautiful Bill"). The anticipated stimulative effects of tax cuts and investment incentives could provide meaningful support to economic growth into the first half of 2026, with working Americans potentially seeing tax refunds that are approximately 43% higher than 2025.

This matters more than it might initially seem. Consumer spending represents over two-thirds of U.S. economic activity, so when households receive these larger refunds in the second quarter of 2026, we could see a meaningful boost to spending and economic momentum. Some estimates suggest this fiscal stimulus could contribute an additional 0.5% to GDP growth during that period, potentially extending the positive trajectory for both the economy and markets.

Portfolio Positioning Changes

We've made several tactical adjustments intended to capitalize on current market dynamics while maintaining appropriate diversification:

Equity Positioning

We've slightly increased our overall equity allocation while maintaining a similar risk profile in the portfolio. This adjustment reflects a slightly more constructive positioning with factors including robust corporate earnings, a more accommodative monetary policy environment, and an improved policy outlook following recent legislative developments.

Within U.S. equities, we're emphasizing companies that have demonstrated strong earnings momentum, particularly in the large-cap technology sector. The AI buildout continues to be financed by companies with exceptional cash flow generation - these aren't speculative bets, but established firms with proven profitability funding their own growth. Recent stock price movements have been justified, with a high correlation to increasing cash flow.

We've also refined our factor exposures, adding to momentum strategies while introducing value positions from a risk mitigation perspective, and as a counterbalance to our growth emphasis.

Regional Allocation

Our preference for U.S. equities over international developed markets has been strengthened. American companies continue to demonstrate superior earnings growth relative to their international counterparts. We have also increased our allocation to emerging markets, which offer exposure to the technology supply chains driving the AI buildout - particularly in semiconductor production.

Fixed Income Strategy

We've streamlined our bond positioning by consolidating into more dynamic, systematic strategies designed to navigate shifting credit and interest rate environments. With inflation concerns moderating, we've exited inflation-sensitive positions in favor of approaches that can actively adjust to changing market conditions.

Credit spreads remain historically tight, making active security selection increasingly important in fixed income allocations.

Looking Forward

The economic backdrop appears supportive, with growth indicators holding up well despite earlier concerns. The policy environment has shifted in a more market-friendly direction, and corporate earnings, particularly among large-cap technology leaders, continue to exceed expectations.

We maintain diversification across asset classes and continue to monitor economic indicators closely. Markets have rewarded patience this year, and we believe the fundamentals support staying invested while remaining disciplined about risk management.

Key Takeaways

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.

• Economy showing resilience: Growth indicators suggest continued expansion despite earlier concerns
• Inflation moderating broadly: Disinflationary trends strengthening across consumer prices
• Increased equity allocation: Reflects improved fundamentals and policy environment
• Emphasis on quality growth with a value counterbalance: Focusing on companies with proven earnings power and cash generation
• Dynamic bond positioning: Moving to more flexible strategies as market conditions evolve
• Maintaining diversification: Balancing opportunity-seeking with appropriate risk management

These adjustments reflect our ongoing analysis of risk and opportunity within current market conditions. As always, we maintain a long-term perspective while making tactical decisions based on the evolving landscape.

As we move into year-end and prepare for 2026, please don't hesitate to reach out with any questions about your overall financial strategy. I'm here to help you understand these market developments and make certain your financial plan remains aligned with your goals.

Certus Wealth Management