January 2026
In this special episode of THE FINANCIAL COMMUTE, CEO Jeff Sarti and Chief Investment Officer Meghan Pinchuk break down market performance in the last quarter of 2025 while looking ahead to what this year may bring. From AI-fueled stock gains and international outperformance to the role of private credit, real estate, and gold, this conversation cuts through the noise to focus on disciplined positioning.
Tune in if you’re interested in…
Watch previous episodes here:
Ep. 170 How to Evaluate Real Estate Funds
Ep. 169 Building Durable Income Through Diversified Credit
Thanks for joining us for this special edition of THE FINANCIAL COMMUTE. Today, Meghan, we're going to be doing a 2025 year in review, right. We'll also talk about 2026 going forward. So stay tuned. You have to stay online or stay listening. That'll come at the end. All right. So we're going to talk about asset classes, how stocks did, bonds did, real estate, gold, all of it.
Let's start with stocks.
Everyone's favorite. And for a reason, stocks did well yet again right. Stocks were up the S&P 500 was up close to 18% last year. So great year. But something that's a little bit concerning is it's been a long run. So what I mean by that is now three years in a row. We've had returns in the high teens, actually, in 2023 and 2024, stock returns were in the 20% range.
It's very unusual to have a three year track record like this. And the challenges typically, historically speaking, after a three year run like this, you have challenging markets ahead. So the only two times in history we've had a run of three years with high teens or more in terms of annual returns or the late 1990s.
That didn't go.
Well. That didn't go well after. Right? We all know what happened in the.com bust. And then the more recent one was actually pretty recent. It was 2019 through 2021. And then we all know what happened in 2022. Stocks were down about 18%. So it's kind of a little bit of a warning signal. But you listen we can't predict timing but things feel maybe a little bit frothy here right.
Yes I agree.
Now that being said, the good news is a lot of this in terms of the strong stock performance, it was somewhat fundamentally driven. Earnings were actually pretty strong. Earnings were up about 12%. So there was a little bit of margin expansion. What I mean by that. And you're going to talk about valuations a little bit. Meaning stocks which are expensive got even a little bit more expensive like on a PE ratio basis.
But still the lion's share of the 18% growth was driven driven by earnings growth, which is good. That being said, the flip side, though, is when you really look at earnings, it was very concentrated in AI. We're going to spend a lot of time in this session talking about AI and technology. So what I mean by that is if you strip out the earnings growth from AI related companies.
So take every other sector of the S&P 500. Earnings growth is only about 2%. So pretty lackluster and disappointing. So sort of a story of the haves and have nots right.
Definitely. And so we're going to share a couple of charts here at the one is looking at as you mentioned valuations. So in a year where earnings are decent and stocks go up by more than that valuations do expand. It gets more expensive right. But this is now looking back longer term. So looking back about 30 years to to the 1990s and saying okay how how expensive have stocks been over time.
And what you can see here is that we are at a very expensive level. So it was more expensive in the 1990s. And then recently at that peak that you mentioned. Yeah.
Right before 2022.
It was right around there at that point. But in stocks this is a price to earnings. It's one of the ways you can measure valuations. And it's showing that we are a very expensive levels at this point. Now another important important metric is looking at how diverse the stock market is at this point because people think, oh, I'm investing in a, a broad range of stocks.
It's the S&P 500 500 stocks like that's diversified, right? But really the concentration levels in the S&P are also the highest they've ever been historically. So looking back it's been call it the top ten. Stocks on average have been around in the 20s 20%.
20% of the total index. Right.
And so now it's.
Almost 40% double the.
Highest it's ever been. And and the top ten are all the names everyone's familiar with the mag seven. But specifically like all of these AI and tech driven stocks.
Yeah. So that's a challenge right. If you're invest in the S&P 500 year point, you're actually very overweight. These technology and AI driven stocks which are not cheap. Yeah. So that's that's somewhat concerning. All right. Somewhat tied of that tied to stocks. We're going to talk about economic growth or GDP growth. And we're going to show a chart on this to growth was really solid in 2025.
And what this chart will show it'll show the first three quarters of 2025 Q4 is not in yet that last column. It shows an average of the first three quarters of a 2.5% average annual growth rate in GDP, but not bad. It was a little bit of a topsy turvy year. Q1 was actually down in terms of growth.
The stock market had a tough time. It seems like ages ago last year, if you remember February, March with all of the tariff related news. But it came roaring back and to some degree exceeded expectations. So pretty good in terms of economic or GDP growth. But again, looking under the hood and looking at the details a little bit more closely, one concerning side is employment.
Employment statistics are actually pretty weak, and have really weakened pretty dramatically in the last 3 to 6 months, where there's really not much in the way of job growth, unemployment rate has picked up. And that's a big reason why the Federal Reserve has been lowering interest rates and is likely to continue lowering interest rates even despite this economic growth.
Unemployment is picking up. Right. So that's not a really good sign. One other aspect, similar to the stock argument is what's driving this GDP growth. And unfortunately again, it's very concentrated in technology or the AI sector specifically. So if you I made up roughly about 40% of that GDP, GDP growth. So if you strip out AI, the rest of the economy, when you think about financials, health care, utilities, you name it, oil and gas, it's really been again, lackluster, very slow, stagnant economic growth.
And I think one of the concerns, something we're going to delve into a little bit more, is the AI portion, because it is such a big piece. And so you really have to look under the hood a little more. And the the AI spending that's happened that's driven a lot of this growth. It it is still a question of is that real right.
Is it is it fundamental or is it artificial. But you know, it's good, right? The the idea being right. You look at, at, these companies, there's a lot of spending happening. Right. Lots of chips being purchased. Let's think with that. But is it actually creating something like is there something positive. Is a revenue being generated coming out of it.
Is there external demand or are people paying prices for these types of services?
Who's making money in this. And so that's something we're going to get into a little more. Because the answer is it's it's it's something of a misnomer. It seems like oh look earnings strong. But like this I even though there's great demand for it is really not generating external revenue at this point.
Yeah. We're all heavy users of it right. But it's not like we're paying large subscription fees for Copilot or Chat GPT so it's you know, it's it's at this point it's not really a massive revenue generating machine.
So if we're not paying for it, where are the earnings coming from.
All right. So related to that we're going to I'm going to spend a little time talking about that where these AI companies are doing very well. Right. In terms of revenue and earnings growth. But to your point it's not really externally driven. So what's happening? And part of the challenge this is you might have heard this in the media.
It's called circular financing. It's a lot of these companies generating revenue by passing the hat to one another in a circular loop. So it all starts with Nvidia right? Nvidia is an incredible company. They're really the engine of the AI revolution. They just they make the world's best computer chips okay Nvidia is making an incredible amount of money.
So what do they do with a lot of these earnings. They invest in other technology companies. So they recently made a very large investment $100 billion with a B in OpenAI. OpenAI is the creator of chat GPT, right. The software that we all use, tremendous investment for OpenAI. So now OpenAI can spend that money in the pursuit of growth.
So what is OpenAI done with this new influx of cash? They made a 300 billion, $300 billion investment or contract. They entered into a contract with Oracle, a five year contract with Oracle. I'll explain what that contract is in a minute. But just to put that those numbers in context, OpenAI made 12 billion of revenue last year. Yeah.
No earnings negative earnings. They're bleeding cash because they're spending so much money. But a company that made 12 billion on the surface a pretty good number but entered into a $300 billion contract with Oracle. Okay. That sort of raises our antenna. Is that sustainable. So what is Oracle doing with this. Cash is open AI entering into a contract with Oracle.
Oracle what they do in essence is they build data centers right. And they leases data centers to OpenAI for OpenAI to pursue its growth path. And you know, learning centers etc.. So Oracle these data centers, they have about 150 across the globe. And they're in the process of building 100 more. With this influx of capital. These are massive projects.
Think on the scale in terms of size 50, 60, 70 football fields in size. I mean, they're utterly massive. But when you think about the cost of building a data center, really it's not really the land. It's not the labor, right? It's not the construction, it's the computer chips. What do they do with these dollars? Typically a large data center.
They'll buy again chips from Nvidia. This is where the circular loop comes into play. Literally a data center might have 100,000 chips and each chip can cost 20 to $40,000. So this investment is to the tunes literally of billions of dollars. And we see again this circular feedback loop where it starts with Nvidia. And as the money fluid flows through the system, what is ultimately being bought?
Nvidia chips.
Back to the video.
It goes back to Nvidia. So again it is a sustainable without external revenue or demand.
Right. And so again you have this closed ecosystem where essentially they're they're all I mean this is generating earnings on the surface of it. You're seeing the money passed in different companies reporting positive earnings. But if you don't get enough external demand which is resulting in revenue. Yeah. Ultimately it's just not sustainable.
Right. A good analogy a lot of a lot of people are again, we're seeing it in the news, people talking. Is there an AI bubble. We don't know the timing of this. And is it a bubble or not. But one of the concerning analogies is going back to the.com bubble where something similar happened. So in the.com bubble, Cisco was the engine of the internet revolution.
They made networking equipment. So they were sort of the Nvidia of their time, largest company in the world at the time. And near the end of the.com boom, what was their business? A lot of it was financing startups, startup companies that had no revenue, but they still needed to buy Cisco networking equipment. So what is Cisco to do?
In essence, they became the largest bank in this space, and they lent money to these startups. And one of those startups to again, with those dollars they bought Cisco equipment. We all know what happened. Those startup companies generally went out of business. And then it all kind of went poof.
And then just again, it's not like the internet wasn't successful. Like the internet is still a thing. It's just the fact that that doesn't mean that each company, right, that all these different pieces and moving parts are going to ultimately be successful. Just because I ends up being successful, they're going to be winners.
And losers, right? This is an example where as fast as technology moves to some degree, finance at times moves even faster, which is not a good thing, right? It's resulting in an overbuild over capacity, potentially oversupply. And that might have to correct itself at some point.
One more nuance that I don't want to get too technical, but that is, I think, also inflating the earnings. The current earnings number a little bit is, is this accounting concept of depreciation. So when you look at this as this loop and the money passing from there to there, one other nuance to it is that they're able to the guys who are now investing right in those chips as an example, they're able to delay open air, can delay when they're realizing those expenses.
Yes. And so now instead of it being like, hey, we you know, we have these or we have revenue, I'm going to realize the expenses against it. They can stretch it out longer and longer and basically make current earnings look higher. And then those expenses are eventually going to hit in future years. And theoretically drag down earnings. Now if if the growth is there, if they can grow at rates and there's future earnings to pay for that, it'll be fine.
It's just that's again still I think an open ended question.
You've seen the Big Short right. Okay. So Michael Burry he was the main guy who was shorting the housing market. He was just in the news recently where he talked a lot about this depreciation games that companies are being play that a companies are playing. So to your point typically when a company like OpenAI or Oracle buys one of these chips you depreciate it, right.
And that's your expense. And historically speaking that was done over a three year period that's now extended of late to five or even six years. Meaning now to your point, these companies, their expenses, their real expenses, but instead of being spread over three years, the cans being kicked and it's being spread over six years, everything looks rosier than it looks rosier.
And that one really is more disingenuous in the sense that like how what is the useful life of these chips? Like, truly, they're they're going to need to replace them closer to the three years and six years. Correct. So yeah. All right US stocks super fun. So let's switch gears a little bit to international stocks because actually for the first time in a while international stocks were more fun.
And they did they did amazingly well. Yes they.
Did. And so as as as well as US stocks did up 18%. International actually did better by a meaningful degree. They were up 32% year. And so this is something where this is not an easy story because actually most of the AI is US based. So really very little in the way in the international index. But when we look at that, we have had an overweight in terms of looking at a typical allocation, right.
Would be more U.S focused in here, but we've had a little bit of more of a tilt toward international stocks for some time. And the reason was valuations. Yeah valuations were were cheaper internationally. Now last year I think what you had was you had again okay earnings growth. But not nearly to that degree I mean earnings growth where it was was fine.
Yeah. So the flip side is now the valuations have expanded. So international stocks are not as cheap as they were previously.
Right.
But we're still looking at it relative to the US and say this is interesting.
Yeah. And to kind of further on that point it speaks to why we diversify. Right. Like we to your point, we've had an allocation to international stocks for quite some time and they've done fine but underperformed U.S. stocks. But we knew we had conviction that because the disconnect in terms of valuations was so wide, meaning US stocks were so much more expensive than international stocks.
At a certain point, there would be a catch up. We had no idea when, but ultimately there would be, you know, closing of that gap. And it's interesting that last year was the closing of that gap, because to your point, it's not like international the fundamentals was that great earnings was actually kind of mediocre with international stocks, yet still the power of valuations when something's cheap, ultimately the gap gets closed.
You know that that really happened last year. And that was a great performer for our portfolios.
And again we're we're watching that. And and we have continued again a modest overweighting toward international. I'd say let's just be clear. We have more U.S. stocks relative to international, but just I'd say more international than most groups would do. Yeah. And when they're weighting these we'll continue to watch it. And if we get more outperformance international, we might adjust that.
But as of right now, I think it still makes sense to have a little bit more of a leaning toward international grade.
Should we shift gears to bonds a little bit.
On bonds, actually. Well, they actually were reasonably good.
Yeah, I was going to say boring bonds, but actually bonds it's not bad.
Yeah.
So bonds they were up call it. The index was up about 7% last year. Pretty good to your point. Pretty solid. Our bond funds were up in the mid to high single digits kind of a range depending on which bond fund we're talking about. So good good performance. But backing up a little bit and looking at long term performance, it's been a very challenging bond market environment for quite some time.
So I was looking back at the data, leading up to this discussion, the peak of the bond market, when interest rates finally started rising was back in mid 2020. So without getting into technicalities too much, that's maybe a later, a later webcast. But again when bond when yields go up bond prices go down. And that's exactly what started happening.
When interest rates started rising in mid 2020 with inflation, bond prices started going down. And if we remember, 2022, for instance, was a really bad year for bond prices where the bond index was down 13%.
Yeah, the safe safe bond safe bonds were down big.
So if you invested in bonds at that previous peak of 2020, made income over the course of five and a half years, even with that income, your total return when you take income plus price appreciation or in this case, price depreciation, you actually would still be negative. You would actually your total return would be a -2%. If you just own the bond index over a five and a half year period.
Good thing we didn't just on the one.
We did not on the bond index. By and large, that is by far the worst bond performance in the history of the US markets. And so it's been a very challenging bond market environment. To your point, we really largely avoided that and really meaningfully outperformed that bond index. That was one one thing we did well. But then a second thing we did well is we just had a very light weighting to bonds anyway, because we knew bonds were in for a rough ride, especially in a 0% interest rate environment.
So for a very long time, what have we done with with the dollars that otherwise should have been in bonds? We put it in bond or fixed income alternatives, private lending. Want to spend a little time talking about private lending?
Yes. My favorite topic. Favorite you? I think in the to your point, we've had when interest rates were super low, even this made a lot of sense like to be in different kinds of private lending. You were making so little to be in any kind of bond. So to have something where you could generate extra income made a lot of sense.
And so we've continued with that overweight. And I'd say last year overall it was a solid good year for private credit. Yeah, there were some hiccups along the way. And specifically now other all too, including kind of more broadly other alternatives. Real estate has been struggling. Yeah. Similarly to bonds actually like traditional bonds because it's sensitive to interest rates.
So since since rates started rising and more more specifically since they started going up more meaningfully in 2022, real estate actually commercial real estate has been in a recession. Yes, this is strange. It feels strange for people who have against their homes. And that's a real estate because single family home is very different, especially in Southern California. Yeah, but commercial real estate, even apartment buildings, but other kinds hotel, office, different things have really struggled.
Our real estate overall has done well that the specific niche or area that's been challenging, both on the lending side and on the equity side has been construction right? So in this environment where people are skittish, it costs more to borrow. They're more selective about what projects are going to invest in. There's very little buyers for a, you know a mid construction project.
Right. Something that's not completed not stabilized yet. Investors are definitely flocking more toward stabilized properties with income. So again, anything in that kind of intermediate phase, that construction type phase or or leasing up, you know, stabilization phase has been more challenging.
And that it was just mainly a cost issue, right? I mean, labor costs, material cost regulations, you name.
It and you have it. But again, financing interest rates also be huge piece of the costs like that. That is so that that drove real estate to a very large degree for a long time. Right. You could borrow cheap. So it didn't matter that you paid a high price because you were borrowing cheaply enough that it that it made sense.
So again, now the real estate market somewhat resetting most real estate lending that didn't have as heavy of a construction component did did fine. Yeah. It's been nice and consistent. The normal on the real on the, private credit side, not real estate related because we a number of years ago said, hey, we have enough real estate.
We started pushing more toward other assets that we could lend against that. That piece also continued to do very well. And broadly speaking, I think we're looking really hard for things that are we think are going to be more resilient and and just not. It's not that there's not risks, there's not the same risks is what are driving the broader economy.
So those spaces continue to do really well. And you would hope they would do well in a year where markets are up again, if that happens this year or if they're down or struggling, the goal is that you can find things that can be they can be resilient in both environments.
And so we continue to look for opportunities in the private lending.
So we're still looking. Yeah.
All right. Should we shift gears to gold.
Yes.
All right. So gold. Gold. It's been really, really very strong incredible performer for us. So we've been in gold going back to 2015 is where we made an allocation in client portfolios in terms of our a core holding. So it's been a very strong run over that decade, actually outperformed stocks over that decade specifically in the last few years.
It's really run up. And then most obviously in the last year, gold itself was up over 60%. In 2025. It's been quite a run. It's making us a little nervous. We'll come back to that. But it has been quite a run. Gold mining stocks. We've had a smaller position partly because it's more volatile, more speculative, but an incredible run.
It was up literally over 150%. So well more than doubled in 2025. And just the best performing sector in the market. So really thrilled and proud that we made that allocation many years ago. I mean, really, really made a meaningful difference in client portfolios. So again, a reminder just from a high level of why we have this allocation in client portfolios, it really comes down to concerns around policies going back to the 2008 crisis, where policies with each passing year again, are stimulatory in nature, and we're not willing to take our medicine and be disciplined from a monetary or fiscal point of view.
Everything from 0% interest rates. For quite some time now, we're seeing pressure again with lower interest rates coming. They've already happened. And again, coming, more coming. Probably in 2026. Money printing galore over the years. And lastly, especially in recent years, I mean, debt levels that are just ever increasing our yearly deficits. It used to be trillion dollar deficits.
Now it's the common commonplace for it to be $2 trillion deficits. So the concerns are really this is all very unsustainable. And we think to a large degree this is why the gold price is moving. It's sniffing this out. We had lots of long term concerns specifically around inflation. Deflation finally happened a few years ago, and that's when gold really took off.
And I think the world at large is continuing to wake up to this. And what do they have concerns around the stability of the US dollar with these fiscal imbalances? Right. The stability of treasuries. So the world at large really is not or they're not buying treasuries as much as they used to. And instead, what are they looking at?
The alternative is a safe haven of gold.
And I think what you're seeing is that one thing that may have driven the price more meaningfully last year because because the dollar, the US dollar was down and that that reflects gold reflected.
That helped.
But not to that degree. Right. So so the extreme outperformance of gold to some degree we think is related to central banks. So basically, governments around the world that, to your point, don't have the same conviction in the US dollar as the safe haven. They want to diversify. And they are they are price insensitive buyers. So they have their schedules and their plans to keep buying.
This is their war chest, right? Just their their war chest where they just want to store value, their point. They don't care about them.
They're just going to keep buying. And so it's not so much it's like, oh, it's expensive. Buy lesser. Oh it's cheap, buy more. It's just this is their schedule. This is what they're buying.
So that gives us some confidence even with this run up. That again makes us nervous. It feels like there is some potential speculation or froth in the gold market, but at least we believe there's some support from central banks. Because, again, they're price insensitive buyers. Another potential area of support in the future is just the North American or American buyer.
They still have largely not participated. The average American most buyers are still in Asia. Central banks. The American buyer, despite now gold almost reaching 5000 an ounce. You're hearing people starting to talk about it a little bit more, but generally speaking, American investors just have 0% in gold. Goldman Sachs actually just did a recent study, and their analysis showed that much less than 1%, it was actually 0.17% of financial portfolios are in gold.
So basically the lion's share of investors have 0% in gold. That's a good thing, right? Because that means potentially there's not froth or a large degree of hot money or speculation in the gold market, at least from retail investors.
And that's what is concerning. Right? So we've been asking like, well, why are you still in it? You know, because it's run up in your value investors, right? So is it is it not cheap anymore? And I think the answer with gold is we we are somewhat not that we're completely price signals. Yeah. But we are looking at this saying that all the things that we're concerned about that you talked about with the the deficits and spending and debt, all those things are not getting better.
In fact, they're getting worse. So we still need this as a hedge in portfolios. And looking at it saying, okay, look, we are concerned about volatility. I think it's very possible you could get big pullbacks along the way, whereas maybe it was a little more boring in the past. I think it could be a little more exciting both up and down.
Yeah. And so now again we're looking forward saying what do we do. We're going to keep an allocation. We are going to be prudent around rebalancing. Yeah.
And we have been we've been pretty disciplined around that.
And so it's looking at each portfolio, you know on an individual basis and saying like when it when it breaches a certain threshold. We have systems to track that and say is this is it time to pull back and.
And take our profits?
And there's some taxes related to that. But look, I'd rather take a little taxes and, you know, write it, write it down. Right. There's going to be a lot of big moves. So we're again, we're very we're very thoughtful around it. We look at a lot of different factors. So it's not just an automatic but it does. It is prudent to do that when you get these types of moves.
Yes, there is going to be volatility without a doubt and potential to your point some pullback. So that's why we're being disciplined in terms of the rebalancing. But again we do think there is still potential upside meaningful upside. We're not predicting this. But the reason we think that's possible is the 1970s. As an example. The 1970s was a time of high inflation right.
Global geopolitical instability and a tough stock market. And so what did investors lean into? Because they were not they were concerned. They were more fearful as opposed to optimistic about their future. They shun stocks and they shun financial assets are bets on the future. And what do they want? They wanted? That's on the present, right? Real tangible assets.
And that's where things like real estate, but most importantly, gold did very well in the 1970s. So again, we're not predicting that by any stretch. But there is that possibility. Right. And there are signs of that. Right. Inflation has been picking up, geopolitical concerns are picking up, you name it, fiscal imbalances around the globe and here in the US so that there is that potential for continued upside with gold.
And I think the price even going up as much as it has because inflation last year moderated somewhat. Right. Yeah. It wasn't as strong as it had been in recent years. So I think it is telling you it's more future looking right. It's telling investors to be worried, to be worried that this is something that that is a concern still.
So again, keeping an allocation doesn't rebalancing thoughtfully, but that I think we do think there is potential volatility but potential upside. Yeah.
So there's still a place for that protection in our portfolio.
I issues with to 2026. All right. We made it. We made it 2025 over done. It's now 2026. All right. And look I think going forward again despite all the concerns that you talked about on the debt and all the things continue to be issues, the geopolitical uncertainty, there is no doubt, though, that it is going to be a stimulatory year in terms of the government continuing to push on different.
Yeah, pull, pull different levers as much as possible, move things and look, the midterms are coming at the end of the year. And so there's no doubt that that there is going to be a big push to say we need the economy to be strong going into the midterms. And so one big one, I think that I was going to say we're watching.
But the truth is it's so obvious. It's it's being telegraphed very clearly is that, you know Powell in the fed. The fed chair is going to be moving out. There'll be any new fed chair. And there is zero doubt that the new person coming in will be very supportive of lower interest rates.
President Trump has put a lot of pressure on the fed that's been in the news. Even if he's not successful in kicking Powell out, that's a big controversial topic. To your point, a new fed chair is coming in in May. And we all know President Trump has made it very clear he wants lower interest rates and lower interest rates.
To your point, are stimulatory another aspect just taxes. So the tax bill, the one big beautiful bill, from 2025, a lot of tax breaks, deductions that were in that bill, it's going to result in potentially pretty meaningful tax refunds. So people are going to get tax refunds a lot of it with no tax on tips, potentially a no tax on overtime, a lot of business related deductions, you name it.
So there could be meaningful refunds from that. Another one that I think is probably likely that's being thrown around is, tariff refunds separate from the tax refunds. Literally, the talk is that adults might might have to meet a certain income threshold, but we'll get checks in the mail to the tune of $2,000 from the tax revenue we brought in.
The original intention of the tax revenue, right, was to moderate or lower our debt. That's now been, to some degree, thrown out the window. Right. And now that's going to result in potentially checks in the mail to the tune. Conservative estimates are that's 2 to $300 billion that can enter the economy. So man that's a lot of different stimulatory measures.
There's there are a couple of others that you were going to mention too.
It it's more it really is even little policy tweaks or things that can be supportive. So they're talking about like a one year holiday or like cap on credit card rates. Right. So people paid 20% plus they were saying, I will cap it a 10%. So that could be meaningful for a lot of people say, oh, I'm they're going to pay a lot less on their credit card bills.
Another one is talking about, you know, Fannie, Fannie Mae, Freddie Mac, are the government agencies, that are invested in mortgages saying, hey, go out and buy mortgages. They're talking about a $200 billion of mortgages. They could go out and start purchasing to get help, lower its.
Mortgage.
Lower. And then, in theory, you know, make it more affordable to buy a home. I'm not exactly sold on that math, because if everyone can buy, demand goes up the price.
Prices might go up.
Yeah. So it's it's it's tricky. I think some of these levers being pulled, we don't it's not quite as clean as they would like in terms of the outcome. But yeah, no doubt it's stimulatory.
So with this right stimulatory we tend not to have a crystal ball. We tend to reject a crystal ball. Yet we're saying it's stimulatory. So I'm sure the question is all right should we lean in and add more to stocks. And not surprisingly probably the answer is no. We have our core allocation. We're comfortable with our weighting. And part of the reason why we have conviction in that stance, it's a short term versus long term argument.
Yes. Short term there might be stimulus. It might work. The reality is we don't really know. Maybe there might not. But more importantly, what drives our allocation decisions. It's long term. It's long term fundamentals. Gold is a good example right. We didn't know when gold would finally tear up. But there were long term fundamentals that we felt supported it.
Similarly, with these stimulatory policies that you speak of we have real concerns around them. Yes, over the short term they might be stimulatory, but over the long term it's adding more fuel to the fire. It's a continuation of policies really we've had since 2008 stimulatory policies, no matter what administration we have, it's been continual stimulus, continual money printing, lowering of interest rates to try to juice the economy in the stock market.
Ultimately, we think there's imbalances and a cost to that. So for that reason we're staying Pat. Also, this is really priced in, right? I mean this is not new news to the market. So to some degree we think this is why stocks did so well in 2025. It's because people saw this coming. So there's no real way to game that going forward.
You should assume that if you hear something like this of like, oh, they're going to buy mortgages, mortgage rates are going that is baked in, right? Yeah, exactly. The market reacts very quickly to that type of news and information. And even the expectation again is that there will be more of this. There's actually a risk that if they didn't do as much as they thought, yeah, it would be bad.
That could now disappoint.
Because it would be oh gosh, it's not as stimulatory as we thought it was. Right. It is very much baked in. But back to your point. Look, we have stocks, we have U.S., we have international. We are you know, when you look at these short term factors, that's not enough for us to say, let's do it. Maybe if stocks were cheap, it would be different to say, oh, there's stimulus and it's a good buying opportunity.
Then we would feel differently. But otherwise we're going to have our core allocation to stocks. We're going to keep something like gold in there. That is going to be very different, behave differently. And then honestly, a lot of the private credit stuff, even though I find it exciting, it's it's not meant to be the exciting part of the portfolio.
Right. We're not looking for 20% boring, intentionally slow and steady. Yeah. And then that is ideal. That is actual diversification. Yeah. True diversification where you're mixing in things that are just going to behave differently in different environments. But the flip side is that stuff is going to be solid, even if the stock market's up 20, if we can make high single digits on some of those more boring things, that creates a really nice balance in the portfolio.
And if those things can hold steady or do reasonably well if the stock market doesn't do as well.
Sure.
That that's what we're looking for is to kind of smooth the ride out. But but we have exposure across the board and I think that's where we're sticking with that philosophy.
Yeah. You hit on the word like true balance. I like even just that concept because listen we're going to have a stock allocation. We're going to have our gold allocation. Both could be up next year. Both could be down next year. Both are going to be volatile. So a core part of what we look for are other pieces of the pie.
To your point, those are just going to balance out the portfolio and are just going to be slow and steady.
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