As we head into the final lap, 2025 has been a banner year for stocks not just in the U.S., but around the world.
Investors have been focused on the upbeat fundamentals–corporate profit growth sparked by economic gains at home and abroad says Louie Valdez of Westlake Village, CA.
The U.S. economy grew at 3.3% in Q3, according to revisions released by the U.S. BEA. It’s the second quarter in a row that GDP has exceeded 3%, a feat that hasn’t occurred in the three previous years.
As Q3 concludes, S&P 500 earnings are up a solid 8.4% versus a year ago, according to Thomson Reuters. And analysts are forecasting a return to double-digit earnings growth in 2026.
Strong gains in the market sometimes encourage investors to plow headfirst into stocks. Others openly wonder if it’s time to move to the sidelines.
Let me take this moment to tell you market timing is a game best left to gamblers. We’ve had almost 60 all-time closing highs in the S&P 500 Index this year (LPL Research, St. Louis Federal Reserve). That comes on top of a string of highs the market has recorded since 2013.
A new high means one thing–stocks closed higher that day versus the prior day. By itself, it doesn’t foreshadow an imminent downturn.
Investment and financial planning
- Is it time to rebalance your portfolio? Changes in the market can cause your asset allocation to shift. As we head into the homestretch, we’ve witnessed strong gains in stocks this year, both domestic and international. Year-end is a great time to review your portfolio and make any necessary adjustments.
Typically, I would counsel that profits should be made next year, pushing the tax burden into tax year 2026.
But I must caution that there is an outside possibility the final version that may land on the President’s desk could produce changes in how capital gains are treated.
- Review your income or portfolio strategy. Are you reaching a milestone in your life such as retirement or a change in your circumstances? Has your tolerance for taking risk changed? If so, this may be just the right time to evaluate your approach.
However, let me caution about making changes based simply on market performance.
One of my goals has always been to remove the emotional component from the investment plan. You know, the one that encourages investors to load up on stocks when the market is soaring and to sell when stocks have taken a beating. Be mindful of this during your 4Q meetings with your advisors.
We know that markets are rising and falling. I get that declines can be unnerving, I really do. Yet over the long term, markets rise much more than they fall.
While stocks have been on a record run, it’s a good time for me to once again remind you that a disciplined approach that avoids emotional decisions has historically been the shortest path to reaching one’s financial goals.
I know I’ve said this before, but it is a key principle for successful investing.
- Take stock of changes in your life and review insurance and beneficiaries. Let’s be sure you are adequately covered. At the same time, it’s a good idea to update beneficiaries if the need has arisen.
- Charitable giving. Whether it is cash, stocks, or bonds, you can donate to your favorite charity by December 31, potentially offsetting any income. Did you know that you may qualify for what’s called a “qualified charitable distribution (QCD)?” A QCD is an otherwise taxable distribution from an IRA (other than an ongoing SEP or SIMPLE IRA) owned by an individual who is age 70½ or over that is paid directly from the IRA to a qualified charity (“Rules to Do an IRA Qualified Charitable Distribution”–www.kitces.com). The IRA owner must be at least 70½ when the distribution is made. This is a benevolent planning idea
You might also consider a donor-advised fund. Once the donation is made, you can realize immediate tax benefits, but it is up to the donor when the distribution to a qualified charity may be made.
I hope you’ve found this review to be educational and helpful, but keep in mind that it is not all-encompassing. Once again, before making any decisions that may impact your taxes, please consult with your tax advisor.
Mr. Valdez has helped hundreds of families in the Conejo Valley including Westlake Village and Thousand Oaks. Louie is retired and currently lives in Phoenix, AZ.