In recent weeks, the Federal Reserve made its first move of this year, cutting interest rates by 0.25%. Markets expect additional cuts in the coming months as inflation trends lower and signs of a cooling labor market emerge. The economy, however, continues to show resilience.
- Equities: U.S. stocks remain near record highs, supported by strong corporate earnings and steady consumer spending. Large-cap growth companies continue to lead, while small- and mid-cap stocks have faced headwinds from higher borrowing costs. International markets have been mixed—developed economies steady, emerging markets more volatile.
- Fixed Income: Bond yields eased slightly after the Fed’s cut but remain attractive compared to the last decade. Investment-grade bonds are providing reliable income, while credit spreads remain tight, reflecting investor confidence in corporate balance sheets.
Our Models & Positioning
Our portfolio structure has remained steady since the summer, with each model aligned to its risk profile and diversified across U.S. and international equities, a blend of active and passive strategies, and a mix of investment-grade and credit-focused fixed income.
Growth-oriented portfolios remain tilted toward broad U.S. equities with selective global and emerging-market exposure. Conservative models continue to emphasize high-quality bonds with some allocation to ultra-short instruments for liquidity.
We make these adjustments within our portfolios by shifting the mix of funds and allocations, ensuring each model stays aligned to its intended risk profile. This positioning allows us to stay disciplined, avoid overreacting to short-term market swings, and remain focused on our clients’ long-term objectives.
Outlook
As we look ahead, several themes stand out:
- Federal Reserve policy: With the Fed beginning to lower rates, borrowing costs should gradually ease. This could support small- and mid-cap companies that have struggled under higher financing expenses, as well as housing and other interest-rate sensitive sectors.
- Economic growth: The U.S. economy remains resilient, though the pace of growth is slowing. Consumer spending has moderated but continues to provide stability. Corporate earnings are expected to grow modestly in 2026, after strong gains in recent years.
- Artificial Intelligence (AI): We view AI as both a growth catalyst and a defensive hedge within equities. Demand for advanced computing power and infrastructure is expanding rapidly, with investment flows expected to rise dramatically in the coming years. Much like the internet era, we see AI as a durable, multi-decade trend that will reshape industries and create a new generation of leaders. We seek exposure through active strategies that can adapt as opportunities evolve, focusing on both the companies enabling the buildout and those harnessing AI’s capabilities most effectively.
- Equities: Valuations are elevated compared to historical averages, meaning returns may be more moderate than the double-digit growth investors saw in 2023–24. That said, earnings growth and falling rates provide constructive support for long-term investors.
- Bonds: Current yields are attractive, and further rate cuts could lead to capital appreciation for existing bond positions. This environment reinforces the value of high-quality fixed income as both an income source and a portfolio stabilizer.
- Risks: Geopolitical tensions, sticky inflation, or a sharper slowdown in global growth could spark volatility. This is why diversification across regions, sectors, and asset classes continues to be essential.
Overall, we remain constructive on the near- to mid-term outlook, with equities positioned to drive growth and bonds providing both income and downside protection.
ETF Spotlight: JPMorgan Active Growth ETF (JGRO)
Behind every portfolio allocation is a carefully selected set of ETFs. In this section, we’ll feature one of those ETFs and explain how it fits into our strategy.
Why JGRO?
- Actively managed exposure to high-quality U.S. growth companies.
- Complements our core index holdings (SPLG, VOO) by seeking to add value through security selection.
- Included across all of our models—with allocations scaled according to risk tolerance, from smaller positions in Preservation and Conservative portfolios to larger allocations in Moderate, Semi-Aggressive, and Aggressive strategies.
JGRO provides growth potential beyond broad market indexes while maintaining disciplined risk controls, making it a consistent building block across our models.
We’re always here to discuss the market environment or how your portfolio is positioned — feel free to reach out anytime.
Canty Financial Management
Bill Canty, CFP®, CPA, Financial Planner
Ed Canty, CFP®, Financial Planner
Joe Canty, CFP®, Financial Planner
Tina Alteri, CPA, Tax Advisor
Maureen Walsh, EA, Tax Advisor
