Windsor Wealth Management LLC

Investment service in Topsfield, Massachusetts

Economy

The Guest Who Never Leaves (and wasn’t invited)

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Let’s kick off April with a riddle:

I’m the guest who never leaves, yet I’m never on the invite list.

I grow while you sleep, I eat before you sit down to dinner, and I’m currently worth about $114,000 for every person in America. Most people ignore me because I’m “too big” to understand—until I start quietly nibbling away at your retirement savings.

The guest’s name? The National Debt.

The total is nearly $39 trillion. It’s a massive, unsettling number.

What’s more, a debt of this magnitude forces the government’s hand, leading to the “quiet” erosion of your purchasing power.

Our role is to help manage these side effects over time.

Three Debt-Control Levers

To manage debt, the government typically pulls three levers. Each move helps stabilize the national balance sheet, but typically creates a “hidden tax” on your savings.

The levers include:

  • Allowing Inflation to Climb: One way to pay off debt is by letting the dollar’s value shrink. By weakening the dollar’s power, the government essentially pays back its obligations with “cheaper” money. While this lightens the debt load, it means you face higher costs in your daily life.
  • Letting Interest Rates Fluctuate: Currently, about 75% of U.S. debt is owned domestically. With the government selling more debt each year, it must raise interest rates to entice buyers to move from “I have enough” to “I’ll take more.” In general, every dollar spent on debt interest is a dollar diverted from public services and infrastructure.
  • Raising Taxes: When inflation and interest rate adjustments aren’t enough to cover the gap, tax policy becomes the final lever. This is the most direct way the government bridges the deficit, often resulting in higher tax rates or fewer deductions.

Your Portfolio: Controlling the Controllables

The debt total is mostly out of our hands.

However, we can control our response to it.

Our approach focuses on insulating your portfolio from the downside risks.

This starts with how we position your assets for the long haul using four key strategies:

#1—Protecting Your Buying Power

Inflation doesn’t happen all at once; it’s a slow erosion of your lifestyle.

To counter this, we rely on growth assets like equities diversified across both U.S. and international companies.

The goal is to help ensure your money keeps pace with rising costs so your standard of living never has to shrink to fit the economy.

#2—Getting Ahead of Future Taxes

If your money is mostly in tax-deferred accounts like traditional IRAs or 401(k)s, then you essentially co-own your account(s) with the IRS.

Therefore, we use strategies like Roth conversions and tax location so that if tax rates rise to cover the national debt later, you keep a bigger slice of your own pie.

Here’s what this looks like in practice:

  • Tax-Protected Placement: We keep high-tax investments, like REITs and high-yield bonds, inside your IRAs. This helps shield these higher interest payments from being taxed at your ordinary income rate.
  • Tax-Efficient Growth: We prioritize low-turnover index funds and ETFs in your taxable brokerage accounts. These assets generate very little tax drag, allowing you to keep more of your returns compounding over time. In fact, we’ve shared how compound interest plays a vital role in maintaining your retirement lifestyle.
  • Strategic Municipal Bonds: For clients in higher tax brackets, we use municipal bonds in taxable accounts. This creates a federal tax-free income stream without “wasting” the valuable tax-deferred space inside your retirement accounts.

#3—Staying Flexible With Interest Rates

When the government issues more debt, rates generally climb to attract buyers.

Rather than locking you into long-term bonds that might get “stuck” in yesterday’s rates, we use short-to-intermediate bond ladders. This keeps us nimble so we can capture better yields as they happen.

#4—Building Policy-Proof Income

We can’t predict what will happen with Social Security or future fiscal policy.

That’s why we stress-test your plan against different Social Security scenarios and use dynamic “guardrail” modeling to build diversified income streams.

We want your retirement to stay stable regardless of shifting economic policies.

The Bottom Line

The national debt is an economic reality.

It’s also a factor we weigh carefully when managing your long-term strategy.

If you’d like to sit down and go over the specifics of your portfolio, reach out anytime.

–David Bunker, Financial Advisor & Licensed Fiduciary

P.S. In case you missed it, our latest post explains why Markets Don’t Send Invitations When the Best Days Arrive.

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

This communication was prepared with financial writer Sharron Senter’s assistance, based on interviews with David Bunker, a financial advisor and licensed fiduciary.

A Key Trend Worth Watching & Your Portfolio

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There’s been no shortage of noise lately about an “AI bubble.”

Yet, the data suggests we’re seeing a structural shift in how the economy operates—driven by steady, long-term investments rather than speculation.

As the chart below shows, technology and R&D spending as a share of the U.S. economy is now higher than it was during the dot-com era, currently led by massive investments in AI infrastructure.

However, unlike the 90s, today’s tech leaders are backed by robust earnings and significant cash reserves—capital that’s available for acquisitions, stock buybacks and weathering downturns without needing to raise outside funding.

Chart Source: Capital Group1

Who will win? A key trend to watch.

All this spending begs the question: how does this build-out translate into shareholder returns?

While current winners include the companies building data centers and power grids that supply the computing power AI requires, history suggests the biggest beneficiaries may not even exist yet.

Just as the internet reaching critical mass enabled companies like Facebook (Meta) and PayPal, today’s AI infrastructure build-out is setting the stage for a new generation of high-growth businesses.

So who will they be?

That’s the key question—and only time will tell.

In the meantime, we’re focused on data and research—tracking where investment, earnings and innovation are converging.

You can read more about this concept and the data behind it in Capital Group’s article, 4 charts on why the U.S. economy could stay resilient.2

Your Portfolio: Rebalancing Is Critical During Aggressive Growth

One of our core disciplines during periods of strong growth is frequent rebalancing.

Specifically, trimming positions and taking profits when portfolios drift out of alignment, rather than chasing what’s already run up.

As always, our focus remains the same: staying invested, staying balanced and keeping your long-term plan on track—regardless of the headlines.

Final Thought

It’s important to remember that roughly $7.5 trillion is sitting in money market funds and cash equivalents waiting to be invested.

This sidelined capital adds a significant layer of economic stability, especially during times of loud “AI bubble” noise.

If you’d like to talk through how this trend fits into your portfolio, reach out anytime.

Happy Holidays,

–David Bunker, Financial Advisor & Licensed Fiduciary

P.S. — I recently spent some time analyzing the year ahead. If you’re curious about what’s coming next, you can find my breakdown here: Rate Cuts, Jobs and Growth: A Look at 2026.

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

This communication was prepared with financial writer Sharron Senter’s assistance, based on interviews with David Bunker, a financial advisor and licensed fiduciary.

Source:

1 & 2: Capital Group, 4 charts on why the U.S. economy could stay resilient, https://www.capitalgroup.com/ria/insights/articles/4-charts-us-economy-resilient.html

Rate Cuts, Jobs, Growth: A Look at 2026

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As we wrap up 2025, we’re closing the books on a year that delivered strong markets and a few surprises along the way.

More importantly, the trends taking shape now will help guide the decisions we make together in 2026.

Today, we discuss:

  • How the markets performed in 2025.
  • Why the Fed is likely to cut rates again.
  • Where the job market is showing quiet signs of stress.
  • What GDP growth and corporate earnings suggest for 2026.

2025 Market Review: Better Than Average

It’s been another impressive year for the stock market.

Year-to-date, we’ve seen growth of about 16.5%, following a strong 24% gain in 2024.

For perspective, the market usually averages around 8% to 10% each year, so we’re well ahead of the curve.

The one major bump we faced was a steep (but short-lived) drop in April when new tariffs were announced. This created a lot of uncertainty. Companies that rely heavily on global suppliers, like Walmart, saw their stock dip instantly.

In anticipation of the tariffs first mentioned in February, Walmart’s stock had already begun its decline from a high of $105 per share. When the tariffs were officially announced in April, the stock dropped further from $89 to a low of $82 per share, but it bounced right back. It’s currently trading strong at $115 per share, driven by people looking for better deals and the company’s leadership in online shopping and delivery.1

The good news is that many companies have adapted to the new tariffs.

For example, Walmart has successfully shifted a great deal of its product sourcing from China to India and Southeast Asia, including Vietnam and Thailand.

Ultimately, the tariffs caused uncertainty, but the market bounced back strongly.

Let’s switch gears now, and talk about three financial projections and key themes for 2026…

#1—Continued Rate Cuts

The Fed has a tough job: they must balance keeping inflation near their 2% target (now about 2.8%) while also ensuring the job market stays strong.

This balance is currently fragile.

To counteract the current risks in the economy, the Fed will likely continue to cut interest rates both in December and in early 2026. These cuts aim to lower borrowing costs, give the job market a lift and restore consumer confidence.

As long as the job market doesn’t weaken too fast, these cuts should help maintain steady economic conditions throughout 2026.

Related: We took a closer look at the delicate balancing act of rate cuts in our recent post, Today’s Economy: What’s Actually Going On?

#2—Labor Market Fragility

A key risk to the economy right now is the pressure placed on jobs, with the primary labor market weakness being concentrated in job cuts at small businesses.

This development will likely continue in 2026.

Signs of this trend were apparent in the November 2025 ADP report, with Reuters reporting an unexpected decline in private payrolls. (ADP processes payroll for 1 in 6 workers in the U.S.)2

This data suggests that while big company layoffs make headlines, the real pressure is happening quietly: small businesses are cutting jobs and offering fewer openings.

Read the full Reuters article here: US private payrolls post largest drop in more than 2-1/2 years in November.3

This pressure can create a dangerous self-fulfilling prophecy, consisting of a three-part cycle:

  1. Small businesses cut jobs due to uncertainty.
  2. People who are worried about losing their jobs start spending less money.
  3. The consequent slowdown validates the initial fear, making the prophecy self-fulfilling.

Keep in mind, small businesses are the main source of new jobs.

According to the U.S. Small Business Administration Office of Advocacy, “The U.S. contains 36.2 million small businesses, which account for almost 46% of private sector employment [share of employees]. From March 2023 to March 2024, U.S. small businesses created approximately 9 out of every 10 net new jobs.”4

If this massive engine pulls back on hiring or starts laying off, the overall job market quickly loses its critical source of new growth.

Two Other Points to Consider:

  • The low 4.4% unemployment rate doesn’t yet reflect what’s happening on the ground. Small business layoffs usually take a few months to show up in data, and the recent government shutdown added an extra delay. We’ll see some clarity when the November jobs report is released in mid-December.
  • We’ve yet to see any broad, hard data (enough to say there’s a clear trend) reflecting the real labor efficiency gains that artificial intelligence (AI) is expected to create. Up until now, the evidence we do see is largely anecdotal.

#3—Moderate Economic Growth

Most analysts’ forecasts for 2026 show U.S. economic growth ranging from 1.8% to 3.2%.

Even at the low end, a growing economy generally makes things easier because there’s more “pie” to go around for everyone.

This projected growth is supported by strong corporate earnings and by the fact that the tariffs didn’t lead to the severe economic damage many feared back in April. Remember, market sentiment also drives growth.

Finally, the housing market could provide a significant lift to the economy.

If the Fed continues to cut rates in 2026, it should cause interest rates and mortgage rates to keep coming down—possibly falling into the 5% range (optimistic but plausible). This could encourage more people to buy homes.

When the housing market picks up, it creates a ripple effect across the entire economy: demand increases for repairs, furniture, appliances and other home improvement projects, which in turn boosts thousands of businesses.

Lastly, on the investment side, several major banks are forecasting a 10% to 12% return for the stock market next year. As always, these are just estimates, but they reflect a generally healthy outlook for corporate earnings and valuations as we head into 2026.

Sincerely,

–David Bunker, Financial Advisor & Licensed Fiduciary

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

This communication was prepared with financial writer Sharron Senter’s assistance, based on interviews with David Bunker, a financial advisor and licensed fiduciary.

Sources:

1: Nasdaq.com, Walmart Inc. Common Stock (WMT), nasdaq.com/market-activity/stocks/wmt/historical

2: adp.com

3: Reuters, US private payrolls post largest drop in more than 2-1/2 years in November, reuters.com/business/us-private-payrolls-unexpectedly-decrease-november-adp-says-2025-12-03

4: U.S. Small Business Administration Office of Advocacy, New Advocacy Report Shows the Number of Small Businesses in the U.S. Exceeds 36 million, advocacy.sba.gov/2025/06/30/new-advocacy-report-shows-the-number-of-small-businesses-in-the-u-s-exceeds-36-million

Today’s Economy: What’s Actually Going On?

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There’s been a lot going on in the financial news recently.

Let’s take a closer look at what’s behind the headlines and how we’re responding within your portfolio.

Marriner S. Eccles Federal Reserve Board Building in Washington, D.C.

Today we discuss:

  • Interest Rate Cuts
  • AI Trends
  • Consumer Spending
  • Your Portfolio

Interest Rates: A Delicate Balancing Act

The Fed continues its tug-of-war between trying to reduce inflation and supporting a weakening labor market.

Inflation has fallen sharply (from about 9% in 2022 to about 3% today). However, getting from 3% down to the Fed’s 2% target is proving tricky due to the weakening labor market.

In late October, the Fed cut rates by 0.25%, following a similar move in September.

The key reason for these cuts is the softening job market. The tricky piece is that rate cuts can sometimes lead to inflation.

How?

When the Fed cuts rates, borrowing becomes cheaper for:

  • Consumers (e.g., lower mortgage, credit card and auto loan rates)
  • Businesses (e.g., lower costs for borrowing and new projects)

This generally stimulates spending and investment, which increases overall demand in the economy.

However, if demand outpaces supply, prices rise and inflation follows.

Many analysts anticipate more rate reductions in the months ahead. However, the Fed reiterated during their October meeting that future decisions will depend on incoming data, not political pressure or market expectations.

Consequently, with much of the government still shut down, the Fed’s relying heavily on private sector sources such as payroll data and state-level unemployment claims.

In fact, to help make up for missing data, ADP is now publishing a weekly version of its National Employment Report.1 ADP facilitates payroll for about 1 in 6 workers in the U.S.2

Zooming out, remember the current job cuts are largely a correction for over-hiring during the pandemic, amplified by a slowing economy. Also, the low unemployment rate (currently about 4.3%) suggests the economy is near full employment (meaning nearly everyone who wants a job has one).

AI Trends: Innovation Meets Speculation

AI continues to dominate headlines and investment dollars. While the potential is enormous, profits have yet to catch up with the spending (and likely won’t for some time).

Many of the major players, including Microsoft, NVIDIA and OpenAI are deeply intertwined through partnerships and cross investments.

For Example:

Microsoft has invested billions in OpenAI, which in turn relies on Microsoft’s cloud servers to power its technology.

NVIDIA supplies specialized chips that make advanced AI possible, and also invests in AI ventures like OpenAI.

This circular web of relationships accelerates innovation, however, it also concentrates immense power, which increases risk.

The opportunities are real, but so are the risks.

Insightful AI Resources:

Article: For an in-depth read, check out Capital Group’s recent article, Are we in an AI bubble?3

Podcast: During this podcast, a forensic accountant highlights what others are ignoring in regard to AI and more, No. 1 Forensic Accountant: the Coming AI Collapse.4

Consumer Spending: The 10% Driving the Economy

There’s another trend we’re watching closely: the concentration of spending among higher earners.

The top 10% of Americans now account for nearly half of all consumer spending.5

This dynamic can mask underlying economic weakness, especially if the job market softens further.

Despite headlines about layoffs at big companies, unemployment remains low. However, younger workers entering the job market are finding fewer openings.

Overall, if spending from the “top 10%” slows, it could weigh on GDP growth even without an official recession. Currently, GDP growth is forecasted at a healthy 3%.

Your Portfolio: Staying Prepared, Not Predictive

Periods like this—when economic indicators present a mixed picture—are why we emphasize planning over prediction.

Our disciplined investment process blends diversification, research and risk management to help protect your investments and long-term goals.

For retired clients drawing income, we’ve already set aside sufficient cash reserves to help avoid selling investments during downturns. We’ve also been taking profits from positions that have appreciated sharply and watching for new buying opportunities supported by data—not headlines or hype.

In times of uncertainty, discipline means focusing on what we can control; specifically, how we plan, prepare and respond. Markets will always move, but our process remains steady.

Learn more about our AI diversification approach in our post, AI Is Booming, Diversification Matters.

Sincerely,

–David Bunker, Financial Advisor & Licensed Fiduciary

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

This communication was prepared with financial writer Sharron Senter’s assistance, based on interviews with David Bunker, a financial advisor and licensed fiduciary.

Sources:

1: ADP, ADP Announces National Employment Report Preliminary Estimate Publicly Available on a Weekly Cadence, https://mediacenter.adp.com/2025-10-28-ADP-Announces-National-Employment-Report-Preliminary-Estimate-Publicly-Available-on-a-Weekly-Cadence

2: ADP, https://www.adp.com

3: Capital Group, Are we in an AI bubble?, https://www.capitalgroup.com/advisor/insights/articles/are-we-in-an-artificial-intelligence-ai-bubble.html

4: YouTube/The Knowledge Project: No. 1 Forensic Accountant: The Coming AI Collapse, https://www.youtube.com/watch?v=E4wXp-DaW8g

5: Morning Brew, The top 10% of Americans account for nearly half of consumer spending, https://www.morningbrew.com/stories/wealthy-americans-account-half-consumer-spending

September 2025 Market Update & Key Trends

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It’s been an interesting year in the markets, and with just a few months left in 2025, now’s a good time to pause and take stock of where things stand.

In today’s update, we cover key market trends:

Year-to-Date Performance: Markets are up about 11%, led by tech and industrials.

Corporate Earnings: Strong results are driving markets to new all-time highs.

Inflation & Jobs: Inflation rose slightly last month and jobs have slowed.

AI Spending: Tech giants are in a race for market share.

Interest Rates: A future Fed rate cut looks likely.

Global Markets: International stocks are outpacing the U.S.

Your Portfolio: We’ll discuss why rebalancing remains critical.

A Strong Year for the Market

Year-to-date, the market is up about 11%—a solid number for just over eight months.

Much of the strength comes from a few sectors, including technology (Microsoft, Nvidia) and communication services (Google, Netflix). Also, industrials are performing well, up around 15% (Raytheon, Boeing, Caterpillar).

However, healthcare has barely moved, gaining about 1%. It’s hampered by political and regulatory uncertainty. Specifically, concerns are over potential changes to drug pricing and Medicare policies.

Other market activity included a brief hiccup back in April due to tariffs, when uncertainty pulled the market lower. However, markets have recovered and are now hitting new all-time highs.

Remember, tariffs only effect about 15% of U.S. GDP. We discussed the “real” impact of tariffs earlier this year in our post: The Economy, Tariffs & Consumer Sentiment. Suffice it to say, the media often leaves out vital information.

Earnings Drive the Story

At the end of the day, daily headlines create noise, but company earnings give us the real signal.

Overall, corporate profits are strong. In fact, much stronger than analysts expected coming into the year. Early-year forecasts predicted about 5% growth, but companies are on track for closer to 10%.

This strength has helped push markets higher despite ongoing worries about jobs and tariffs.

In fact, Morgan Stanley’s top equity analyst details three reasons for continued market growth in the coming months. (Note: the article allows one free view before a paywall.)1

Inflation & Jobs

Inflation is at 2.9% (up from 2.7% in July). The Fed’s long-term target is 2%. The rise is primarily being driven by increases in housing, food and energy costs. For a deep dive, read the August Consumer Price Index report.2

The job market has continued to soften. Government jobs are shrinking (includes early retirement packages), and many companies are trimming staff while raising prices to keep profits steady.

The August jobs report showed the U.S. added just 22,000 jobs, June was revised to a –13,000 job loss, and the unemployment rate rose to 4.3% (July was 4.2%), signaling a clear slowdown in the labor market.3

This Reuters article provides some simplified charts showing monthly changes in U.S. jobs, government jobs, and job gains and losses by sector.4

A key question in the months ahead is whether slowing job growth will become a bigger drag or if the economy can grow through it.

The AI Market Share Race

AI spending continues to be a major driver of economic growth.

Big tech companies, e.g., Microsoft, Nvidia, Google, etc., are pouring hundreds of billions into AI infrastructure.

It’s expensive, but unlike the dot-com bubble of the early 2000s, these are well-established, profitable companies with the resources to sustain the investment. This is a major contrast to the dot-com era, when many companies were newly formed and had no profitability history.

Overall, it’s a market share race; specifically, a competition to become leaders in a transformative technology.

Interest Rates & Global Markets

Markets are currently pricing in a 95% chance the Fed will cut rates soon, likely by 25 basis points. Overall, we’re anticipating a 1% cut by year-end.

Lower rates will help ease pressure on mortgages, boost housing activity and support continued growth.

Finally, international stocks are up about 20% this year, outpacing U.S. markets (for a change). Our decision to increase your exposure earlier this year is helping your portfolio take advantage of this momentum.

Portfolios

Tech’s fantastic run has been great for portfolios, but it can also make the sector a little too big.

This is why we’re constantly rebalancing, taking some of those profits and reinvesting them to keep portfolios diversified.

It’s an especially smart move in non-taxable accounts, since we can do it without a tax hit. We’re always watching your portfolio’s sector weightings to help keep it balanced and strong.

Please reach out with any questions.

–David Bunker, Financial Advisor & Licensed Fiduciary

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

This communication was prepared with financial writer Sharron Senter’s assistance, based on interviews with David Bunker, a financial advisor and licensed fiduciary.

Sources:

1: MarketWatch, The stock market is hitting records — three reasons why top Morgan Stanley strategist sees more room to run, https://www.marketwatch.com/story/the-stock-market-is-hitting-records-three-reasons-why-top-morgan-stanley-strategist-sees-more-room-to-run-33892ee8

2: Bureau of Labor Statistics, Consumer Price Index – August 2025, https://www.bls.gov/news.release/pdf/cpi.pdf

3 & 4: Reuters.com, US unemployment rate near 4-year high as labor market hits stall speed, https://www.reuters.com/business/us-unemployment-rate-near-4-year-high-labor-market-hits-stall-speed-2025-09-05/

Is market news scaring you? Here’s the bigger picture.

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Could the financial news headlines be more daunting?

Trade uncertainty and its economic ripple effects are behind most of these headlines. (Read our post for the “real” impact of tariffs.)

However, a crucial point often absent in media coverage is the historical link between market volatility and long-term portfolio growth.

For Example:

The below chart depicts the growth of one dollar from 1926 till 2024. The red lines highlight 20%+ market drops.

As you’ll see, time after time the market bounces back—even higher.

Your Financial Plan

We’ve built your financial plan to navigate market volatility.

Candidly, if you want long-term portfolio growth, then the price you pay is short-term volatility.

Unsurprisingly, we’ve seen this recent volatility before, i.e., during Covid. And, we bounced back from that—even higher!

Uncertainty drives volatility.

No one knows when the volatility will end. Nevertheless, we’re confidently buying valuable companies on sale.

I encourage you to stay the course and maintain your financial plan.

Reach out with any concerns or questions.

–David Bunker, Financial Advisor & Licensed Fiduciary

P.S. Thank you to everyone who requested a copy of Bill Perkins’ “Die With Zero.” I was thrilled by the response following last month’s email, How To Spend Confidently & Without Regret in Retirement, where we discussed the book. I still have a few copies available, so please let me know if you’d like one.

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

This communication was prepared with financial writer Sharron Senter’s assistance, based on interviews with David Bunker, a financial advisor and licensed fiduciary.

S&P 500 Shifts From Home Runs to Singles and Doubles

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For the past few years, the Magnificent 7 have dominated market earnings growth, at one point soaring nearly 60%. (see chart)

However, this pace is unsustainable.

As expected, the Mag 7’s (Apple, Microsoft, Amazon, Nvidia, Tesla, Alphabet and Meta) earnings growth is slowing. It’s now projected around 20%, still a strong gain.

Meanwhile, the rest of the S&P 500 is growing steadily.

This is a welcome sign, since diversification helps manage risk, (i.e., instead of home runs, the market’s delivering singles and doubles—small, steady gains that add up over time).

Let’s face it, home runs are great.

But, a well-rounded team—built on singles, doubles and solid defense—wins more games.

The same goes for diversification in investing.

What’s causing the shift?

Steady economic growth is helping drive the broader earnings, including a GDP around 2.5-2.7% and low unemployment. AI also remains a key growth driver.

It’s encouraging to see more companies contributing to earnings growth.

Granted, the right side of the chart (gray shaded area) is an estimate, but if these trends hold, we’re likely looking at a more balanced market in the coming months.

PS: If you missed it, we previously shared a detailed update on the economy: The Economy, Tariffs & Consumer Sentiment.

–David Bunker, Financial Advisor & Licensed Fiduciary

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

This communication was prepared with financial writer Sharron Senter’s assistance, based on interviews with David Bunker, a financial advisor and licensed fiduciary.

The Economy, Tariffs & Consumer Sentiment

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During last year’s client survey, the economy was the top concern for many clients. It’s also the key topic for today.

Before diving into the details, here are two friendly reminders:

#1—Take a long-term view when assessing the economy, markets and stocks.

#2—Question headlines. Economic news is often exaggerated for clicks. Verify sources and take breaks from news and social media if it feels overwhelming.

Source: Microsoft Designer AI

Today, we discuss:

– The economy, including the labor market, corporate profits and consumer sentiment.

– Trump’s tariffs—the “real” impact.

– How Windsor Wealth Management responds to economic uncertainty.

The U.S. Economy Is a Mixed Landscape

Labor Market

The labor market remains strong, with employers adding 143,000 jobs in January, bringing the unemployment rate down to 4% (from 4.1% in December).

However, job growth pace is slowing.

U.S. Growth

Capital Group economists predict U.S. Gross Domestic Product (GDP) growth will reaccelerate to 2.7% in 2025.

The global investment firm believes strong corporate earnings and rising incomes will keep job growth and spending steady. Although, inflation will likely remain stubborn, keeping interest rates higher for longer.

For comparison, the U.S. economy’s GDP rose 2.8% in 2024, slightly below 2023’s 2.9% growth.

In general, the new White House administration is creating uncertainty, which is to be expected.

Corporate Profits

Business earnings are expected to grow at a steady 10-11% in 2025, aligning with historical long-term averages, according to analysts.

This level of profitability suggests businesses are maintaining resilience despite shifting economic conditions, providing a stable foundation for investment and growth.

While challenges such as inflation and interest rates remain factors to watch, these projections indicate a healthy corporate landscape moving forward.

Consumer Sentiment

Consumer sentiment decreased in early 2025, according to the preliminary University of Michigan Index of Consumer Sentiment.

The index dropped to 67.8 in February, down from 71.1 in January, reflecting growing concerns about inflation and its potential economic impact.

Exactly what is this index and why does it matter?

It’s like a mood ring for the economy.

The university surveys consumers every month to gauge how optimistic or pessimistic they are about the economy.

They ask people questions about things like:

  • How they feel about their current finances.
  • What they think about the economy in the short term and long term.
  • Whether they think it’s a good time to buy big things like appliances or cars.

This index is important because it gives us clues about where the economy is headed.

Of course, it’s just one of the many factors to consider.

Decreasing Consumer Sentiment Impact

When consumer sentiment declines, it can create a negative feedback loop.

It looks like this:

When people are worried about the economy, they often spend less.

They might postpone big purchases (e.g., new bedroom set) or cut back on non-essential spending (e.g., dining out).

This decrease in consumer spending can lead to:

  • Slower Economic Growth: Consumer spending drives the economy. In fact, it’s two-thirds of the economy. A pullback hurts business sales and jobs.
  • Risk of Recession: A prolonged drop in consumer spending can contribute to an economic downturn.
  • Business Uncertainty: Companies may delay hiring or investment if they see weaker demand ahead.

Overall, pessimism leads to less spending—slowing growth—which fuels more pessimism and further spending cuts, i.e., a negative feedback loop.

This drop in consumer sentiment is not surprising. Households have been feeling pressure from inflation and increased prices for months now.

Trump’s Tariffs—The “Real” Impact

Let’s start with some background…

In early February, President Trump imposed new tariffs on imports from Canada, Mexico and China, citing a national emergency related to illegal immigration and the flow of fentanyl into the U.S.

These tariffs include a 25% increase on imports from Canada and Mexico, and a 10% increase on imports from China. Energy resources from Canada will have a lower 10% tariff.

The administration says these measures are necessary to pressure these countries into taking stronger action against illegal immigration and drug trafficking, according to a White House fact sheet.

Canada and Mexico:

Both countries initially announced 25% retaliatory tariffs on U.S. goods. However, after negotiations they agreed to delay them for 30 days.

As part of the agreement, Canada committed to appointing a “fentanyl czar” and enhancing border security, while Mexico agreed to deploy 10,000 National Guard troops to its northern border to curb drug trafficking and illegal immigration.

China:

China has retaliated, imposing a 15% tariff on U.S. coal and liquefied natural gas, as well as a 10% tariff on crude oil.

IMPACT: Key U.S. Imports

The U.S. relies on key imports—horticultural goods from Mexico (e.g., fresh fruits and vegetables) and energy from Canada. Canada supplies almost 20% of U.S. oil supply and more than half of total U.S. oil imports.

The most direct impact of tariffs is higher costs for imported goods, which can drive up prices for consumers.

When it comes to tariffs, is the media providing the full picture?

No.

Tariffs have an impact, but it’s important to keep perspective.

Specifically, 85% of U.S. GDP comes from domestic activity—leaving only 15% tied to trade.

What’s more, about half of the 15% comes from China, Canada and Mexico, effectively reducing the 15% by half, softening the overall tariff impact.

Candidly, the tariff situation is still unfolding and is highly fluid.

The uncertainty isn’t surprising, however, given that tariffs were a key focus of the new administration’s campaign.

How Windsor Wealth Management Responds to Economic Uncertainty

While we provide many services for our clients, helping you navigate uncertainty is a critical focus. Economic and market uncertainty increases financial risk, making decision-making more challenging.

That’s why we take a disciplined, research-driven investment approach—one that prioritizes long-term strategy, risk management and adaptability.

How do we do this?

By diversifying portfolios to reduce unnecessary exposure to volatility, actively monitoring market conditions and relying on deep, unbiased research to guide our decisions.

In today’s landscape, with shifting government policies, tariffs and geopolitical changes, staying informed and maintaining a structured investment process is essential to managing risk and seizing opportunities.

–David Bunker, Financial Advisor & Licensed Fiduciary

Before You Go

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This communication was prepared with financial writer Sharron Senter’s assistance, based on interviews with David Bunker, a financial advisor and licensed fiduciary.