Windsor Wealth Management LLC

Investment service in Topsfield, Massachusetts

Financial Planning

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

3 Later-in-Life Conversations; Important Decisions as Life Changes

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With the holiday season approaching, many of us are looking forward to favorite traditions like gathering for a big family dinner, watching a classic movie or relaxing by the fire together.

It’s also an ideal time to discuss how important decisions should be handled as your life changes.

Of course, these conversations are not always easy.

In fact, a new Fidelity study on later-in-life conversations found that as families age, they actually talk less about the topics that matter most.1

Even among financially prepared households, discussions often stall when it comes to three critical issues:

#1—Decision-Making and Change of Control: Who steps in if you can’t make financial or medical decisions?

#2—Dependence and Dependent Living: What’s the plan if living independently becomes difficult?

#3—Thinking Ahead for a Health Incident: Do loved ones know your wishes and how to access important information?

Fidelity’s research shows these conversations drop sharply around age 70, just when they become most urgent.

Also, nearly nine in ten baby boomers say at least one emotional barrier keeps them from talking about later-life issues, including not feeling prepared or not knowing how to start.

According to the study, baby boomers rank thinking ahead for a health incident as one of their most relevant topics. Yet, it’s the topic they’re most unwilling to talk about.

And while many describe their family communication as “open,” two-thirds admit they aren’t actually discussing the topics they consider most relevant.

The study also found that families who have active, ongoing conversations report more confidence that their plans will unfold smoothly, and feel closer as a result.

If you haven’t revisited your plan for these situations, now is the time.

We’re happy to help you:

  • Review or update your powers of attorney and health-care directives.
  • Clarify who makes what decisions and where key documents are stored.
  • Model how long-term care or a sudden health event could affect your finances.

[RELATED]: Longevity plays a major role in how long your plan needs to work for you. We discuss this and two other key considerations in our post, 3 Critical Retirement Planning Dynamics.

Let’s make sure your financial plan reflects both your wishes for care and decision-making.

Sincerely,

–David Bunker, Financial Advisor & Licensed Fiduciary

P.S., In case you missed it, check out our latest blog post: 5 Financial Moves to Make Before Year-End

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: Fidelity, Later-in-Life Conversations Study, https://www.fidelity.com/bin-public/600_Fidelity_Institutional/fidelityinstitutional/Application/AP168302/family/TGP_LIL_Report_FCFE_FINAL.pdf

5 Financial Moves to Make Before Year-End

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Fall brings more than changing leaves. It’s also an ideal time to revisit your financial plan before the holiday rush begins.

By making a few smart updates now, you can take advantage of valuable year-end opportunities and set yourself up for a strong start to the new year.

Let’s look at five key moves to consider:

#1—Revisit Retirement Plan Contributions

Now’s a great time to revisit your retirement plan contributions.

Even a small bump can make a big difference down the road. Plus, if your employer offers a match, that’s essentially free money. Also, consider directing a portion of any bonus or raise to your retirement accounts.

And don’t forget the power of compounding—it’s what turns small, consistent contributions into meaningful long-term growth.

Learn more in our post: Maintaining Retirement Lifestyles: Compound Interest’s Role

#2—Review Major Life Changes

If you’ve experienced any major life event, please contact us as soon as possible, including:

Employment Changes: New job, raise or retirement coming up? Let’s review your benefits, income, health insurance and tax withholdings. If you’re retiring soon, we’ll also help you determine whether your life insurance is portable and if you still need it.

Family Changes: Marriage, divorce, a new child or caregiving responsibilities? These often require adjustments to estate plans and insurance coverage.

Selling, Buying or Inheriting: Transactions like selling a home or receiving an inheritance can impact your taxes. Be sure to review your 2025 withholdings and be prepared for any capital gains or losses.

#3—Recognize OBBBA Impact

Tax laws changed earlier this year with the introduction of the new One Big Beautiful Bill Act (OBBBA).

One key benefit (the Senior Bonus Deduction) is for those age 65 and older.1

It’s a new “bonus” deduction, including $6,000 for qualifying individuals and $12,000 for qualifying couples. This benefit is in addition to the standard deduction. It’s available to both itemizers and non-itemizers but begins to phase out once income exceeds $75,000 for individuals or $150,000 for couples. This bonus deduction is temporary, and is effective for tax years 2025-2028.

Here are two resources on our website describing key takeaways from OBBBA:

#1—2025 Tax Changes: One Big Beautiful Bill Act (OBBBA) (Includes a “SALT Deduction Savings Example” highlighting how the higher SALT deduction cap now allows many households to deduct more of their state and local taxes than in previous years—and how you may save more by itemizing rather than taking the standard deduction this year.)

#2—Key Financial Data spreadsheet (Includes updated 2025 tax brackets, standard deductions, child tax credit and more.)

If you’d like, we can run year-end tax modeling to show how these changes may affect you.

Our Holistiplan tax software helps us forecast your taxes, model different scenarios, and identify opportunities such as Roth conversions or itemizing under the new, higher SALT deduction cap.

#4—Prepare for Year-End Charitable Giving

If you’re planning to give before year-end, start now to maximize your impact and tax benefits.

Consider using some of the following tax-smart strategies. We’re happy to help you decide which ones fit best.

Appreciated Assets: Donating stocks or mutual funds that have grown in value enables you to deduct their fair market value and avoid capital gains tax.

Donor-Advised Funds (DAFs): Gain an immediate tax deduction by making a contribution now, and enjoy the flexibility of distributing the funds to your favorite charities over time. This is a powerful tool for managing multi-year giving.

[RESOURCE]: Fidelity does a great job explaining what DAFs are, and you can take a quick quiz to see if this resource may work for you (or call us).2

Matching Gifts: Ask your employer if they’ll match your donation.

Qualified Charitable Distributions (QCDs): If you’re 70½ or older, you can donate directly from your IRA to help reduce Required Minimum Distributions (RMDs).

#5— Manage Income to Avoid Future Medicare Surcharges

When managing your 2025 taxes, it’s important to keep IRMAA (Income-Related Monthly Adjustment Amount) for Medicare on your radar.

IRMAA surcharges are based on your modified adjusted gross income (MAGI) from two years prior, meaning your 2025 income will determine what you pay for Medicare premiums in 2027.

Strategic tax planning can help you stay below key IRMAA thresholds by managing income sources such as Roth conversions, capital gains and RMDs. Timing these activities (especially toward year-end) can help reduce future surcharges and keep your overall retirement healthcare costs in check.

Medicare Resources Available on Our Website:

Will I avoid IRMAA surcharges on Medicare Parts B & D?

Medicare Premiums and Deductibles for 2025

BONUS MOVES: Other Tax & Retirement Savings Strategies

  • Roth Accounts: Consider whether shifting from a traditional 401(k) or IRA to a Roth option makes sense given your tax outlook. Remember, withdrawals in retirement from Roth accounts are tax-free, creating flexibility later on (e.g., reducing taxable income in years when you draw more from other sources).
  • Health Savings Account (HSA): If you’re eligible, consider maxing out your contributions. HSAs offer a triple tax advantage; specifically, contributions are tax-deductible, grow tax-deferred and can be withdrawn tax-free for qualified medical expenses. For example, a family contributing the 2025 maximum of $8,550 could reduce taxable income by that same amount, and individuals age 55 and older can add an extra $1,000 catch-up contribution. To qualify for an HSA, you must be enrolled in a High Deductible Health Plan (HDHP).
  • Tax-Loss Harvesting: Even with markets trending higher, we continue to look for tax-loss harvesting opportunities where appropriate to help offset gains and improve your after-tax returns. Keep in mind, if you have other accounts that we don’t manage, be sure to coordinate with us so you achieve maximum impact.

Quick Reminder

Many of the federal energy home improvement credits expire on Dec. 31, 2025. If you’re planning to replace your front door, add better attic insulation or similar, consider doing it now to take advantage of the credits.

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: IRS.gov, One, Big, Beautiful Bill Act: Tax deductions for working Americans and seniors, https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors

2: Fidelity, What is a donor-advised fund (DAF)?, https://www.fidelitycharitable.org/guidance/philanthropy/what-is-a-donor-advised-fund.html

Bay Colony Advisors, DBA Windsor Wealth Management, is not a Certified Public Accountant and does not provide tax, legal, or accounting advice. Any tax-related information provided is for general informational purposes only and should not be construed as legal or tax advice. Each individual’s tax situation is unique, and you should consult with your own tax, financial, or legal advisors before making any decisions. We strongly recommend seeking the advice of a qualified CPA or other professional for personalized tax advice.

Clear Thinking: Are You Defining the Right Problem?

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Ever made a decision you later second-guessed?

Shane Parrish’s book, Clear Thinking: Turning Ordinary Moments into Extraordinary Results, tackles this head-on.1

Clear thinking and decision-making are incredibly relevant for successful retirement planning.

While Clear Thinking had many great ideas, one in particular really stuck out.

Parrish suggests a two-session approach to decision-making, whether it’s for business or personal matters:

First, define the problem, and then, solve it.

Why?

In general, we’re taught how to solve problems, but rarely how to define them well. And a poorly defined problem often leads to poor decisions, no matter how clever the solution, according to Parrish.

Let’s apply this concept to retirement planning…

3 Retirement Planning Examples: Identifying the “Real” Problem

Here’s how separating the problem from solving it may look like:

Example #1

Let’s say you’re deciding whether to downsize your home or keep it as a base for the grandkids.

Instead of jumping to “What should I do?”—start by asking: What problem am I really trying to solve?

Is it cash flow? Simplicity? Travel flexibility? Family legacy?

Once the problem is clearly defined, you’re better equipped to make a thoughtful, regret-free decision.

Example #2

Let’s say you’re considering whether to buy a second home in another state.

Instead of jumping straight to “Can I afford this?” or “Is now the right time?”—start by asking: What problem am I really trying to solve?

Is it about escaping winter weather? Being closer to family? Creating new memories? Diversifying lifestyle assets?

By defining the why, you might uncover simpler alternatives or confirm it’s truly worth the tradeoffs. Clarity on your real goal helps you evaluate options more effectively.

Example #3

Let’s say you’re debating whether to help an adult child with a major expense, like a home down payment or launching a business.

Instead of going straight to “Should I give them the money or not?”—pause and ask: What problem am I really trying to solve?

Is it about providing opportunity? Keeping family close? Reducing future estate taxes? Easing your own guilt or anxiety?

Once you clarify your core motivation, it’s easier to assess if financial support is the right tool or if there’s a better way to support your goals and theirs. Separating emotional pressure from the actual problem leads to clarity.

Mental Time Travel

Another powerful insight from the book encourages us to slow down and consider the perspective of our future selves, a form of ‘mental time travel’ that can lead to better decisions.

To travel forward in time ask yourself:

“What would future me wish I had done?”

“How will this decision feel in 10 days, 10 months or 10 years?”

These questions help you avoid impulsive or rushed choices, a real risk when retirement brings a flood of new freedoms and decisions.

High Stakes vs Low Stakes

Parrish recommends spending more time on decision-making when the stakes are high, and less time where they’re low.

Said differently, when the cost of a mistake is high and irreversible, move slow. When the cost of a mistake is low and easily reversible, move fast.

Examples:

High Stakes “Irreversible” Decisions (e.g., when to take Social Security or whether to sell a business) deserve careful thought and deliberate planning.

Low Stakes “Reversible” Decisions (e.g., which airline credit card to use or whether to try a new budgeting app) are best handled quickly, saving time and mental energy.

[Related Resource]: Download our handy budgeting worksheet.

Retirement Decision-Making Checklist

Before making final retirement planning decisions, ask yourself these questions:

  • What problem am I really trying to solve?
  • What does success look like and what would I regret?
  • What assumptions am I making?
  • What could go wrong? Have I planned for it?
  • Is there a way to split this decision into smaller, more manageable parts?
  • Am I being reactive, or thinking clearly and long term?
  • What would future me wish I had done?
  • What are the hidden opportunity costs?
  • If you say yes, what are you saying no to (and vice-versa)?
  • And then what?

Diving Deeper: What Could Go Wrong?

If markets experience a prolonged downturn, a job loss occurs or family needs change, how is your financial plan impacted?

Parrish urges us to prepare for setbacks before they happen.

We couldn’t agree more!

In our world, that might mean:

  • Estimating a spouse’s death impact on Social Security benefits.
  • Keeping income sources diversified.
  • Preparing for income disruption (e.g., disability).
  • Running “what-if” simulations to stress test your plan.
  • Setting aside a buffer for unexpected expenses.
  • Updating insurance coverage regularly for adequate protection.

These kinds of safeguards allow you to spend confidently, knowing your retirement can weather a few storms.

Retirement planning and financial well-being thrive on clear thinking.

We recently wrote more about this mindset in our articles:

> How to Spend Confidently Without Regret in Retirement

> 3 Steps To Help Your Money Outlive—You (Describes the financial guardrails we use to stress test your retirement portfolio.)

As an aside, we spend a tremendous amount of time asking: What could go wrong, and have I planned for that?

This approach is key to managing uncertainty within your portfolio.

–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.

Source:

1: Amazon: Clear Thinking: Turning Ordinary Moments into Extraordinary Results, https://www.amazon.com/Clear-Thinking-Turning-Ordinary-Extraordinary/dp/0593086112