Windsor Wealth Management LLC

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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

The Fed Cuts Rates, Here’s Why It Matters

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Here’s a quick update on the Fed’s recent rate cut.

What happened?

On Sept. 17, the Fed announced a 0.25% rate cut in response to a softening labor market and a slight uptick in inflation. This move brings the federal funds rate to about 4% to 4.25%, the key benchmark for many other interest rates across the U.S. economy.

Why the rate reduction?

The main reason behind this decision is the Fed’s concern about the labor market.

The Bureau of Labor Statistics’ August jobs report showed a clear slowdown in job gains, and the unemployment rate inched up.1

Remember, the Fed’s dual mandate is to keep both inflation low and employment high.

In simple terms, this cut is aimed at making it cheaper for businesses to borrow and invest—potentially encouraging more hiring.

Fidelity’s chart below highlights the job slowdown since 2023. You can also see the unemployment rate trending up:

Chart Source: Fidelity2

Two More Rate Cuts Possible by Year-End

Analysts are forecasting the possibility of two more rate cuts before year-end.

The prospect of more cuts is good news for consumers with adjustable-rate debt, e.g., mortgages, credit cards and auto loans.

However, it usually also means lower interest earnings on savings and money market accounts. Also, rate cuts can trigger concern, i.e., if businesses and consumers believe the economy is headed for a slump, they may reduce spending and investment regardless of lower interest rates.

Looking Ahead

We’ll be watching key economic indicators like the upcoming jobs report and the latest inflation data, which will give us a clearer picture of the Fed’s next move at their October 28-29 meeting.

Please reach out with any questions.

–David Bunker, Financial Advisor & Licensed Fiduciary

P.S., In case you missed it, see our post: September 2025 Market Update & Key Trends

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: Bureau of Labor Statistics, The Employment Situation—August 2025, https://www.bls.gov/news.release/pdf/empsit.pdf

2: Fidelity, Rate cuts are here, https://www.fidelity.com/learning-center/trading-investing/the-fed-meeting

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/