What We're Thinking: Another 25 Years

 

Back in the Spring of 1991, I joined IBM's Quarter Century Club, marking 25 service years. Now, in the Spring of 2026, I'm celebrating another Quarter Century milestone as an independent, freelance financial advisor. Two quarter centuries in one lifetime. Who knew? 

Doing what I'm drawn to do, I've pulled together some financial stats from the last 25 years. Here's what's happened on an average annualized basis: 

Inflation/CPI                                                 2.5%

All fixed income (cash, CDs, bonds)           3.5%
Portfolios of 40% stocks and 60% bonds    4.1%
Bay Area residential real estate                   4.7%
Portfolios of 50% stocks and 50% bonds    5.2%
Portfolios of 60% stocks and 40% bonds    6.3%
Portfolios of 80% stocks and 40% bonds    8.4%

 

The great news is that everything has stayed well ahead of inflation. Not only has wealth been preserved, it's been enhanced. 

Now, zooming in for the Main Event.  

We're a bit more than halfway through this decade and there have been four "disruptions" no one predicted. COVID in 2020-21, 9% inflation in 2022, a Tariff Tantrum in 2025, and now a "military operation." 

Keep this in mind the next time you hear an "expert" or "influencer" tell you what's about to happen and why you must do now! Predictions are useful for eliminating things to worry about. Someone said that "risk is what's left after you've thought about everything else." Which leads to the next point: It's impossible to worry about unknown unknowns.

The table below highlights market data points we follow. Notice that none of them are personal or political. We don't conflate personalities or politics with personal finance. That dog don't hunt.

	Mar 2020			Oct 2022		Apr 2025		Mar 2026		Notes
	COVID			Inflation		Tariffs		Iran
Money market funds	0.10%			4.00%		4.20%		3.60%		1
US Treasury 10-year bond yield	0.80%			4.00%		4.00%		4.30%		2
Brent North Sea oil	$32			$83		$92		$114		3
CNN Fear & Greed Index	2			16		4		10		4
Peak VIX	85			36		60		35		5
Balanced portfolios prev 12 months	-23%			-29%		-20%		-8%		6
Balanced portfolios next 12 months	+42%			+18%		+26%		?

Notes:

1. Most banks are still paying .1%. The difference between that and 3.6% is how we're able to get free checking accounts. 

2. This is the bond market key metric. The rate has fluctuated between 3.3% and 5.0% since 2022. As long as it stays under 5%, all's well. Not a prediction.

3. No one paid much attention to oil until lately. Know that there's also a crude oil type called West Texas Intermediate. It's usually priced about 6% less than Brent. The sweet spot for oil is roughly between $45 and $90. Anything above $90, for any reason, puts pressure on global finances and discourages drillers. There are incentives all over to get this mess cleaned up.

4. The CNN Fear & Greed Index is a reliable short-term measure of financial market sentiment. Anything under 25 is Extreme Fear. As Warren Buffet has said, "Buy when people are fearful."

5. VIX is the Chicago Options Exchange Volatility Index. It's another measure of sentiment widely used by professionals. Readings above 30 have been harbingers of better times.

6. Balanced portfolios are the likes of Vanguard's LifeStrategy Moderate Growth (VSMGX), Fidelity's  Balanced Fund (FBALX), and iShares 60/40 Balanced Allocation ETF (AOR). Most investor's portfolios are pretty close to these.

 So, that's where we are. A long time ago, I heard someone say, "Things are never as bad as they seem, or as good as they seem." If you'd like to chat about any of this, or even tell us how we've got it all wrong, we'd love to hear it.

 James Cosgrove, CFP, Plano, TX jim.cosgrove@verizon.net 972-489-0262
Jim Cosgrove, Partner, San Jose, CA jimcos42@gmail.com 408-674-6315

Evidence-based. Rules-driven. Policy-focused.

 

 

What We're Thinking: What Happens in Markets During Wars?

 

They're at it again. When will we ever learn?

In the meantime, financial markets are in the news and you might be wondering how to navigate this particular case. We take a broader, long-term view of historical precedents. Here's what we see.

There are eleven war cases, going back to Pearl Harbor. One year later, the S&P 500 was higher in eight of the eleven cases. That's a 72% positive rate. And it's only for one year. Longer time frames produce outcomes exceeding 90%. 

 

The main long-term driver of stock market returns is not war or peace. It's corporate earnings (profits). Except in recessions, profits continuously move higher. Here's an 80-year illustration. Earnings are in black. The S&P 500 is green. 

As usual though, there's a caveat. In this case it's valuation.

Valuation is an expression of the premium above fair value that buyers are willing to pay. At this point, buyers are paying a historically high premium for U.S. stocks. (International stocks are closer to fair value.)

 

This doesn't necessarily mean there has to be a crash. It does mean we should expect lower average annual returns going forward. Some analysts are calling for low single-digit average annual returns for the next 10 years. We actually use those conservative values in estimating low ranges of future portfolio values. 

If any of this concerns you or you just want to talk about it, we're here. We can have the conversation that uniquely applies to you.

 

James Cosgrove, CFP, Plano, TX jim.cosgrove@verizon.net 972-489-0262
Jim Cosgrove, Partner, San Jose, CA jimcos42@gmail.com 408-674-6315

Evidence-based. Rules-driven. Policy-focused.

 

What We're Thinking: Your Best Strategy

  

“What does 2026 hold?”
“Will the stock market crash?”
“What will happen with interest rates and inflation?”
“Should I buy gold or Bitcoin, or both?”
"Is AI in a bubble?"
“What are the big questions facing the markets in 2026?”
“How should we deal with what’s going on in Washington?”
“Will Social Security go away?”

Sorry. We don’t have answers to those questions. Why? Because some version of them show up every year as a response to a demand and hunger for certainty. Yet, the documented research on forecast reliability concludes that it's pretty much a coin toss. The truth is, the world is uncertain, and personal finance is largely an exercise in managing uncertainty.  

With that out of the way, let's remember what we control. We can't control or accurately answer any of the questions above. But we can control things like...

· How we allocate financial assets. This shapes over 90% of portfolio outcomes.
· How much media we consume and what kind. This blog post is a rare slice of unconflicted media.
· Where we spend money, especially on discretionary choices.
· How much money we spend. Many people can actually spend more than they think.
· Our strategies.

Your Best Strategy

“The best long-term strategy is to stick with your long-term strategy."
Elisbetta Basilico

Your best strategy is the one you have. If you’ve been working with us for a while, you know that everything is based on your goals, your tolerance for volatility, your tax profile, and the feel of your day-to-day life. 

 

So, the answers to the questions that typically come up about next year or "the future" are already embedded in your strategy. That’s the best place to work. Here are a few ways to sustain a robust strategy.

1. Keep it simple! A simple strategy is one you could explain to a 10-year old in less than 25 words. Complexity leads to distractions, loss of focus, blurred vision, and conflicted actions.

2. Be adaptable. The world can change quickly. A flexible strategy will allow you to bend but not break, adapt to challenges, and spot new opportunities. The good news is that globally diversified portfolios do this. They automatically catch the cream rising to the top. If you own a total stock market index fund, you’ve actually owned Nvidia for 25 years.

3. Speculate at the edges. If an exciting idea or possibility calls to you, try it out in a small way. Failures won’t be fatal and you can always go deeper. This could also satisfy the need to “do something” or neutralize FOMO.

4. Stay focused. Distractions abound. Know the job-to-be-done, the problem to be solved, the goal to be achieved. Dial down notifications and breaking news.

5. Be action-oriented. Great strategies lay out a clear path and steps to take. Otherwise, a plan just sits on a shelf. This doesn’t mean to always be doing something. It does mean that when something needs to get done, it gets done. Let us know how we can help.

                                                                      Best Wishes for a Joyful Holiday Season
                                                                        And Contentment in the New Year 

 James Cosgrove, CFP, Plano, TX jim.cosgrove@verizon.net 972-489-0262
Jim Cosgrove, Partner, San Jose, CA jimcos42@gmail.com 408-674-6315

Evidence-based. Rules-driven. Policy-focused.

 

 

 

What We're Thinking: Are Stocks in a Bubble?

  

 Last week’s stock market thunder has added new urgency to the conversation about the possibility of a developing stock bubble.

While that might get clicks and shares on social media, the tailwinds driving this bull market remain in place. The Fed is guiding interest rates lower. Global central banks are doing the same. Company profits remain largely on track. Credit spreads (the difference in yield between high and low quality bonds) are narrow. Even deficit spending counts as a tailwind.

However, while these arguments support continued price appreciation, they can also contribute to a melt-up scenario in which valuations are already historically and statistically over-extended. Almost every major asset class is hitting all-time highs at prices reflecting heavy premiums. Hence, some thoughtful caution is warranted.

First, accurately timing a market peak is 100% luck. Read that sentence again. One especially amusing example was that three days before the 1973 U.S. peak, Time magazine ran an article highlighting the beginning of a gilded age! A new market high did not happen for nine years.

Seven epic bubbles have unfolded over the past 100 years. The U.S. in 1929, 1973, 2000, and 2007. Japan in 1989. China in 2007 and 2015. All of them show that time and hindsight were needed to identify a peak. No one knows they’re happening in real time.

So, what’s an investor to do? Three things will keep you sane:

1. Mind your asset allocation policy. Stay in your lane. 
2. Make changes incrementally over time. Avoid sudden “all-in” or “all-out” bets.
3. Build ready cash or short-term bond resources. Liquidity is your edge in a downturn.

Age group and generational demographics help shape strategy. There are Youngs, Middles, and Olds.

👉Youngs are under age 40. They are building personal capital through career development and financial capital through saving and investing. In hindsight, every market downturn, without exception, has been a golden opportunity to buy quality assets “on sale.” Their job is to hold their noses and continue to invest aggressively in all market conditions. Full stop.

👉Middles are between 40 and 70. This group has reached full development of personal capital. They’ve built a base of financial capital. Sooner or later, they retire. This is the most challenging age group. There’s an inclination to press hard to maximize retirement savings, but in doing so, may expose themselves to significant declines and limited time to ride the eventual recovery. Recoveries after full blown bubble collapses can take several decades.  

Careful planning needs to take place in these years. Contact us if you or someone you know is in this age group and they’re trying to wing it or just hoping for the best.

👉The over 70 Olds tend to already be more conservatively positioned, so market trends have less of an impact on them. However, the news background during declines is always troubling. This causes people to think about doing potentially regretful things like going to all-cash or buying an annuity.

Please contact us if any of this raises questions or concerns for you. We were made for these times.

James Cosgrove, CFP, Plano, TX jim.cosgrove@verizon.net 972-489-0262
Jim Cosgrove, Partner, San Jose, CA jimcos42@gmail.com 408-674-6315

Evidence-based. Rules-driven. Policy-focused.